“Breach of faith”: Business groups slam decision to dump company tax cut but Small Business Minister still committed

Business groups have hit out at the Government’s back flip on promised company tax cuts in last night’s budget.

The Government dumped its two-year long commitment to reduce company tax from 30% to 29% from July for companies with less than $2 million in turnover. 

Small Business Minister Brendan O’Connor has been spruiking the company tax reduction since his appointment in March this year and told SmartCompany this morning the Government was not going to give up on company tax cuts.

“I understand that there will be people in the small business community that will be very disappointed by this,” O’Connor says.

“I say to them that there we have two great initiatives in the loss carry-back scheme and the investment write-off and we are committed to working through with the Business Tax Working Group on how we can proceed with those tax cuts.”

While the Greens had offered to support the company tax cuts for small businesses with less than $2 million turnover, O’Connor said this was not an option the Government was prepared to take.

“What we were not prepared to do was to allow the Liberals and the Greens to prevent tax relief for other businesses. That would have been a disadvantage for other businesses.”

O’Connor says the loss carry-back scheme will provide “targeted” relief to businesses when they need it most.

“They will feel secure in the knowledge that they can take sensible risks and make sensible decisions and know that they will be supported in a loss-making year.

“This will be built into the economic strategy to ensure that we are able to provide better-targeted support for businesses that are facing the cyclical changes in the economy.”

Australian Chamber of Commerce and Industry chief executive Peter Anderson told SmartCompany the Government’s change of tack showed it was taking “a very indifferent approach” to SMEs.

“We are deeply disappointed that the Government has failed to deliver on its promised company tax reduction, that failure dwarfs the benefit that is in the budget that allows businesses to carry back losses,” says Anderson.

“The company tax reduction is a bitter blow to the business sector; especially to the small and medium sector, which is facing higher superannuation levies, higher labour costs and the carbon tax.”

Anderson says the whole Government from the Prime Minister down to O’Connor had repeatedly promised that the mining tax would fund company tax cuts.

“That strategy has now been blown out of the water, we have a mining tax without the sweetener of the tax cut,” says Anderson.

“That is a breach of faith and also a blow to business confidence.”

The Australian Retailers Association was also critical of the Government’s decision to scrap the promised reduction in company tax, claiming the Government was financing a return to surplus by penalising business.

ARA president Roger Gillespie said: “ARA is disappointed retailers will suffer from the abandonment of an important promised tax cut from 30% to 29% and [this] shows small to medium businesses aren’t sharing in the benefits of the mining boom”.

However, Council of Small Business Australia executive director Peter Strong was more sanguine about the move, saying it would not affect most small businesses.

“Most small businesses will not be impacted by it, it is a big business not a small business problem’, says Strong.

“Because most of us are not incorporated those that are and were going to claim the 1% will be disappointed, but that is only 300,000 businesses.

“Again, this brings out the need for a better definition of small business.”