After first announcing them in the 2016 budget, and on the last parliamentary sitting day before the 2017 budget, the Turnbull government has finally secured enough support in the senate to pass its company tax cuts — but at a far smaller scale than they hoped.
Company tax cuts have been on the government’s agenda since the 2016 budget, when the measures were announced. Ultimately, the plan was to reduce the company tax rate from 30% to 25% by the 2026-27 financial year for all companies.
The amended legislation however will lower the company tax rate from 30% to 25% only for businesses with an annual turnover of up to $50m. Companies with a turnover of less than $10m will receive a reduction in their tax rate (to 27.5%) this financial year with the reduced tax rate rolled out to higher turnover businesses over the next two years. The second stage of the tax cut, which would extend to businesses with a turnover of $100m in 2019-20, is yet to be passed.
How the company tax cuts will be phased in:
- Companies with a turnover of less than $10m will receive a reduction in their tax rate to 27.5% this financial year.
- In 2017-18, companies with a turnover of less than $25m will receive the reduced tax rate of 27.5%.
- In 2018-19, companies with a turnover of less than $50m will receive the reduced tax rate of 27.5%.
- The tax rate will progressively reduce down to 25% over the next ten years.
The Turnbull government is hopeful these partial tax cuts will drive investment, economic growth and create more jobs but face criticism from the Labor party and media suggesting that impact to the economy may be minimal at best.
The legislation will return to the Lower House for confirmation at the next sitting on 9 May (2017 budget day).
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