Small-to-medium businesses will get $5.3 billion in tax breaks over the next four years as the federal government attempts to kick start the economy’s post-mining boom recovery. Small businesses will be the first to benefit, while major corporations have been promised their first tax rate cut in two decades – but not until 2023.
From July 1, the tax rate for around 870,000 businesses with an annual turnover under $10 million will drop from 30 per cent to 27.5 per cent.
That cut will gradually be handed out to larger businesses in the next six years, and the company tax rate then lowered over four years to 25 per cent.
“Introducing new measures to support business and delivering stimulus to the hip pocket on top of the RBA interest rate cut will be just what the doctor ordered for retail,” said Russell Zimmerman, executive director, Australian Retailers Association (ARA).
“The ARA is pleased to see corporate tax cuts, which will help small to medium businesses and the millions of people they employ. On top of this effort, the work to offset bracket creep through personal tax threshold changes will be a boost for consumer confidence and spending.”
Zimmerman asserted that while tax cuts for small and medium businesses are welcome, whoever wins the election needs to cut company tax across the board to make Australia more attractive to international and local investment.
“There is no question that Australia’s company tax rates are excessive by international standards,” said Zimmerman. “Changes to international tax compliance are welcome, along with the government’s commitment to fix GST loopholes such as the Netflix Tax and low value GST compliance on goods under $1000, due to be implemented mid next year.”
Zimmerman said the phase out of the five cent coin would have little impact on retailers, given the growing use of electronic payments, with most retailers expected to round prices either up or down to the nearest 10 similar to the abolition of one and two cent pieces in the 1990s.
Retail Council Chairman, Peter Birtles said there is little in the federal budget to spook consumers and business can also be buoyed by a commitment to set a clear path to long-term growth.
“Personal income tax cuts and company tax cuts for small and medium businesses announced tonight should help business conditions and stimulate economic activity,” he said.
“We are encouraged by the government’s commitment to reduce the company tax rate for all businesses. However, we are disappointed that these measures will take a decade to implement – particularly as those companies that must wait the longest are the very companies that employ a high proportion of the workforce and make a significant contribution to economic output.
“Furthermore it delays the flow-on benefits delivered to Australian households who would also benefit from a reduction in the company tax rate, primarily through higher real wages and increased employment,” said Birtles.
To find out more about what last night’s federal budget means for retailers, keep an eye out for next week’s issue of Inside Retail Weekly. Access exclusive analysis, locked news and reports with Inside Retail Weekly. Subscribe today and get our premium print publication delivered to your door every week.