Federal Budget 2016 win for small, medium businesses

ALMOST 100,000 businesses are set to get a 1.5 per cent tax cut in today’s Federal Budget.

• Labor beefs up its Budget tax attack
• Just one in five South Aussies to win tax relief
• Smokers forced to cough up
• Submarines win ‘just like Olympics for Sydney’

NEARLY one million small and medium sized businesses could get a surprise tax cut in Tuesday’s Federal Budget, as the Government tries to kickstart the economy.

The Government will reveal a plan to start changing tax thresholds and tax rates to deliver company tax cuts and drive growth.

Currently, small businesses – those that turnover less than $2 million a year – pay 28.5 per cent tax.

Treasurer Scott Morrison will lift that threshold so about 90,000 medium businesses are included, in addition to the 800,000 businesses already in the bracket. The tax rate could then drop to 27.5 per cent for all the businesses now under that threshold.

Other changes will be brought in over time to “harmonise” tax rates in a so-called “glide path” to bring all taxes down. There is speculation at least some cuts will be delayed.

A crackdown on multinational tax avoidance is expected to raise billions in order to fund the cuts.

Mr Morrison visited a company on Monday with a $6 million turnover, saying they were “getting the job done and that is driving our transitioning economy”.

Treasurer Scott Morrison will hand down the Budget on Tuesday. Picture Kym Smith

“They are the companies that are ensuring that our economy continues to transition, continues to transform, continues to drive jobs and to drive growth,” he said. Mr Morrison singled out the defence industry supply chain, saying they would help drive a transformation to hi-tech jobs.

“It’s companies all across the country, across all the different defence procurements, whether they’re naval or air force or any of these other areas.” The Budget will be delivered in Parliament at 7pm.

Mr Morrison emphasised that it would not be “a typical Budget” or an election Budget, but a “national economic plan for jobs and growth for a stronger economy”. It is “not a time to be throwing money around”, he said.

Opposition treasury spokesman Chris Bowen scoffed at the idea it would not be an election Budget and said the Government was set to introduce policies similar to Labor’s. “Let me make this clear; where the Government adopts Labor’s policy agenda we will back them,” he said.

However, Mr Bowen wouldn’t be drawn on whether Labor would pass legislation on an income tax cut for those earning more than $80,000.

Mr Bowen said their policy was “fully and independently costed by the Parliamentary Budget Office” and that the tobacco revenue was just one of their savings proposals.

“This is a desperate attempt to cover for the fact the Government will be adopting, in full, Labor’s policy on tobacco excise,” he said.

The Government is expected to announce a measure to tackle “bracket creep”, where inflation pushes people into the higher tax bracket that kicks in at $80,000. However, most Australians will not reach that threshold, anyway. Mr Bowen pointed out that the average wage is $60,000.

The Coalition is set to announce an increased tobacco excise, an idea first floated by Labor. Prices will increase 12.5 per cent per year for four years.

Labor used PBO modelling to claim that would raise almost $48 billion over 10 years while reducing the number of smokers. Over the forward estimates it would raise $3.8 billion, they said.

However, Treasury modelling obtained by The Advertiser found it would only raise about $28 billion over a decade and only $2.3 billion over the forward estimates.

Labor had planned to dramatically increase education funding and other election promises using that money along with other savings.

It is not clear what led to such dramatically different modelling results. Education funding is set to be a big issue during the election campaign – which will officially start when Mr Turnbull calls the election. He is expected to do that on Friday or the weekend.

Infrastructure funding is shaping up to be another battlefront. The Government is giving the states a bonus 15 per cent funding if they sell public assets in order to fund infrastructure. Mr Turnbull has included rail projects in the Asset Recycling Scheme.

South Australia – which in fairness will benefit hugely from shipbuilding projects and the $50 billion Future Submarines – will miss out on much of that funding because it has few assets to sell.

One possibility is that the Government renders the possible sale of the Motor Accident Commission eligible for that funding. Money could flow to the Northern Connector project, the Kangaroo Island Airport or other projects.

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