Nick Xenophon has signalled his party may be open to lifting its $10 million cap on business tax cuts after Treasurer Scott Morrison met with the crucial minor party senators in Adelaide on Friday morning.
Currently Senator Xenophon supports changing the company tax rate to 27.5 per cent tax for businesses with a turnover up to $10 million a year. This would mean the Turnbull government would have to split its contentious $48 billion, 10-year plan to cut corporate tax rates into smaller, cheaper tranches if it was deliver the small business tax cut this year.
Asked whether his team would be prepared to lift the cap higher, Senator Xenophon told AFR Weekend: "that's still the subject of negotiation".
Mr Morrison has been leaning on Senator Xenophon to support at least a $50 million cap on the tax cut because it would help the government meet its short-term election promise until 2018-19. The government would then be able take the next round of tax cuts - for businesses with turnover up to $100 million - ahead of the next election.
The government points out a $50 million turnover tax cut limit would also give an immediate boost to many iconic South Australian businesses, including Haigh's Chocolates.
Mr Morrison and Senator Xenophon and his team also discussed on Friday Prime Minister Malcolm Turnbull's plan announced this week to unifie multiple childcare subsidies into one means-tested payment.
The Turnbull government wants to put its company tax cut bill to the Senate by the end of March and Senator Xenophon said the government expected an answer from NXT in "coming weeks".
But Senator Xenophon said arguments by think-tank the Australia Institute – refuting Prime Minister Malcolm Turnbull's claims that lower company tax helps drive foreign investment – should not be ignored.
The analysis by the Australia Institute this week found 97 per cent of the applications to Australia's foreign investment review board came from countries with lower company tax rates, which suggested "giving tax cuts to foreigners" would not necessarily make Australia more attractive to the international investment community.
Mr Morrison said he'd "continue to work constructively with the crossbench".
"We will be introducing some important measures next week, and obviously they will ultimately go to the Senate and we will be seeking support from right across the board."
A large and influential slab of Australian business has given the government the green light to focus on passing a tax cut for small to medium business in the next two months, putting aside the politically fraught campaign for cutting big business taxes until the next election.
The Australian Industry Group's chief executive Innes Willox has taken the pragmatic position that it is better to lock-in the near-term goal now – he is pushing for a $100 million cap initially – and prosecute the case for big business tax cuts later once the economic benefits of lower taxes for 90 per cent of Australian businesses has been felt.
It represents an emerging split in the business community with AIG and the Council of Small Business Organisations urging the government to take the smaller more achievable victories now, compared to the Business Council of Australia and the Australian Chamber of Commerce and Industry both urging the government to hold out for company tax cuts for businesses of all sizes.
