30 April 2015

Tony Abbott plays to small business on tax

Big businesses will be required to pay the top corporate tax rate on every dollar they earn as the ­Abbott government hands small business a 1.5 per cent tax cut and an accelerated depreciation ­allowance up to $10,000 in next month’s budget.

The Australian has learned that Tony Abbott’s razor gang plans to reject a push to extend the new 28.5 per cent rate to the first $5 million of profit for all companies and will restrict the tax cut to small business.

Business representatives are understood to be hostile to the move and have warned the government it would increase the ­incentive to structure companies artificially to get below the threshold. However, the decision will be popular with retirees and sharemarket investors because it will mean the level of franking credits on share dividends will ­remain the same.

The Australian has also been told there has been a fierce debate within the government on the definition of a small business that will be used to deliver the tax cut. Some argued for the 28.5 per cent tax rate to be cut off at $2m in profit but insiders believe the government will ultimately land at $5m.