Small business is expected to cop a $26.6 billion increase in costs as a result of the Henry Tax Review due to increases in the compulsory superannuation rate says Bruce Billson Shadow Minister for Small Business, Deregulation, Competition Policy and Sustainable Cities.
The Rudd government’s response to the Henry Tax Review will add further taxes and costs to thousands of small businesses Mr Billson claims. Small business run as a sole trader or partnerships will not benefit from the government’s reduction to the corporate tax rate. By the government’s own estimates, two thirds of Australia’s 2.4 million small businesses will miss out on a cut in corporate taxes.
Small businesses that are incorporated however stand to benefit significantly from the Government’s response to the Henry Tax Review, with the planned 28 percent company tax rate effective July 2012, compared to 2014 for larger corporate entities.
Liberal MP Bruce Billson contends that more than 640,000 small businesses will be slugged with an additional tax on their payroll thanks to the government’s increase in the superannuation guarantee.
“What the government has given with a two percentage point reduction in corporate taxes it has more than taken back with a three percentage point increase in the superannuation guarantee.” He said in a statement.
Instead of being better off under the government’s proposed tax cut, the Liberal Party contends many small businesses will actually be far worse off. For example (Liberal Party Numbers):
- By 2019-20, for every $1 in tax savings, small business will need to pay about another $25 in compulsory superannuation costs. This means radically higher costs for small business – costs that will reduce employment, reduce investment, and cause thousands of small businesses to close.
- In the whole period to 2019-20, small business will save approximately $2.4 billion in taxes, but will have to pay an extra $29 billion approximately in compulsory superannuation. This means small business will be $26.6 billion worse off.