Senate support to fast-track small biz tax cuts

One Nation and the Centre Alliance are in favour of fast tracking the introduction of a 25 per cent company tax rate for small and medium enterprises, giving the government a fallback option should it be unable to convince the Senate to grant tax cuts to bigger businesses.

The two Senate parties have two votes each and the government needs all of them to secure the passage through the Senate of any more of its company tax cut package.

When Parliament resumes next week, Finance Minister Mathias Cormann will seek the support of One Nation and the Centre Alliance for the remainder of the package, which will lower the rate from 30 per cent to 25 per cent by 2026-27 for all companies with annual turnovers above $50 million.

While no final position has been taken, both Senate parties stressed again on Monday their reluctance to grant further tax cuts. But both said they had no problem with fast tracking the tax cuts that had already been legislated for companies with turnovers under $50 million. These companies have already had their rate reduced from 30 per cent to 27.5 per cent and it is scheduled to fall to 25 per cent in 2026-27.

Finance Minister Mathias Cormann will seek the support of One Nation and the Centre Alliance for the remainder of the ...
Finance Minister Mathias Cormann will seek the support of One Nation and the Centre Alliance for the remainder of the government’s tax package.

Alex Ellinghausen / Fairfax Media

The small business lobby says that should be brought forward to July 1, 2020.

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Too far off

Centre Alliance senator Stirling Griff said the fall to 25 per cent was too far in the distance and bringing it forward “would be a good move on many fronts”, while a spokesman for One Nation leader Pauline Hanson said she was more likely to support this move than a lower rate for bigger companies.

“(Senator Hanson) prefers to talk more about that than further tax cuts for businesses with higher thresholds,” he said.

Senator Hanson is still overseas and yet to begin formal talks with Senator Cormann. Centre Alliance has had fleeting contact in recent weeks.

Senator Griff said he would be happy if the 25 per cent rate was applied to small and medium businesses today, if affordable.

Sources within the Coalition who have been mulling the fast track option for several weeks, believe it would put pressure back on the Labor Party because tax cuts for small business were popular.

Last month, Labor suffered an internal and external backlash when it announced that, if elected, it would revoke the tax cut already legislated for businesses with turnovers between $10 million and $50 million.

It agreed, instead, to keep the rate at 27.5 per cent for firms with turnovers up to $50 million. But it will still try to legislate to stop it dropping to 25 per cent in 2026-27.

Election issue

Bringing forward the drop to 25 per cent would make small business tax cuts an election issue.

The majority view within the cabinet and Coalition backbench is for Senator Cormann to extract what he can from the Senate in the next fortnight and then junk the remainder of the package rather than take it to the election.

The party has not given up on securing a higher turnover threshold under which the tax cuts would apply. Independent senator Derryn Hinch has proposed $500 million, which would exclude the banks, miners, retailers and other major employers.

One senior minister said on Monday the government needed to take what it could and “move on to another policy”.

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