Federal election 2025: Small business sector calls for 20 per cent tax rate as costs climb

The Australian small business lobby is calling on the next government to deliver a small business tax cut, proposing the company tax rate for firms earning under $20 million be reduced to 20 per cent to drive small business investment and boost the economy.

The Council of Small Business Organisations (COSBOA) says the Australian small business sector has borne the brunt of the cost-of-living crisis and is being choked by “suffocating red tape”, leaving many firms struggling to survive.

“This tax cut would provide instant respite to Australian small businesses and let them focus on what they do best: running their businesses and serving our communities,” COSBOA chief executive Luke Achterstraat said.

“Investment growth has been lacklustre in Australia, leading to reduced competition, higher prices and lower living standards. RBA research confirms lower tax drives new investment.

“With this simple, sensible change, Australian small businesses will be primed to thrive now and into the future. They will be better able to contribute to the economy and their communities.”

COSBOA surveyed small business sentiment around the election and found Peter Dutton enjoys stronger support among small business voters, with a net favourability of zero. This is significantly higher than his national average of minus 22 points. In contrast, Prime Minister Anthony Albanese holds a net favourability of minus 20 among the same group, below his national figure of minus 16.

The organisation surveyed more than 2,000 voters between November and March, including over 1,200 in marginal seats. The research found 69 per cent of voters support the proposed small business tax cut, rising to 76 per cent in marginal electorates.

“Small businesses are the engine room of the Australian economy and part of our social fabric. But they’re doing it tough,” Mr Achterstraat said. “Like their customers, they’re bearing the brunt of the cost-of-living crisis. Red tape is increasing, and staff are getting harder to find. Our research shows that without urgent change, 50 per cent of small businesses are worried about surviving.”

“That’s why COSBOA is calling for sensible small business support policies to help businesses keep prices stable, employ more staff, and invest in innovation so they can compete with huge multi-nationals. Cutting the tax rate would have an instant impact and provide Australian small businesses with the fair go they deserve.”

COSBOA member Anthony Karnasiotis, owner of Goodfields Eatery in Sydney’s Lindfield, said his business has been hit by rising costs across the board, including wages, electricity and insurance.

“You name it and it’s gone up,” Mr Karnasiotis said.

He said the shifting industrial relations (IR) landscape had made business planning more difficult.

“All the changes to IR laws have been a challenge and we just want consistency for our business and our staff. The last three years have been especially difficult.

“The impact of a tax cut would be instant and huge. It would allow us to put money back into the business, hire more staff and absorb fluctuating costs so we don’t have to pass them on to our customers.”

The hospitality sector has been particularly hard hit by small business insolvencies, with ratings agency CreditorWatch finding one in eleven hospitality businesses closed in the past year. This is a record high.

Sector-wide insolvencies rose again in February to 1,273 after a dip over the Christmas period, following a record peak of nearly 1,400 businesses in November.

Meanwhile, small business owners are still waiting for clarity on the future of the Instant Asset Write-Off. This measure, a cornerstone of small business support policy, allows firms to instantly deduct eligible expenses up to $20,000. The scheme is due to expire on June 30.

Although legislation to extend the measure was passed by crossbenchers last week, the policy was notably absent from the Federal Budget.

Mr Achterstraat described the apparent discontinuation of the Instant Asset Write-Off, a mainstay of small business policy for nearly a decade, as “one of the worst decisions we’ve ever seen.”

COSBOA said small businesses comprise 97.7 per cent of all Australian businesses, employ more than 5.1 million people in our communities and contribute $500 billion a year to the economy.