Edition 23 – Lower Business Taxes
One of the most exciting measures in the Federal Government’s 2016/2017 Budget was the proposal to lower business taxes for small to medium businesses.
In summary, the current $2 million turnover threshold for the new lower corporate tax rate of 27.5% will increase to $10 million from 1st July, 2016. From 1st July, 2017, this will further increase to $25 million.
Increasing the turnover threshold and decreasing the corporate tax rate will also enable those businesses immediate access to the $20 000 instant asset write off.
These are great policy decision from the Federal Government. They will stimulate family business. They will encourage family businesses to invest in new items of equipment. They will act as an incentive for longer term planning in family businesses.
So, why is the Federal Opposition so dead against this proposal?
Why is the man who wants to be Prime Minister wanting to engage in a class warfare commentary about the measures, rather than arguing them on their merits?
Why does he insist that lower corporate taxes are a $50 billion giveaway to big companies?
I work with many family businesses whose turnover is more than $2 million and less than $10 milion.
They aren’t big businesses.
They are small employers. Sometimes with 10 staff. Sometimes more.
Depending on their industry, their profit margins can be tight.
Some of them require significant capital investment to generate a return to the owners.
Whilst the business may make a profit annually, I’m yet to see a successful family business that takes every cent of that profit each year and run out to buy a fast car or speedboat.
Growing family businesses need to make profit to:
- Invest in the future growth potential of their business.
- Pay back debt.
- Put money aside for any future economic shocks.
- Create additional employment opportunities; and,
- Provide a return to the owners commensurate with the risk associated with being in business.
Suggesting that businesses with $10 million turnover are a big business is nothing short of ignorant.
Lifting the turnover threshold from $2 million to $10 million brings more than 90 000 additional businesses into these measures. That means more than 50% of the Australian workforce will be employed by businesses that will benefit from these measures.
This will create further opportunity for those employees and further financial security for them and their families.
For me, the interesting spin on this is that, for the most part, these measures will apply to businesses that are Australian owned. These are the businesses that pay tax in Australia and create wealth for the nation.
Large businesses, on the other hand, will miss out on these measures. The spotlight has already shone brightly on many household name corporates and the way they structure their corporate and taxation affairs, which is the topic for another time.
All of these are reasons why I embrace the proposal for lower business taxes.
They are a big vote of confidence in Australian owned family businesses.
They are a thank you for the contribution they make to the Australian economy through employment, economic growth and the payment of tax.
Let’s stop the class warfare commentary and start the economic opportunity and wealth creation one.
This Week’s Tip
Embracing a smart policy that encourages entrepreneurialism and risk taking benefits everyone in Australia.