Federal Budget 2016: Small business gains surprise bonus

CLOSE to one million small businesses will be urged to go on a hiring spree with a surprise tax cut due to kick in the day before the July 2 election.

CLOSE to one million small businesses will be urged to go on a hiring spree with a surprise tax cut to 27.5 per cent due to kick in the day before the July 2 election.

And an extra 90,000 medium-sized businesses will be handed the same perk thanks to a more generous cut-off based on turnover, The Courier-Mail can reveal.

Treasurer Scott Morrison will use the Budget to deliver a cash injection to small and medium sized business to bolster his promise to create jobs and drive economic growth.

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The Government will use the extra boost for smaller businesses to hit back at Labor’s claims it is favouring the big end of town.

Large firms will see a plan to cut the company tax rate below its current rate of 30 per cent in stages but this will only take effect after 2020.

About 900,000 companies, which received a tax cut to 28.5 per cent this financial year, will have their rate cut by another one percentage point.

Businesses can only currently enjoy this discount rate if they have an annual turnover of less than $2 million but this threshold will be significantly increased – slashing company tax by a massive 2.5 percentage points for 90,000 mid-sized firms.

In a sign of the target for the measure, Mr Morrison yesterday visited a business in the bellwether seat of Eden Monaro that has a turnover of $6 million and aims to increase this to $10 million. “This Budget is all about jobs and growth and backing in companies just like this one, which are increasing employment and getting the job done,” Mr Morrison said.

The tax cuts could deliver a jobs bonanza that the Government argues will boost employment in parts of Queensland hard hit by the end of the mining boom.

Middle-income earners will be wooed with a modest tax cut by lifting the $80,000 level where the second highest tax bracket kicks in.

The plan will spark an election campaign class war, with Labor arguing the Government is handing tax cuts to the rich. The highest income earners on more than $180,000 a year will receive a double tax benefit because the Government will axe the extra 2 per cent “deficit levy” from July 2017.

But the wealthy will see tax on their super increase while low income earners are handed a boost to their retirement nest eggs.

The average full time income is just under $80,000 but the average pay of all workers including part-timers and casuals is about $60,000.

Labor released ABS figures showing only nine electorates in the country have an average income above $80,000. None are in Queensland and the highest is Mr Turnbull’s Sydney electorate of Wentworth.

“Four out of five workers in regional Queensland earn less than $80,000,” Mr Shorten said. “Why is the Prime Minister giving the top 1 per cent of income earners a tax cut at the same time as leaving four out of five workers in regional Queensland with absolutely nothing?”

Mr Morrison will copy Labor’s plan to hike tobacco excise but will warn the Opposition has an almost $20 billion hole in their costings. Treasury modelling revealed the plan to lift the tax on cigarettes by 12.5 per cent a year over four years would raise $28.2 billion over a decade while Labor claimed it would raise $47.7 billion.

The Government argues the shortfall shows Labor cannot pay the extra $37.3 billion they have pledged to cover Gonski school funding.