The government is fast tracking tax cuts for smaller companies

Steve Christo  Corbis via Getty Images

Steve Christo Corbis via Getty Images

Australian Prime Minister Scott Morrison said on Thursday (Oct 11) that his government will bring forward proposed tax cuts for small businesses by five years, as his coalition seeks to regain voter support ahead of an election next year.

Under the plan, companies with an annual turnover of less than $50 million would have their tax-rate lowered to 25 per cent within four years.

Under the plan, announced on Thursday, the government will lower the tax rate for businesses with an annual turnover of less than $50m from 27.5% to 25% by 2021-22 rather than from 2026-27 as now legislated. "And what we need to do is ensure that every cent that's directed, those many millions of dollars - close to 30 billion, that would be the effect of this huge tax cut - be invested in our schools, in our hospitals, in infrastructure, in the foundations of a decent society".

Mr Morrison says the tax cuts will help many Australians.

The proposal was approved by the government's Expenditure Review Committee on Thursday and will be introduced as legislation when parliament returns on Monday.

"This means that a small business that makes 500,000 AUD profit, will have an additional 7,500 AUD in 2020-21 and 12,500 AUD in 2021-22 to invest back into the business or staff, or help to manage cash flow", Morrison and Treasurer Josh Frydenberg said in a statement released on Thursday morning.

The prime minister said that whether the cuts lead to higher wages depends on the businesses that will benefit from the policy.

We will introduce legislation during the next session of Parliament, fast-tracking our business tax relief for more than three million businesses that employ almost seven million Australians.

"If small- and medium-sized businesses are paying less tax to the government then they are more able to provide better wages to their employees". They don't just walk away and put the money in their pocket.

"They employ thousands of Australians and deliver a vital service within our health system and in local communities".

Tax rates for small and medium-sized businesses were already cut to 27.5 cents in the dollar past year from the previous 30 cents.

The Government's latest move comes after it abandoned its tax cuts for bigger businesses because they were rejected by the Upper House.

"We are not ruling it out and we are not ruling it in".

"We want to see the numbers".

"We're prepared to compromise in the national interest", Shorten said on Friday.

Shadow treasurer Chris Bowen is anxious about the total cost to the budget.

"We know he already wants to rip up our legislated tax relief and make each one of those 3 million small businesses pay more than they have to", he said.

"The government has made a policy announcement today, the appropriate thing for us to do is consider it carefully".

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