Budget 2014: Government’s petrol tax hike to slug small business

The federal government will use next week’s budget to increase petrol tax according to various news reports, a move which will hurt small businesses by driving up costs and making it harder to compete with large companies.

Fairfax reports the government will reintroduce the twice-yearly practice of indexing fuel excise in line with inflation, in a bid to improve the budget’s bottom line.

Indexation of the fuel excise was abolished by former prime minister John Howard in 2001 due to rising fuel prices and voters angry over the introduction of the GST. Since then motorists have paid 38.1 cents per litre in fuel excise, however Fairfax reports unfreezing indexation will add up to three cents a litre in the first year.

The move is expected to raise billions of dollars despite Tony Abbott promising there would be no new or increased taxes prior to the 2013 federal election.

Peter Strong, the executive director of the Council of Small Business of Australia, told SmartCompany it’s important for small business owners to start thinking about how a hike in petrol tax will affect them.

“The cost of goods will go up everywhere because the cost of transport is going up,” he said. “If you’re in a business where you’re using your car a lot you’re going to have to think about what this means.”

Strong says he would like to see the proposed tax increase in more detail so companies can understand how it will affect the day-to-day running of their business.

“It would be really nice to have the government highlight what it means for specific sectors, not just generically for business,” he said. “The thing about a petrol rise is it is going to impact some sectors more than others.”

Fairfax reports the government will try to limit a political backlash by promising to use the money raised from the increased tax to boost productivity and stimulate the economy.

However chief executive of the Australian Automobile Association, Andrew McKellar, said in a statement any increase in the fuel excise in the upcoming budget would be unjustified.

“Any increase would break the government’s commitment to motorists, with no suggestion before the election that fuel tax would be increased,” he said.

“Motorists already pay too much tax and are not getting fair value for money with only a fraction of fuel excise being returned to spending on transport infrastructure by the Federal Government.”

Strong says while he doesn’t necessarily support a tax increase, he understands the government wants to make sure everyone is doing the heavy lifting.

“It’s much better than just sticking it on one group,” he said. “Everyone is contributing here. But again, we want to make sure those people who are carrying it more than others are aware of what that might cost.”

Strong also pointed out small businesses might be disadvantaged if large companies like Coles and Woolworths are able to absorb the costs of the tax hike and not pass it on to consumers.

“Are Coles and Woolworths going to be able to use this to their advantage? That will force any number of people to close,” he said.