Common sense could be the winner from Labor’s backflip on business tax

By James Pearson, CEO Australian Chamber of Commerce & Industry

Many Australian businesses breathed a sigh of relief last Friday when common sense prevailed amongst the ALP’s leadership team.

They backed away from a tax hike on many small, medium and family businesses in response to widespread community concern.

The Australian Chamber of Commerce and Industry, Australia’s largest and most representative business group, had made clear the impact that would have had.

A tax hike would have penalised some 20,000 hard-working small and medium and family businesses.

20,000 businesses who employ well over one million people.

One million people whose employers would have had to play a guessing game because they didn’t know if they would be able to keep the tax cut which Parliament made law last year or if it would be replaced by a tax hike if Labor wins the next election.

But we’re not out of the woods yet.

The Opposition plans to block further tax cuts for hundreds of thousands of small, medium and family businesses with a turnover of less than $50 million.

This despite the fact those tax cuts have already been passed by the Parliament.

That means no more tax relief for businesses which employ millions of people.

The law says these businesses will get a further cut in tax, from 27.5% to 25%, phased in over three years starting in 2024-25.

Labor says they won’t.

That’s left the businesspeople the Australian Chamber represents scratching their heads, because Labor in 2014 called for taxes for small businesses to be cut down to 25%.

And there’s no tax relief at all for the thousands of businesses with a turnover of over $50 million who again support millions of jobs, because those tax cuts have been blocked by the ALP, The Greens, and several cross bench senators.

They will be paying a 30% tax rate, higher than other Australian businesses and higher than businesses in many other countries with whom they have to compete.

But I’m hoping the common sense that Labor’s leaders showed last Friday encourages more politicians – in Labor and on the cross bench – to recognise that backing business to succeed is the sensible way to create more and better jobs.

That’s because more than eight out of ten jobs in Australia are jobs in business.

But those jobs aren’t guaranteed.

If it gets too hard and too expensive to run a business in Australia, then there are plenty of businesses and people in other countries who are ready to step in and provide Australians, and Australia’s customers overseas, with the goods and services they need.

You only have to look at the rapid rise in online shopping, and the way our exporters have to fight tooth and nail to win markets overseas, to see the truth in that.

And when it comes to backing business, we need to recognise that businesses large and small are all in this together.

They depend on each other.

In many industries in Australia, small businesses do most of their business with big businesses, and vice versa.

In construction for example, think of all the small businesses that supply big companies with the trades, the materials, the fittings and the furnishings that go into building and running a big office building, apartment block or shopping centre.

Putting a magic dividing line between small business and big business, and saying that a $49 million turnover business deserves a tax cut but a $51 million turnover business doesn’t, flies in the face of common sense.

If one succeeds, so does the other – and that means the people who work in those businesses are more likely to keep their jobs, go on to get better jobs, and their kids to get jobs too.

Common sense says we should encourage our politicians to back business, not pull business down.

Because when businesses go down, so do the people who work for them and the local communities that rely on them.

The very same people and communities that politicians say they stand for.