The Bull

Tuesday 25

September, 2018 7:26 AM



Big business to get little joy in budget

Big business to get little joy in budget

Tuesday's federal budget will focus on voters rather than businesses despite mounting pressure on Senate crossbenchers to agree to further company tax cuts.

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By AAP 06.05.2018 11:08 AM

Households are expected to be gifted with tax cuts this federal budget but big business will likely be left waiting for any goodies as the government's company tax cut plan remains stalled in the Senate.

Economist Chris Richardson says companies shouldn't expect much in Tuesday's budget, despite increased pressure from the Business Council of Australia on Senate crossbenchers to agree to the next stage of corporate tax cuts.

The Turnbull government fell short of getting the numbers in the Senate at Easter to pass legislation reducing the company tax rate to 25 per cent from 30 per cent for all businesses.

"This will be a budget that is focused on voters rather than businesses," Mr Richardson said.

"Businesses would be happy that the corporate tax cuts are still on the government's agenda."

Recently the budget bottom line has been lifted by soaring corporate tax payments, driven by companies and super funds having used up claimable tax losses racked up during the global financial crisis and returning to paying tax again.

In 2016-17 company taxes made up 17.2 per cent of Australia's total revenue, second to individual income tax which contributed 48.3 per cent.

Statistics from the Australian Taxation Office show the nation's top 10 companies paid more than a quarter of all corporate tax and the top 50 companies paid 38 per cent of the take.

The BCA - which has just launched a pre-budget national campaign to press for reforms including corporate tax cuts - said the failure of the parliament to pass the full suite of reductions means that Australia's biggest companies do not do the "lion's share" of investing in the economy, and will continue to pay one of the highest company tax rates in the industrialised world.

"Reducing the company tax rate for larger businesses is becoming more urgent by the day," the BCA says.

"Since 2008, almost two in every three industrialised nations have reduced or are planning to reduce their rates."

While big corporations may be disappointed on Tuesday, small businesses can expect to benefit from an extension of the instant asset write-off, first introduced in 2015, which allows firms with a turnover of up to $10 million a year to instantly claim tax deductions on all equipment purchases worth less than $20,000.

But there are also fears the government could make cuts to Australia's $3 billion research and development tax rebate scheme to prevent "arbitrary" use of tax incentives - a move that could force some medical firms to axe research programs and clinical trials.

Pressure remains on the government, however, to get its promised tax cuts through the upper house - a task made more challenging by new research that showed the 2015 tax reduction for small businesses - from 30 per cent to 28.5 per cent - was either pocketed, invested or went towards new jobs, but did little to boost wages.

AMP chief economist Shane Oliver expects the government will continue to push corporate tax cuts and if it fails, it will use the savings of $35 billion over ten years to provide more "election goodies".

"For now they will stick with it and have another go after the budget," he said.

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