As all of us sit down to finalise our accounts for the past financial year, owners of fuel retail and distribution businesses with less than $25M are discovering the benefits derived from the application of a reduced tax rate – from 30% to 27.5%.
In addition, businesses with turnovers of less than $50M are preparing forecasts for the next financial year based on their entitlement to the same concessionary rate from 1 July 2018.
These concessions have been hard earned by repeated advocacy over recent years and ACAPMA, together with most of the business community, has applauded the reduced tax rates in the face of ever increasing wage and business costs.
But the benefits of these reduced tax rates may be short-lived, given an unplanned announcement by Federal Labour this week that they intend to increase company rates back to 30% for businesses with total revenue of just $10M – and potentially down to businesses with annual turnover exceeding a mere $2M.
At a general level, the timing of this statement – as businesses finalise financial accounts for the current year and prepare financials for the forward year – is extraordinary, given that it introduces uncertainty about the future tax position of all businesses with more than $2M.
This uncertainty is likely to result in businesses adopting a ‘wait and see’ attitude to near term investment, which could potentially contribute to a slowing of recent good economic growth.
A development that is not in the interest of anyone.
“But the debate was much more relevant for our industry as it pointed to the fundamental problem of determining tax rates based solely on turnover”, said ACAPMA CEO Mark McKenzie.
In justifying the tax increase, many statements were made that a business with turnover was the big ‘end of town’.
This assessment fundamentally misses that point in that turnover is not a measure of profit.
“In our industry, a family owned business with two average volume service stations – and 12 staff – will turnover between $12M and $16M depending on the fuel price”, said Mark
From that, they return around 46% to the federal government in fuel tax and GST and pay an average of 45% to the fuel supplier for the fuel they purchased.
This means that the service station captures around 9% of gross income and from that they must pay wages (which have increased by 6.8% in the last two years), electricity (which has increased by 80% in the last two years), and a range of other business costs, said Mark.
“All of this against a backdrop of 4% CPI increase in the last two years and accusations that they are somehow gouging motorists in the face of high oil prices”, continued Mark.
“Fuel retailers are businesses and that is a fact that the Australian community has to get used to, but the Labour party announcement was the last straw for us”, continued Mark.
So, ACAPMA teamed up with the Council of Small Business Organisations of Australia (COSBOA) to voice staunch and loud opposition to the planned repeal of the business tax cuts.
“This included a range of media statements and an unplanned trip to Canberra yesterday to complain to every labour MP we could find”, said Mark.
While ACPMA will always strive to be politically neutral – as rightly required by our members – we will call out politicians regardless of colour, if we believe that they are championing a policy that is going to make it harder for our members to maintain a sustainable business.
“Sure, we raised a few eyebrows”, said Mark.
“But if we didn’t make a noise on this, we could have rightly been criticised by our members for not fighting for their interests in the face of a policy that was grossly unfair to small and family owned fuel retail businesses – and the people they employ”, concluded Mark
Anyone wishing to discuss ACAPMA’s stance on Federal Labour’s proposal to increase taxes for businesses with revenue below $50M is encouraged to contact the CEO, Mark McKenzie, by calling 1300 160 270 or emailing firstname.lastname@example.org.