Following intense criticism, Labor has backed down on plans to reverse tax cuts for mid-sized businesses, with several industry bodies claiming it showed the party had “listened” to SME concerns.
In a move labelled a “kick in the guts for SMEs” by the Australian Chamber of Commerce and Industry (ACCI), the federal opposition announced on 26 June that, if it won next year’s federal election, it would reverse tax cuts for businesses with turnover of between $10 million and $50 million — just days before they were due to take effect.
ACCI CEO James Pearson had said that such a backflip created great uncertainty for SMEs, a killer of business and jobs growth.
Media reports subsequently suggested the proposal was not a party policy but had been “policy on the fly” by opposition leader Shorten, which had angered and alienated the rest of the party.
On Friday (29 June), Labor announced a policy u-turn, meaning the tax cuts for mid-sized firms will remain.
Master Builders Australia, which represents 32,000 builders and construction-related businesses nationally, applauded the prompt policy reversal as a windfall for SMEs as well as for democracy.
“[The opposition] deserves credit for this decision. It shows that they have listened to the concerns of thousands of SME builders,” the association’s CEO, Denita Wawn, said.
“Company tax cuts for small and medium business is [a] heartland issue for Master Builders as SME builders make up 98 per cent of our members and of our industry. We have been very direct in saying that scrapping tax cuts is the wrong call and Labor has listened.”
However, Ms Wawn suggested that SMEs are not entirely off the hook.
“We note that this decision applies to tax cuts that will already be implemented if Labor were to win the next federal election, and not the future cuts that have already been legislated with the strong support of the Parliament, including the Senate crossbench,” she said.
“[We] will continue to constructively engage with Labor on further reductions in company tax for SMEs.”
The Council of Small Business Organisations Australia (COSBOA) also welcomed the reversal of the sudden tax hike proposal, but similarly noted the issue of company tax for SMEs is far from settled.
“We appreciate that Mr Shorten and his team have heard our arguments against raising taxes for businesses with annual turnovers below $50 million. Although this decision does threaten the legislated tax cut to 25 per cent for businesses with turnover up to $50 million,” COSBOA said in a statement on its website.
“There are some 20,000 businesspeople and their employees who will be disappointed.”
The council insisted that business tax cuts here in Australia are more crucial now than ever in a bid to keep the country competitive on the world stage.
“The rapid lowering of tax rates in other countries means that we too must reduce our rates at the same (or faster rate) if our businesses are to remain globally competitive and keep Australians employed in them,” it said.
“We urge all federal politicians to lower the company tax rate to 25 per cent for all businesses sooner rather than later.”
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.