"In our view, raising business investment is a leading priority in the current environment in which the Australian economy is rebalancing in the wake of the mining investment boom. In particular, this rebalancing requires the rejuvenation and re-capitalisation of the non-mining trade-exposed sectors so adversely impacted by the period of high currency which was closely linked to the surge in commodity prices.
"While the company tax measures would be phased in over an extended period, enacting the Enterprise Tax Plan would provide a more immediate catalyst for investment because the time horizon over which new investments were assessed would include years in which lower company tax rates applied.
"Relative to the OECD as a whole, Australia stands out having one of the highest company tax to GDP ratios. Further, the gap between Australia and the OECD average has increased over time as the share of company tax to GDP in Australia has trended higher.
"While Ai Group attaches a very high priority to each of the elements in Government's Enterprise Tax Plan, we also understand that there is considerable hesitation about some of the measures.
"If this hesitation were to prevent the passage of the Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016 in its entirety, despite it being very much a second best option, we would urge:
- The measures scheduled to take effect from 1 July 2016, namely the lifting of the small business entity threshold to $10 million; the reduction in the company tax rate to 27.5 per cent applying to companies of this size; and raising the discount for unincorporated small business entities from 5 per cent to 8 per cent be given priority; and
- Very strong consideration be given to introducing tax measures specifically aimed at lifting business investment over the next few years. Measures such as investment allowances or accelerated depreciation would have this impact.
Read Ai Group’s full submission here
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