Bringing forward tax cuts for small and medium businesses could win Labor’s support, meaning the coalition won’t have to negotiate with a tricky Senate.
Under the plan, companies with annual turnovers below $50 million will have their tax rate cut to 26 per cent in 2020/21, then 25 per cent the following year.
Prime Minister Scott Morrison is confident of winning support for the plan, which would bring the cuts forward five years at a cost of $3.2 billion.
“We will be bringing in the legislation next week to make those accelerated tax cuts for small and family businesses more in this country,” he told a business lunch in Melbourne on Thursday.
Labor leader Bill Shorten isn’t ruling out supporting the proposal.
“We will keep an open mind on this question as we examine the numbers, but the other criteria we have is that our first priority is to properly fund our schools, to properly fund our hospitals,” he told reporters in Brisbane.
Businesses turning over up to $50 million had their tax cut from 30 to 27.5 per cent last year.
The government had initially planned to implement further rounds of tax cuts in 2024/25 and 2025/26, but now wants to fast-track the plan.
Mr Morrison believes key crossbench senators who rejected the coalition’s plans to slash tax for big businesses in August will back the step.
The prime minister said the change won’t affect the government’s plan to return the budget to balance by 2019/20, followed by a more hefty surplus the following year.
Mr Morrison is using the tax cut plan to highlight a policy difference with Labor ahead of the next election.
“Labor’s five-point plan, as they said on the weekend: more tax, more tax, more tax, more tax, more tax,” he said.
The government claims the tax relief will benefit more than three million small and medium-sized businesses.
Shadow treasurer Chris Bowen is worried about the total cost to the budget.
“They are so desperate to throw cash at issues, whether it be small business tax cuts or other issues for their political purposes that they have thrown out their own budget rules,” he said.
Australian Chamber of Commerce and Industry chief executive James Pearson said the move would be a major boost for small businesses.
Business Council chief executive Jennifer Westacott said the cuts would breathe life into businesses in cities, towns and regions.