The Government’s Enterprise Tax Plan is to progressively reduce the corporate tax rate from 30 per cent to 25 per cent for all entities. For companies with an aggregated turnover threshold of $50 million the corporate tax rate is reduced to 27.5 per cent in 2018-19 progressively reducing to 25 per cent in 2026-27.
High turnovers, low profit margins and large volumes of high value stock subject to floor plan finance are the characteristics of a dealership business. The high turnover characteristic means the lower corporate tax rate will not apply to many dealership businesses unless the threshold test is removed.
A more competitive corporate tax rate will encourage investment, enhance productivity, increase the level of economic activity and over time increase real wages and living standards. The economic impact of the new vehicle retailing sector in Australia is significant and the total turnover/sales amounts to over $54 billion and the estimated total economic contribution is over $12 billion.
The Government’s Treasury Laws Amendment (Enterprise Tax Plan No. 2) Bill 2017 introduced into the Parliament on 11 May 2017 will progressively extend the lower corporate tax rate to all corporate entities. Passage of the Bill will require bi-partisan and cross bench support.
- Australia’s statutory corporate tax rate is amongst the highest in the world compared to the US (21%) and Japan (proposed 21%).
- The aggregated turnover threshold test of $50 million means that many dealership businesses will not benefit from lower corporate tax rates under the Government’s Enterprise Tax Plan No. 1.
- Enterprise Tax Plan No. 2 currently before the Parliament will extend the lower corporate tax rate to all entities. Unless the Bill is passed many dealerships will not benefit from a lower corporate tax rate.
Treasury Laws Amendment (Enterprise Tax Plan No. 2) Bill is currently before the Parliament. AADA urges all Parliamentarians to support the Bill.