Morrison puts company tax cuts on fast track

A second round of tax cuts for more than three million small and medium-sized ­businesses will be fast-tracked to 2021-22.

Scott Morrison has a beer yesterday morning during a visit with Liberal MP Lucy Wicks to Six Strings Brewery in Erina. Picture: AAP

A second round of tax cuts for ­more than three million small and medium-sized ­businesses will be fast-tracked to 2021-22, delivering a new 25 per cent tax rate five years earlier than originally planned.

In a pitch to a key sector of the Liberal Party base today, Scott Morrison will announce the ­acceleration of further tax cuts for small and medium-sized businesses that employ almost seven million people.

The policy is understood to have gone through a meeting of the government’s razor gang yesterday, with a price tag of $3.2 billion over the forward ­estimates.

It will be mostly offset by improved revenue and savings achieved from the scrapping of proposed tax cuts for larger companies, which the Turnbull government was unable to push through the Senate.

Legislation will be moved in parliament as early as next week with the majority of Senate crossbenchers having indicated they would be more amenable to ­further tax cuts for small business, instead of the rollout of the ­enterprise tax plan for larger ­companies.

The Prime Minister will frame the new tax measures as a test for Bill Shorten, who was forced to reverse his announcement to roll back the government’s already legislated tax cuts after being overruled by his shadow cabinet.

In a speech to the Melbourne Institute/The Australian Economic and Social Outlook Conference today, the Prime Minister will confirm that companies with turnovers of less than $50m a year, having last year benefited from a drop in the tax rate from 30 per cent to 27.5 per cent, will now receive a further cut to 26 per cent in 2020-21 before moving to 25 per cent the following year.

 

The original plan was over 10 years and included a drop to 27 per cent by 2024-25 and 26 per cent the following year before falling to 25 per cent by 2026-27.

Mr Morrison’s announcement will draw on a plan that was being drafted in the final days of Malcolm Turnbull’s leadership, using the savings from the shelving of tax cuts for larger companies and shovelling them into earlier tax relief for smaller businesses.

The government claims the new plan will benefit about 3.3 million small and medium-sized businesses, including 940,000 with turnovers between $2m and $50m a year and 2.3 million unincorporated businesses with turnovers of less than $5m a year.

Mr Morrison’s speech marks his first substantial policy announcement since becoming Prime Minister on August 24 following the leadership spill.

“Our government is unashamedly on the side of the women and men who run small and medium-sized businesses in this country,” Mr Morrison will say in his speech.

“And we’re on the side of the millions of people they employ.

“This is good news for all Australians — lower company tax supports more investment, higher productivity, more jobs and higher wages.”

In his speech, provided to The Australian ahead of today’s conference, Mr Morrison says the policy to support small business was built on a “modern Australian compact” forged more than 40 years ago by the reform-era prime ministers from both sides of politics including Bob Hawke and John Howard.

“After years of economic ­underperformance, a generation of Australian leaders from different walks of life came to appreciate that we could only aspire to be a good and compassionate ­society with a stronger, more competitive economy,” Mr Morrison will say.

“From Bob Hawke to John Howard, Bill Kelty to Hugh Morgan, if you cared about prosperity and fairness in Australia, you cared about economic growth. You nurtured growth by fostering a vibrant, productive, free-enterprise system.

“The lesson of the Australian compact is that you don’t reduce poverty by bringing people down; you do it by lifting everyone up.”

Mr Morrison disputes Labor’s claim of a growing equality gap, claiming that disposable income per capita in Australia has risen by an average of 1.9 per cent a year since the 1980s compared with 1 per cent in Britain and just 0.7 per cent in the US.

Mr Shorten was forced to ­reverse his position on scrapping the government’s already-­legislated tax cuts for businesses above $2m following concerns among his shadow cabinet colleagues that going to an election vowing to repeal tax cuts would be politically difficult.

Mr Shorten was convinced instead to commit to keeping the current 27.5 per cent rate. However, he flagged that Labor would not support a further drop to 25 per cent, setting the scene for a renewed clash over company tax.

“The Labor Party has discarded the mindset of Bob Hawke, and replaced it with Bill Shorten’s politics of envy and division,” Mr Morrison will say in his speech.

“In this vein, the Leader of the Opposition and the party he leads now paint a strikingly dystopian picture of modern Australia. The goal of Labor’s anti-business, anti-enterprise crusade is clear. It is to stoke resentment with the market economy, with those having a go in business and with our free-enterprise system itself.”

The Melbourne Institute Economic and Social Outlook Conference — now in its 16th year — is the premier public policy event. As well as speeches from the Prime Minister and the Opposition Leader, it includes presentations from ministers, business leaders, academics and non-­government leaders. Political leaders at this year’s conference include Energy Minister Angus Taylor, Labor Treasury spokesman Chris Bowen, Jobs and ­Industrial Relations Minister Kelly O’Dwyer and Labor foreign affairs spokeswoman Penny Wong.

Business leaders include Business Council of Australia chief executive Jennifer Westacott, Energy Australia managing director Catherine Tanna, Seek chief executive Andrew Bassat, and Incitec Pivot chief executive Jeanne Johns.