Bill Shorten says Labor not targeting small business on trusts
Opposition Leader Bill Shorten says Labor will co-operate with small businesses but will still push ahead with its plan to limit the company tax cut and tax trusts at a flat rate of 30 per cent.
"The best contribution I can make for small business is to enable small business to pursue their own opportunities. We do it by a mindset of co-operation," Mr Shorten told the Vodafone National Small Business Summit on Friday.
Bill Shorten said while Labor backed the tax cut for businesses with turnover below $2 million, the tax cut for bigger businesses was misdirected.Credit:AAP
Company tax cut a '$65 billion tax giveaway'
Labor is opposing the governments full 10-year tax cut for businesses with turnover of more than $2 million, which Mr Shorten describes as a "$65 billion tax giveaway".
"When you have gross national debt rocketing past a trillion dollars taking $65 billion out of the Australian budget without replacement revenue or an offset cut to expenditure is reckless," he said.
"If you take $65 billion out of the national budget over the next 10 years and you don't replace that money with new revenue or the equivalent amount of budget cuts. What it means is that not only will we have less to do more with but we will also have to service the increased national debt."
Mr Shorten said while Labor backed the tax cut for businesses with turnover of under $2 million, the tax cut for bigger businesses was misdirected, with $7 billion of the $65 billion reduction set to go to the big four banks.
"When we talk about this being a reduction, the big banks do not need a corporate tax reduction," he said.
"Another big chunk of the corporate tax reduction which the government is pushing through will go to multinationals headquartered overseas. Up to 60 cents in every dollar of the reduction will go overseas.
"So it's champagne money for foreign shareholders but I'm not sure how thats a guaranteed driver of the Australian economy."
Mr Shorten said an across-the-board company tax cut would result in "billions of dollars" boosting the profits of overseas competitors many of whom already pay less tax than Australian businesses.
"As you know our system of dividend imputation means foreign shareholders will take a benefit from these tax cuts and because of dividend imputation mum and dad shareholders will not," he said.
Trust policy 'does not target small business'
While it is estimated 200,000 small businesses will be impacted by Labor's plans to crack down on income splitting through the use of discretionary trusts, Mr Shorten said the policy was not targeted at small business.
It's champagne money for foreign shareholders but I'm not sure how that's a guaranteed driver of the Australian economy.
Bill Shorten
"I understand that many small businesses use trusts for asset protection," he said.
"I understand we shouldn't just get rid of trusts and we shouldn't just tax all trusts as companies. I want to assure you the use of trusts for asset protection does not change under any policy we have outlined. It does not change.
"What we are proposing is a simple change. If you use your trusts to pay the parents so they can pay your kids' school fees, where adult children who are at university and these people do not work in your business. They are unrelated to your business. They just do it to minimise the tax threshold they have to pay. That is what we are looking at."
Mr Shorten said Labor's policy would target people like "successful investment bankers" or heads of accounting firms who earn $500,000 and get another $100,000 in passive income and distribute that to family members.
"This is actually costing the budget tens of thousands of dollars in each case," he said.
"Literally tens and tens of millions of dollars over a year and billions over a decade. That income-splitting workload, we think it is now time to bring an end to.
"This does not change your businesses, your asset protection. It does not change if you have family members working in your business, the tax that they are paid."
Mr Shorten said Labor's policy would not impact charitable trusts, deceased estates, disability trusts, farm trusts, fixed trusts, fixed unit trusts, public unit trusts or cash management unit trusts.
"When our gross national debt is now over half a trillion dollars we cannot allow a situation where a few fortunate high net worth individuals use discretionary trusts purely as a vehicle to minimise their tax it is not sustainable," he said.
"Our policy does not target small business. Our policy does not have an affect on 98 per cent of tax payers and the vast majority of taxpayers big and small."
Cara is the small business editor for The Age and The Sydney Morning Herald based in Melbourne