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Council of Small Business Organisations Australia (COSBOA) revealed that cutting the small business tax rate from 25 per cent to 20 per cent could provide an $11.4 billion boost to the economy and result in 3,370 jobs.
There were three models floated for reaching this goal:
- An immediate 5 per cent reduction to 20 per cent in 2025–26.
- A phase-in approach where the rate reaches 20 per cent in 2027–28.
- A phase-in approach where the rate reaches 20 per cent in 2029–30.
According to COSBOA CEO Luke Achterstraat, each scenario would increase the cash flow of small businesses, retain earnings, loosen credit constraints, and boost investment.
It would also see an increase in productivity, wages, jobs, and economic growth, he said.
“Small businesses comprise 97.7 per cent of all Australian businesses, employ more than 5.1 million people in our communities and contribute $500 billion a year to the economy. In regional and remote Australia, areas more reliant on small businesses, they are the heartbeat of the community,” Achterstraat said.
“This tax cut is the one policy that can provide instant respite to Australian small businesses and let them focus on what they do best – running their businesses and serving our communities.”
As we approach the federal election, Achterstraat believes the lead-up has been lacking in reforms that benefit small businesses and the economy.
He said the proposed changes would be “fiscally prudent” and make for solid economic policy. It would also benefit all Aussies – not just those who operate businesses.
“With two weeks of campaigning left, this policy is free to be adopted by the major parties as a clear path forward for small businesses across Australia. The numbers are in – we can’t afford not to cut the small business tax rate to 20 per cent. It is fiscally prudent, targeted and will produce a growth dividend in uncertain economic times,” he said.
“Moreover, this is good economic policy because it addresses a significant burden on small business – especially after the GFC and Covid periods: it improves access to cashflow and credit on reasonable terms.
“Under this modelling, GDP would be boosted by up to $10 for every $1 in foregone tax revenue – that’s a compelling return. The flow-on effects of higher incomes and job creation assist in significant tax clawback and minimal impact on the budget. It is not just a win for small business, it’s a win for all Australians.”
