HENRY TAX REVIEW: Cut in company tax to 28%

The Government has ignored Ken Henry’s recommendation to reduce company tax to 25%. However, the Federal Government will reduce the company tax rate from 30% to 29% for the 2013-14 income year and to 28% from the 2014-15 income year.

Better still, small business gets the jump early. Companies under $2 million revenue move straight away to the new 28% rate from the 2012-13 income year. The Government estimates that more than 720,000 companies will be eligible for the cut.

This move is predicted to cost the Government $50 million in that year, followed by $300 million the following year and $200 million in 2013-14. 

Overall the company tax cut that includes the small business “head start” will cost the ATO coffers $2.2 billion by 2013-14.

The cut in company tax will move Australian from 22nd to 17th among similar OECD countries. And of course, one can argue that 17th is still a fail. And we are likely to keep sliding back as more companies around the world continue to lower the company tax rate, recognising that a lower company tax rate means a greater investment in companies, growth, jobs and higher wages.

But it’s a start and will make Australia a more popular investment destination. And as the Government has been happy to remind us in their fact sheet today, who can forget the 49% company tax rate of the mid-1980s?