Ever since the Coalition government announced its $60 billion plan for a company tax cut, Opposition leader Bill Shorten has made merry with rhetoric about the money going to big banks, multinationals (who he simultaneously argues don’t pay tax anyway) and mining billionaires.
It’s fertile ground with Australians feeling they’ve been handed the short end of the ATO stick, playing into Labor’s narrative that Malcolm Turnbull is a Big End of Town toff.
But his announcement on Tuesday that Labor would repeal the tax cuts for companies with an annual turnover between $10 million and $50 million — a “captain’s call” made by Shorten without consulting the shadow cabinet — is every bit as stupid as when former Prime Minister Tony Abbott decided to knight Queen Elizabeth’s consort, the Duke of Edinburgh (a move that damaged his credibility and some argue hastened his demise as leader).
The government steered the first part of its corporate tax cut plan through the Senate last year, and this week is making another attempted to get the rest of the package passed before Parliament rises for the winter break.
The result was that from this financial year, companies with a turnover of up to $25 million had a 2.5% reduction in company tax to 27.5%, with the drop then applying to businesses under $50 million in FY18-19.
With Labor ahead in the polls, and an election due within 12 months, Shorten’s announcement yesterday sends a shockwave of uncertainly through the country’s small and medium-sized businesses.
And it gets worse — a matter we’ll get to shortly — but for now, you can imagine that every successful business with a turnover of $10-50 million will be pulling out their business plan for the year ahead and adding the Shorten factor to the risk category.
A ripple of caution will go through employment and investment plans.
It’s damage that’s difficult to benchmark, but it will be there.
And compounding the problem is the uncertainty in Shorten saying Labor hasn’t yet made up its mind of whether the threshold for the tax reduction should be $2 million — the party’s current position — or $10 million.
To put that figure in perspective, there’s a hamburger joint in Sydney’s CBD, run by a franchise operator, that turns over $3 million annually.
The young bloke in charge is a long way from being the next Twiggy Forest. And Labor seems determined to make sure that remains the case.
The problem with Shorten’s measure is that plenty of businesses in increasingly competitive markets, from hospitality to agriculture, building and retail, have high turnovers with low margins. For many small businesses, the company’s profit is essentially the owner’s defacto salary.
Treasurer Scott Morrison says Labor’s policy will hit around 20,000 businesses with turnovers of between $10-50 million. They have an average of 75 employees. All up, that’s around 1.5 million workers.
Morrison didn’t hold back in invoking one of Labor’s worst leaders of all time when he said Shorten had turned former leader Mark Latham’s “ladder of opportunity” into “the snake of envy”.
A company with a $10 million turnover might have 10-20 employees, or less. They’re in a growth phase, investing any profits back into the business, including with more employees. They already have one eye on the thresholds for state-based payroll taxes, which is essentially a government fine for employing people.
Shorten can run a case against big business, but the people he’s now targeting with this policy are not run by CEOs on multi-million salaries. They’re the people driving innovation, building the next Atlassian. It’s the sector where the government’s company tax cut will have the greatest impact, giving them additional capital to plough back into growing.
It’s even stranger that Shorten’s surprise announcement came just a day after frontbencher Anthony Albanese called on Labor to build better relationships with business. The Labor leader’s response on Tuesday was essentially “Yeah, nah”.
The fact that Labor would even consider $2 million as its threshold shows how distant the party is from the reality of business in Australia.
*This column is the author’s opinion.
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