31st May, 2024
Members of the small business community have welcomed comments by Minister for Industry and Science Ed Husic that have kickstarted a debate about company tax rates.
Slashing corporate tax rates would free up cash for SMEs, allowing them to invest further in their businesses and drive “critical innovation”, according to MYOB chief executive Paul Robson.
Speaking at an AI summit held by the Australian Financial Review on Tuesday, Husic argued in favour of reforming Australia’s corporate tax rates and introducing business investment allowances, to encourage firms to invest in new technologies, including artificial intelligence and automation-based advanced manufacturing.
Australia’s corporate tax rate is currently set at 30% for large firms, while companies with aggregated annual turnover under $50 million pay a tax rate of 25% on company profits.
While the Minister did not specify exactly how much company tax rates should be reduced by, he said Australia needs to confront the “challenge” posed by ageing manufacturing assets and a lack of investment in new technologies.
When asked directly if cutting the corporate tax rate would help achieve this, Husic reportedly referenced the way the Hawke-Keating Labor government brought the business community and unions together to “show that everybody wins”.
“And we need to consider how we do that, either through corporate tax reform or the way in which we provide investment allowances for the uptick in manufacturing capital,” he said, according to reports.
“That is something long term, I think, [that] does need to be considered … We need to see business be able to invest and free up capital.
“Any discussion around corporate tax reform needs to be able to entwine both the benefits for capital and for labour, to be able to have that successful discussion, and I think that’s where we probably will be likely to head.″
Treasurer Jim Chalmers was asked about Husic’s comments on Tuesday and responded by referring to the production tax credits contained in the government’s Future Made in Australia policy, which was featured in the federal budget earlier this month.
However, Husic’s comments about broader corporate tax reform have been embraced by SME advocates, as well as the larger industry groups.
According to recent results from our Bi-Annual Business Monitor, some 37% of Australian SMEs and 29% of mid-market businesses would like the company tax rate to be lowered.
In the lead-up to the federal Budget, industry groups also called for changes to company tax rates as part of a broader approach to reforming the Australian tax system.
With SMEs making up the vast majority of Australian businesses and contributing to more than half of GDP, Paul Robson says a company tax cut would have a profound effect on these operators.
“Company tax reforms will mean more available cash to these businesses, which leads to increased investment in their operations as well as driving critical innovation,” he says.
“Any assistance SMEs and the mid-market can get to scale and grow will lead to job creation, wage increases and a stronger economy for all Australians.”
Similarly, the Australian Chamber of Commerce and Industry (ACCI) thanked the government for raising what it called a “crucial issue”.
“Lowering the corporate tax rate or introducing investment allowances are critical measures that can drive business investment, spur economic growth and ultimately benefit all Australians,” ACCI chief executive officer Andrew McKellar says.
“Businesses need the ability to free up capital and invest, especially given the sluggish productivity growth over much of the past decade.”
Cutting the company tax rate or providing investment allowances would encourage businesses to upgrade their technology, improve productivity and create jobs, added McKellar.
“An approach that enhances productivity and ensures sustainable economic growth would be a win-win for all Australians,” he says.
A version of this article first appeared here
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