Aged care providers and businesses supporting the industry with a turnover of less than $10 million will benefit this financial year from tax cuts that were passed in Parliament late yesterday.
Six weeks out from the 2017/18 Budget, the Turnbull Government was finally able to pass some of the commitments it made in last year’s Budget after heavy negotiation in the Senate to get the Bill through.
While headlines today have proclaimed the benefits for companies with a turnover of up to $50 million, the tax reductions will be introduced progressively over the next three years.
The rate of 27.5 per cent will apply to businesses with a turnover of up to $10 million in 2016/17 financial year and be extended to those turning over up to $25 million in 2017/18.
In 2018/19 reduced rate will be applied to businesses turning over $25-$50 million.
Minister for Finance, Senator Mathias Cormann, said the Government remains committed to its original Budget promise of decreasing the tax rate on all companies to 25 per cent by 2026-27.
“All types of businesses benefit from these changes, including 2.3 million unincorporated businesses,” Senator Cormann said.
“This reform fully delivers in this term on a key election commitment. But the job is not over – we remain committed to delivering our full plan for economic growth and employment.”
Earlier in the week the Government passed the Diverted Profits Tax, which will impose a 40 per cent penalty rate of tax on large multinationals that attempt to shift their Australian profits offshore to avoid paying tax.
“By making sure multinational companies pay their fair share of tax, we can ensure the tax paid by small and medium enterprises is as low as possible,” Senator Cormann said.
Labor said the arrangement between the Government and Nick Xenophon Team that got the Bill through – which included a one off payment of $75 to singles and $125 to couples who receive the aged, disabled and carers pensions, to cope with rising electricity prices – is a “dirty deal” that would do little to stimulate the economy.
However, Senator Cormann said the cuts will lead to increased employment opportunities and higher wages.
“Many businesses across Australia and their employees will benefit from the increased investment, the increased job security and the increased opportunities for more jobs and higher wages that will come from legislating this plan today,” he said.
“After a lot of good and effective work by crossbenchers in the Senate, the government believes we have been able to achieve a consensus across the chamber to reduce company tax.”
ACSA CEO Pat Sparrow said that while the changes won’t impact many of its members, the association welcomes any changes that support the industry as a whole.
“As they are predominantly not-for-profit organisations, very few ACSA members would be affected by the changes to the company tax rate cut. However, some have structured their business in such a way they will benefit from it,” she said.
“ACSA supports any measures that make the aged care industry more viable. This measure needs to be balanced to ensure a broad enough tax base so government support for social services such as aged care is sustainable.”
Business Council chief executive Jennifer Westacott welcomed the news, saying it is an historic step towards rebooting Australia’s international competitiveness and prosperity.
“It is now imperative that parliament continue negotiating the full passage of the Enterprise Tax Plan, which should remain in the budget as the only policy on the table to revive the economy with better jobs and higher incomes,” she said.
“There is no Plan B to get the economy moving again.”