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Labor's decision good - let's go the rest of the way and be competitive

COSBOA welcomes the announcement by Bill Shorten that the tax rate for businesses with a turn-over up to $50m will be 27.5%. We also welcome the decision to agree on the threshold for definition for a small business for other tax initiatives such as the instant tax write off to be up to $10m turnover. We appreciate that Mr Shorten and his team have heard our arguments against raising taxes for businesses with annual turnovers below $50M. Although this decision does threaten the legislated tax cut to 25% for businesses with turn over up to $50m. There are some 20,000 business people and their employees who will be disappointed.

We urge all Federal politicians to lower the company tax rate to 25% for all businesses sooner rather than later. The rapid lowering of tax rates in other countries means that we too must reduce our rates at the same (or faster rate) if our businesses are to remain globally competitive and keep Australians employed in them.

Given that many small businesses earn income selling their products and services to big businesses, it is vital that big businesses receive the same tax cuts so that they maintain their global competitiveness and keep buying services from Australian small businesses.

The tax rate should be the same for all businesses if innovation, productivity and prosperity is to remain high or improve.

The debate of the past week highlights the need for all of us to recognise the very big difference between turnover and profit - for businesses any size. A service station with a turnover of $8M, for example, hands half of this revenue back to the Australian Government in fuel excise and GST collections. A further 40% goes to the fuel provider to pay for the fuel they bought. So, although the revenue is high, the amount actually captured by the owner of the service station is 10% to fund all business costs and return a modest profit.

Similarly, an independent grocery store in a regional area will earn $16M in revenue but earn just $96,000 in profit (0.6% of total revenue)

Let’s get tax rates down to 25% and put a better definition of a small business in place for future discussions about the taxation and regulation of businesses based on size.

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