POLL: “Jobs and growth” the tax cut goal, but how is that panning out?

In the 2016-17 federal budget, the government announced that it will reduce the corporate tax rate progressively from 30% to 25% over the next decade. “Jobs and growth” tax cut goal, how that panning out?

First off the block were small businesses, which from July 1, 2016 pay tax at 28.5%. Eventually (by the 2026-27 income year) all firms, regardless of size, are to pay tax at a 25% rate. The stated aim is that the reduced tax take from businesses will promote the creation of employment and will go towards growing of the economy.

To test the theory (admittedly early in the game), Tax & Super Australia held a poll of its members, who are predominantly tax and BAS agents, accountants and other tax and super professionals, which asked for feedback on how these professionals’ business clients had so far been directing the savings generated by the tax cut.

The question asked was: “Since the tax rate for small businesses reduced to 28.5%, which of the following options (choose one) would your small business clients have been more likely to have actioned?” The options to choose were: Employed more staff; Bought plant and equipment; Saved for a rainy day; Paid down debt.

The poll was taken over one month to mid-October 2016, and the results were…

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As an indicative sample, the results seem to suggest that the priority for business owners so far has been to pay off amounts their enterprise owes. After that it seems the next priority is to put a little something aside to act as a buffer should general economic conditions go sour.

The next priority seems to be to invest in their business’s future by buying business assets, with finally the smallest portion put aside for employment goals. Time will tell, but if the finish line is “jobs and growth”, the business tax cut has definitely started at the back of the field.

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