DAVID GRAY/AFP/Getty ImagesScott Morrison (C).
The Morrison government could legislate before the federal election to increase the pressure on Labor going into the campaign.
The government has already decided it will fast-track the tax cuts that have been legislated for businesses with turnovers capped at $50 million but that change will require new legislation. A senior source said while there had been no formal discussions or a decision yet, it was more than likely the government would lock the changes in before the election.
This would mean Labor would have to go to the election promising to unravel a tax cut that was already in place or due to begin soon.
Under current legislation, the company tax rate for businesses with turnovers of up to $50 million has already been reduced from 30 per cent to 27.5 per cent. It is scheduled to drop to 25 per cent in 2026-27.
Now that the government has abandoned tax cuts for bigger businesses, it intends to fast-track that drop to 25 per cent for SMEs by up to five years. Treasury costings prepared when Malcolm Turnbull was prime minister and Scott Morrison was treasurer listed the preferred option as dropping the rate to 27 per cent in 2019-20, to 26 per cent in 2020-21 and 25 per cent in 2021-22. This would cost the budget $3.6 billion over the four-year, forward estimates period.
It would also mean that if Labor won the next election, due by May next year, it would be confronted with a legislated rate drop on July 1 the same year.
Labor supports the current rate of 27.5 per cent but opposes it falling further.
The current for SMEs. Early last month, key balance of power parties One Nation and the Centre Alliance said they would support bringing them forward.
Centre Alliance senator Stirling Griff said the scheduled fall to 25 per cent in 2026-27 was too far in the distance and bringing it forward “would be a good move on many fronts”.
Labor leader Bill Shorten had an awkward few days when he announced Labor opposed any tax cut for business with turnovers above $10 million. After a strong internal backlash, he backflipped and said Labor would accept the current rate of 27.5 per cent for the SMEs but legislate to stop it falling to 25 per cent in 2026-27.
Legislating the fast-tracking of the lower rate before the election will ensure small business will be a key battleground of the election. Upon becoming Prime Minister, Mr Morrison elevated the portfolio back into cabinet as a gesture.
One source said the government had also looked at expanding the current accelerated depreciation scheme that allows an instant-asset write-off of up to $20,000 for business with turnovers capped at $10 million. It canvassed options expanding both the turnover threshold as well as the amount that could be written off but they were “too expensive”, the source said.
There will be other measures in the small business package yet to be announced.
In Parliament on Thursday, Mr Morrison conceded the government had been a rabble but was coming back.
“Our party is coming back quickly together, getting on the front foot,” he said.
“I can tell you, Mr Speaker, the Leader of the Opposition isn’t looking as certain as he was two weeks ago.
“I can tell you they are looking under a bit more pressure than they did two weeks ago.”
This article was originally published by The Australian Financial Review. Read the original , or follow the AFR on .