SMEs with revenues up to $50 million will have their tax rates cut after the Federal Government struck a deal with the Nick Xenophon Team (NXT) in the Senate on Friday.
Under the deal, which will cost $5.2 billion over the next four years, the tax rate for businesses with turnovers up to $10 million will see their tax rate from 30% to 27.5% this financial year. From July 1, companies with turnovers up to $25 million will pay 27.5% and, from 2018-19, this tax rate will apply to those with $50 million annual turnovers.
According to Prime Minister Malcolm Turnbull, the tax cuts are the first stage of the Federal Government’s ten-year Enterprise Tax Plan, which involves reducing the tax rate for SMEs with turnovers up to $10 million to 25% in 2026-27. He said deal means three million SMEs, employing 6.5 million people, have been delivered a tax cut.
He told a press conference, “The beneficiaries will be Australian workers because the firms for which they work or which they own in the case of the smaller businesses, they will be able to invest more, grow more, employ more. That is the fundamental leverage that cutting business tax delivers. More growth, more jobs and it makes Australia more competitive.”
Tim Reed, the CEO of MYOB, said the deal shows the Federal Government “recognises the importance of SMEs in helping to drive the Australian economy.”
He continued, “We’d liked to have seen confirmation of the whole 10-year plan to cut the rate from 30% to 25% for all companies by 2026-27, however the political realities in the Senate meant the government got the best deal it could for Australian businesses.”
Last year, a survey by MYOB revealed more than half (56%) of small businesses believed that lowering the company tax rate to 27.5% for businesses with up to $10 million in revenue would have a positive impact. The survey also revealed that 7% of SMEs agreed growth would be encouraged through widening the definition of a small business.
Tim Reed said the government’s tax cuts will mean business owners will be less constrained when it comes to scaling up.
“It’s good that those barriers to growth have been removed,” he said.
“The old system discouraged SMEs to grow beyond $2 million in revenue because of the benefits they lost from being counted as a small business.
“We hope the Government is able to secure support for its ongoing program of company tax cuts. The simple fact is that lower corporate taxes across the board would have made Australian business more internationally competitive.
“For every dollar small businesses spend with big businesses, big businesses spend $2 with small businesses. This is the nature of the economic ecosystem we have – and we need the whole thing to be healthy.
“The confirmed changes will encourage small business to invest, take on more employees and grow. It’s a good day for Australian small to medium sized businesses, their employees and the whole community.”
