1 September 2016

Turnbull Government introduces Ten Year Enterprise Tax Plan

Today the Turnbull Government introduced legislation designed to immediately support up to 3.2 million small businesses employing around 5.5 million Australians.

This legislation will reduce the corporate tax rate to 27.5 per cent from 1 July 2016 for 870,000 incorporated businesses with a turnover less than $10 million. These companies employ more than 3.4 million Australians.

Australians know that our future depends on how well we transition from the largest mining investment boom in our history to a stronger and more diverse economy.

The Government’s Ten Year Enterprise Tax Plan will remove impediments and create the right conditions for Australian employers, especially small businesses, to grow and create more jobs.

Only five OECD nations have a higher corporate tax rate than Australia and our tax on business is much higher than our neighbours in the Asian region.

This discourages investment and disincentives enterprise within Australia.

Reducing the burden of tax on these Australian employers will improve their cash-flow and allow them to reinvest in new equipment and machinery, to take on new staff and to pay higher wages to their employees.

Over ten years the Government will also encourage investment and higher-paid jobs by decreasing the tax rate on all companies to 25 per cent by 2026-27. This will make Australian companies more internationally competitive in a tough global market place; driving real wage increases, better jobs and higher living standards.

The Ten Year Enterprise Tax Plan builds on the support the Government provided small businesses in the 2015-16 Budget including a reduction in their tax rate of 1.5 percentage points for small companies and the introduction of a 5 per cent tax discount for unincorporated small businesses as well as immediate deductibility for assets that cost less than $20,000.

The Government is providing support for over 90,000 additional small businesses (incorporated and unincorporated) by increasing the turnover threshold to $10 million, up from $2 million. In 2009 the Henry Tax Review recommended the threshold for small business be raised.

These small business concessions include access to immediate deductibility for assets costing less than $20,000 acquired before 30 June 2017, the lower corporate tax rate and other tax simplification provisions. The $2 million threshold for access to the small business CGT concessions will remain unchanged.

The Turnbull Government recognises that many small businesses are not companies, so the legislation will improve access to the unincorporated small business tax discount. From 1 July 2016, this tax discount will be available to businesses with an annual turnover of less than $5 million, up from the current threshold of $2 million, and will be increased to 8 per cent. The maximum discount available will remain at $1,000.

Small and medium businesses are driving jobs growth in Australia and must continue to do so. They are overwhelmingly Australian owned and more likely to reinvest their earnings in future growth, as they seek to build their businesses.

A tax on their businesses is a tax on their enterprise and the jobs they provide. A lower company tax rate will deliver significant gains to Australian workers through increased investment and higher productivity.

The reduction in revenue from these measures is fully offset within the forward estimates by the increased revenue derived from the revenue and integrity measures in the Budget.

Securing growth in a highly competitive, volatile and uncertain global economy is no easy task.

That is why the Government is sticking to its National Economic Plan for Jobs and Growth which will facilitate the economy’s transition to broader‑based growth over the next decade and beyond.