Once-in-a-generation SME tax reform would fix unemployment and deficit

If Australia is to recover from the worst economic downturn since the 1930s Depression, get one million mostly young Aussies back to work, and eliminate the debt-noose around the neck of future generations, the government needs a new social contract with its legion of family-owned small businesses.

Small business employs over 70 per cent of the workforce. The people who have been economically affected the most in this recession are not the ones still in full-time employment but the small-business owners and millions of young Aussies they employ.

We rarely hear politicians or unions ever mention the small-business sector that just keeps on doing, employing, and risking all for long hours, a doubtful pay-day and unimaginable daily stress to pay bills and make wages.

But what we do know is that governments and unions won’t dig this country out of its mountainous economic debt – small business will! They know better than anyone else how to rebuild their patch. They simply want the bureaucrats to “get out of their pockets and out of their way”.

Change urgently needed

To get on with their job, small business needs urgent tax reform.

Small Business Company Tax. This is already legislated to reduce from 27.5 to 25 per cent in the 2021-22 financial tax year. Implement it this financial year and leave small business owners’ hard-earned cash in their own hands. We should even go further and approach the rest of the OECD countries standard and reduce this to 20 per cent now.

Payroll Tax. Introduced as a “temporary state tax” in 1941 during WW2. It means employers need to pay their State government a further tax for employing people! It is anti-employment and limits the employers’ incentive to employ. Some States have commenced reducing it already to provide much-needed employment stimulus. This tax must be abolished now.

Stamp Duty. The State government takes a bite of so many transactions including

a tax on all house and car sales, driving the cost up. With these two important sectors in freefall, dumping this tax will incentivise their resurgence.

Fringe Benefit Tax. The Federal government takes a bite of anything it sees an employer getting that it deems a small luxury including charging employers for providing their employees a car park! The abolition of this tax would be a huge boom for the restaurant, bar, tourism, accommodation, private school and car sales sectors – all in desperate need of stimulus.

Capital Gains Tax. When small-business owners sell their business to retire and take their reward, the Federal government takes a bite of their life’s work. With so many small businesses never to re-open their doors again, we need to incentivise the next wave of small-business owners by abolishing this tax.

Asset write-off. Make the current temporary asset write-off in year one permanent and extend the limit to $100,000. This will encourage asset purchases and support the automotive and manufacturing sector.

But how do we pay for all this?

Good and Services Tax. A better balance between consumption and income tax is the fairest way forward. We need to bring Australia into line with other OECD countries and finish what the Howard/Costello government didn’t. We should apply GST to all products and services, without exemption and raise GST to 20 per cent and settle on an equitable sharing of GST with the States to compensate them for the loss of these tax bites that are debilitating to a small business. These taxes take so much time, angst and paperwork for small business to comply with – time they could spend out there growing and employing. Small business craves simplicity and clarity. 

John O’Brien, Founder and CEO, Poolwerx

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