Bruce Billson denies the government is under pressure to dump 1.5% small business tax cut

Small Business Minister Bruce Billson has played down speculation he and Prime Minister Tony Abbott are under pressure to drop the government’s proposed 1.5% company tax cut for small businesses from this year’s budget in favour of accelerated depreciation for small business capital purchases and wages.

Fairfax reports two members of the Coalition parliamentary party with small business experience – Craig Laundy and Bert van Manen – have told Billson and Abbott an accelerated depreciation rate would have greater benefit to the small business community.

This is one of three tax options presented to Billson’s office in a letter from Peter Strong, executive director of the Council of Small Business of Australia.

In a copy of the letter seen by SmartCompany, COSBOA also nominates an accelerated depreciation rate of 150% for capital purchases and wages as its preferred reform to tax arrangements for small businesses.

“The 1.5% tax break recently proposed by the Prime Minister whilst welcome will not have a big impact on confidence or business activity,” Strong said in the letter, which also canvasses other options for government assistance to small business, including support for employment, training and skills, local economic development and the removal of fringe benefit tax for childcare and health services offered by employers to their staff.

“We believe we need a more substantial policy in the tax area if we are to have a real impact.”

But Billson told SmartCompany this morning, claims the government is under pressure to drop the slated company tax cut are “slightly misrepresentative from what’s going on”.

Billson says, as part of a consultation process, the government invited input from the small business community.

“It’s not a question of either or, or one measure versus the other,” he said.

Billson says the 1.5% cut to the company tax rate, first flagged by Abbott during a speech at the National Press Club, is “the starting point and we are working to go beyond that”.

He says the government is looking at three themes to support small business, including a reduction in tax paid on income, what government can do to re-engage enterprise activity, including reforming employee share schemes, and red-tape reduction measures.

“That’s why we’re formulating a range of measures and we recognise there is no silver bullet,” he said.

Strong also hosed down speculation COSBOA would like to see the government drop the proposed tax cut, saying “of course we’ll grab it”.

But he says it is clear the proposed tax cut will not reach all Australian small businesses, many of which are not incorporated.

“That’s why the big issue is how small business is defined,” he said.

Strong says a 1.5% cut to company tax is “still good” but says other measures outlined by COSBOA in the letter to Billson’s office would likely deliver more substantial benefits to SMEs.

A key proposal from COSBOA is to decentralise planning for industry and economy development to local councils, trials for which it says could be completed in four locations for a total cost of $4 million. The idea would involve local councils being responsible for bringing together local small businesses to develop economic development plans.

“These are communities they [politicians] never visit but they think they know what’s best,” he said.

Laundy declined to comment when contacted by SmartCompany this morning. SmartCompany contacted van Manen, but a response was not available prior to publication.