Labor to keep $30b tax cuts passed by Malcolm Turnbull but repeal any changes for biggest businesses

Labor would repeal the Turnbull government’s tax cut for the biggest companies if passed by the Senate, but is likely to retain the cuts legislated in 2017 for companies with turnover below $50 million.

Sources say the opposition “will seek to repeal the company tax legislation and settle on a final position on what passed the Parliament last year”.

Currently the lower rate is legislated to apply only to companies with aggregated turnover of less than $50 million from the 2019 financial year onwards.

Chris Bowen and Bill Shorten speaking at a press conference earlier this year.
Photo: James Brickwood

Labor's approach - a mix of pragmatism and fight - sets the stage for a high-octane argument over business costs and sovereign risk at the next election, while giving Labor some $35 billion extra to use for new spending and budget repair.

It would also put the ALP on a collision course with the big business lobby, which has been increasingly engaged in the company tax push, and which could be expected to become more outspoken if the cuts for major companies become law but then face repeal under a change of government.

As the Coalition edges towards an unlikely deal with Senate crossbenchers that would see the 30 per cent company tax rate dropped to 25 per cent for all companies by 2027, Labor’s response is critical given its consistent lead in the polls.

Suffering his 29th consecutive Newspoll loss this week, Mr Turnbull has pinned his government’s recovery on securing the unlikely corporate tax relief - an outcome considered all but impossible through such a hostile Senate.

The Coalition argues the 25 per cent rate is vital to maintaining Australia's international competitiveness and would also fuel an investment and jobs boom leading to wage rises.

The laws already passed cost $29.8 billion in foregone revenue over a decade, while the remainder of the package would cost another $35.6 billion.

The mood within Labor is unusually settled behind the repeal option with MPs and frontbenchers from all factions of the party, expressing confidence that the party is on the right track by excluding larger firms such as the big four banks and the biggest resources companies.

Shadow treasurer Chris Bowen left little doubt as to his party’s ultimate direction, if not the final turnover threshold.

“Labor will continue to fight against the government’s $65 billion company tax cuts,” he told Fairfax Media.

“Labor’s response will continue to be guided by our longstanding view that the big business tax cuts are an unfunded budget wrecking ball and Labor’s cheaper, fully funded Australian Investment Guarantee, which directs tax relief only when investment in Australia occurs, is the better way forward.”

Earlier on Monday, former treasurer Wayne Swan showed contempt for the Business Council of Australia, which last week wrote to Senate crossbenchers, suggesting that the reduction in company tax liability would lead to greater domestic investment, more jobs and better pay.

“Their ultimate aim is to milk our economy dry. Effectively they will do this. They will push up tax rates for other Australians, and they will take vital money away from health and education," Mr Swan said.

“This is the equivalent of simply getting a B-double [truck], driving it down to the Treasury, backing it up, sucking out $65 billion and then handing it around to themselves and to their shareholders.”

Explaining Labor's determination to roll back the Coalition's policy despite the risk of appearing anti-business, another Labor MP said "the world had changed" after some six years of wage stagnation during which company profits have soared.

The MPs said that politically for Labor, the response from voters struggling to meet household costs would be harsh if it simply backed the government's tax cut.

But in the Senate, the government's chief negotiator, Finance Minister Mathias Cormann said he could "guarantee" that Australian working families would actually be better off once the business tax cuts were passed in full.

He accused Right faction-aligned Labor figures, such as Mr Shorten and Mr Bowen of changing their tune on company tax cuts simply because the government proposed them.

Senator Cormann said to Labor in the Senate that if the cuts are blocked "we [Australia] will ship jobs and investment overseas, and it will be on your head".