Earlier this month, Prime Minister Tony Abbott announced the government would look at cutting the company tax rate as part of an overall review of the tax system.
The tax and compliance costs of small businesses was the focus of his speech at a lunch event hosted by the Australian Chamber of Commerce and Industry (ACCI).
The ACCI immediately welcomed the proposed cut as a way to help small businesses in tough economic times.
However, it was still a concern that larger companies will still face one of the highest corporate tax rates in the developed world.
Business tax around the world
Australia has one of the highest rates of company tax in the developed world at 30 per cent. The OECD average is only 25 per cent.
Australia must be competitive in a global economy if it is to maintain its high levels of prosperity. To do this, the local business environment must encourage companies in Australia to be able to grow and remain profitable.
Tax and compliance cost are a major part of how successful small business can be, but according to KPMG, Australia has one of the highest rates of company tax in the developed world at 30 per cent. The OECD average is only 25 per cent.
Most of Australia’s major trading partners have a company tax rate that is lower. New Zealand (28 per cent), UK (21 per cent) and China (25 per cent) all have company tax rates less than 30 per cent.
Only the United States has a significantly higher company tax rate, at 40 per cent.
A weakening economy has put lowering company tax and reducing business compliance costs back in the spotlight. A survey from earlier this year found 47 per cent of small businesses in Australia felt red tape and compliance costs were holding them back.
Australian tax review
The government recently released a discussion paper on the how the Australian tax system should operate going forward.
The document states that “the government is committed to reducing the regulatory burden facing all Australian businesses, including small businesses”.”
The current tax system was negatively affecting many aspects of the small business sector, such as how they were structured, the interaction between personal and business tax paid as well as how much time and money businesses spent on compliance.
A comprehensive review of the tax system should complement other efforts being made to reduce compliance cost for small businesses, according to the Prime Minister.
Lowering the burden of tax and regulation is essential if Australia is to remain a competitive place to operate a business. Having a form of small business accounting software can be one way to make dealing with tax and compliance costs much easier.