Company tax defeat puts Coalition focus on small firms

The Senate has rejected big-business tax cuts, leaving the government without its signature economic policy ahead of an election.

Finance Minister Mathias Cormann reacts during debate on company tax cuts. Picture: AAP.

Malcolm Turnbull has been forced into another embarrassing backdown after the Senate rejected his big-business company tax cuts, leaving the government without its signature economic policy ahead of a looming election.

The failure to legislate a lower tax rate for companies with an ­annual turnover of more than $50 million comes one week after the national energy guarantee was effectively killed off amid division within the Coalition.

The Prime Minister, Scott Morrison and Finance Minister ­Mathias Cormann have now begun work on accelerating the rollout of existing tax cuts for small and medium businesses turning over up to $50m. These businesses pay a 27.5 per cent tax rate and are not due to receive the lower 25 per cent tax rate until 2026-27.

“We will not be taking the tax cuts for larger companies to the next election,” Mr Turnbull said yesterday. “We are going to review our enterprise tax plan in so far as it applies to small and medium businesses, and focus on how we can provide enhanced support, or perhaps an acceleration of the tax cuts for the small and medium businesses.”

Australian Industry Group chief executive Innes Willox conceded business was partly to blame for the Senate’s opposition to tax cuts for big business, saying they had failed to sell the policy. “We need to create much greater recognition of the links between business success, employment growth and improved opportunities and living standards,” he said.

Senator Cormann also said big business “needs to do the work” to convince Australians of the importance of their contribution to the country’s economic security, prosperity and success.

The government has $1.3 billion in extra revenue to play with over the forward estimates after the remaining company tax cuts were voted down by Labor, the Greens, One Nation, Centre ­Alliance, Victorian Derryn Hinch and South Australian Tim Storer.

Labor estimates it will cost the budget $1.8bn over four years to bring forward the existing tax cuts. An amendment to exclude the big four banks from receiving the lower tax rate was also defeated yesterday after a failed last-ditch attempt by the government to win over crossbench votes.

Senator Cormann unleashed on Labor, declaring Bill Shorten’s “latest lie” was that he was ­opposed to tax cuts for the big banks.

“Every Labor senator in this chamber just voted in favour of tax cuts for the big banks so you are now in favour of tax cuts for the big banks instead of more money for hospitals, more money for schools,” he said.

Labor senator Doug Cameron fired back: “This is Senator Cormann’s signature economic policy, and it’s down the drain like this government.”

The Prime Minister’s leadership rival Peter Dutton said it would be a mistake to campaign on tax cuts for big businesses at the next election.

The big business tax cuts would have cost the government $35.6bn over 10 years. Their defeat means the tax rate will remain at 30 per cent for all businesses turning over more than $50m.