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Monday, 12 February 2018
Page: 796

Senator FIERRAVANTI-WELLS (New South WalesMinister for International Development and the Pacific) (16:50): I table a revised explanatory memorandum relating to the Treasury Laws Amendment (Enterprise Tax Plan Base Rate Entities) Bill 2018. I move:

That these bills be now read a second time.

I seek leave to have the second reading speeches incorporated in Hansard.

Leave granted.

The speeches read as follows—


This Bill clarifies that passive investment companies do not qualify for the lower company tax rate.

The amendments in this Bill will introduce a clear test that enables companies to determine whether they are eligible for the lower rate of tax of 27.5 per cent.

Companies that derive more than 80 per cent of their assessable income in passive forms will not be able to access the lower company tax rate. The 'passive income' test replaces the 'carry on a business' test as a requirement for access to the lower company tax rate. The new test will have effect from the 2017-18 income year. It will make it easier for companies to determine which tax rate applies, thus providing companies with greater certainty about their taxation liabilities.

The Turnbull Government is reducing company tax to make Australia a more attractive location to do business. A lower rate will enable companies to reinvest more of their profits, grow their businesses and increase employment.

The consequential amendments in this Bill will align imputation arrangements with the new test.

Full details of the measure are contained in the explanatory memorandum.


This Bill represents the second part of the Government's overhaul of the Australian company tax system, and our commitment to the businesses of Australia that drive growth, provide employment and grow exports.

This Bill follows the Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016 to deliver the remainder of the Government's plan to cut the company tax rate.

This Government will not rest until we have successfully fought to implement a company tax framework that sets our country up to have higher paying wages and more jobs for future generations. We cannot do that until we have a company tax rate that allows us to compete globally and allows our businesses to reinvest and hire more employees.

On 31 March 2017 the Government announced that it had Senate cross bench support to cut the company tax rate for companies with an aggregated turnover up to $50 million. The Government successfully passed the Bill in this House on 9 May 2017. This is a good start, and impacts around 3.2 million businesses employing over 6.5 million workers. However, we cannot afford to stop there.

Under this Bill, which I am introducing today, the turnover threshold to qualify for a lower tax rate will be progressively raised to cover all companies by 2024-25, before the company tax rate is reduced to 25 per cent for all companies by 2026-27.

While the cut in company tax for companies with a turnover of less than $50 million is a good start, Australia must continue with the second stage of this reform to make the nation's company tax rate internationally competitive.

When Australia cut its company tax rate to 30 per cent in 2001, there were 19 countries in the OECD with a higher company tax rate. Now only four OECD countries have a statutory company tax rate higher than Australia's.

Furthermore, both France, and as President Trump announced recently, the United States have plans to cut their corporate tax rates below 30 per cent. The US Government's tax reform plans call for a 15 per cent rate, while France is also expected to cut its corporate rate with the new President-elect, Emmanuel Macron supporting a 25 per cent rate.

These developments intensify the pressure on corporate tax rates around the world, and raise the prospect of Australia having the least competitive corporate tax rate in the OECD before long.

The company tax rate is critical because it has a significant influence on business investment decisions. A lower company tax rate, compared with other countries, will raise the attractiveness of Australian investments — making it easier to for companies to attract the foreign investment they need to grow their businesses.

More business investment, such as upgrades to machinery and equipment, would make Australian workers more productive and generate growth in real wages.

Treasury's economy-wide modelling suggests a cut in the corporate tax rate to 25 per cent would generate a sustained increase in the level of GDP of just over 1 per cent in the long term. Legislating the rest of the company tax cuts now will allow businesses to base their long-term investment decisions on a 25 per cent tax rate.

Critically, for the workers of Australia, the majority of the gains from a company tax cut are expected to flow through to Australian workers in the form of increases in real wages. This is why the Government's Enterprise Tax Plan is essential to supporting Australian jobs and wages into the future.

Full details of the measure are contained in the explanatory memorandum.

Debate adjourned.

Ordered that the bills be listed on the Notice Paper as separate orders of the day.