Small business to save $5 billion in taxes over two years, says Treasurer

Treasurer Josh Frydenberg is drawing battle lines around tax policy ahead of the upcoming federal election, revealing that existing tax cuts will save small business $5 billion over two years.

In a statement released today, Frydenberg said Treasury analysis shows that small businesses will be more than $2.5 billion better off this year and $2.4 billion better off next financial year as a result of the Morrison government’s tax relief and investment incentives.

“JobKeeper, the cashflow boost, tax cuts and record investment incentives have allowed small business to play a key role in the recovery,” Frydenberg said.

The existing measures that will contribute to the tax relief include the reduction in the company tax rate from 30% to 25% for some businesses, and an increase in the unincorporated small business tax discount rate to 16% this year.

Treasury’s analysis also looked at measures the government adopted during the COVID-19 crisis, such as the instant asset write-off scheme which allows small business to write off investments, and the loss carry back tax offset aimed at boosting cash flow.

Frydenberg said these tax relief measures contrast to Labor’s proposed tax on discretionary trusts, which would impose a tax rate of about 30% on small businesses run in some types of discretionary trusts.

Labor first proposed the 30% tax rate for discretionary trust distributions to adults in 2017, which the party said at the time would help prevent high-wealth individuals from minimising tax obligations.

Labor, however, hasn’t confirmed whether it will adopt the same policy if it wins the 2022 election. Labor has so far indicated it will enter the upcoming election campaign with a focus on taxing multinational companies operating in Australia.

Speaking on ABC’s Insiders program on Sunday, Shadow Treasurer Jim Chalmers said that the Opposition hadn’t finalised its complete tax policy agenda.

As Frydenberg highlighted the benefit of the Morrison government’s tax cuts for small businesses today, Treasury also published previously unreleased single-touch payroll data from the Australian Taxation Office.

The data shows that between April 2020 to the end of September 2021, small businesses with less than 20 staff created 300,000 jobs, while medium businesses with less than 200 employees also created 300,000 jobs.

“Despite the challenges from COVID-19, small and medium businesses have created 600,000 jobs right across the country,” Frydenberg said.