Background and Overview

1.1       Labor is committed to a budget and a taxation system that links effort and reward in a fair way. Labor is also committed to taking responsible decisions that improve the sustainability of our public finances, reduce the risk of a credit rating downgrade and ensure we can make targeted investments that promote inclusive growth.

1.2       Labor always approaches budget repair in line with our values and priorities. The Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016 (the bill) as drafted contains measures that are contrary to Labor's values and priorities. Labor supports a reduction in company taxation that supports small businesses, but given existing fiscal pressures, now is not the time to be delivering tax relief for large businesses.

1.3       The Government contradicts itself when it talks about budget repair while proposing to deliver a $50 billion dollar tax cut at a time when Australia is at risk of losing its AAA credit rating.

Specific measures

2.1       Labor Senators are committed to working constructively with the Government to find ways to support small businesses while protecting the integrity of the budget.

2.2       Labor Senators propose the following amendments to the bill:

• Only reduce the company tax rate to 27.5 per cent for businesses with a turnover of less than $2 million (the threshold that remains consistent with the ATO definition of a small business);
• Only increase the unincorporated small business tax discount from 5 per cent to 8 per cent, and only for businesses with a turnover with a turnover of less than $2 million; and
• Not proceed with the increase to the small business entity threshold.

2.3       The Grattan Institute made a submission and stated that the best analysis from the Commonwealth Treasury shows that the net benefits to Australians' incomes will be much smaller once profits flowing out of Australia are taken into account. In addition, a cut to the corporate tax rate places pressure to raise taxes in other areas and the benefits from additional investment may take time to emerge.

2.4       The Australian Council of Social Service (ACOSS) also stated in its submission that it is a flaw in current fiscal policy to reduce company tax while keeping an over-reliance on bracket creep in income tax to restore tax revenue. ACOSS also stated that more substantial economic benefits can be realised by increasing public investment at a time when money is historically cheap to borrow and to increase investment in workforce participation and education.

2.5       Labor Senators believe that investments to infrastructure, education and healthcare will deliver greater returns than the benefits of the corporate tax cut set out in this bill.

2.6       Labor Senators believe that changes to this bill will deliver needed support to small business while protecting Australia's AAA credit rating. Labor Senators also call on the Government to abandon fiscal recklessness and instead work cooperatively to continue the work of budget repair in a way that is fair.

Senator Chris Ketter                                             Senator Jenny McAllister
Deputy Chair                                                         Senator for New South Wales

Navigation: Previous Page | Contents | Next Page