Small business tax cut boosts economy, creates jobs

COSBOA: Small business tax cut could boost Australia’s economy by $11.4 billion and create 3,370 permanent jobs.

In Short

COSBOA’s economic modelling suggests that reducing the small business tax rate from 25% to 20% could boost the economy by $11.4 billion and create around 3,370 jobs.

CEO Luke Achterstraat urges major parties to adopt this fiscally prudent proposal, which could enhance cash flow, innovation, and overall economic growth for small businesses.

Economic modelling by the Council of Small Business Organisations Australia (COSBOA) indicates a reduction in the small business tax rate from 25% to 20% could enhance the economy by up to $11.4 billion and create approximately 3,370 permanent jobs.

COSBOA’s CEO, Luke Achterstraat, described the tax cut as “fiscally prudent” and beneficial for economic policy, noting it could stimulate cash flow and business growth.

Achterstraat stressed the importance of this proposal for small businesses, emphasising that it would lead to increased economic growth, innovation, and productivity. He explained that the modelling suggested the GDP could rise by $10 for every $1 lost in tax revenue, resulting in significant economic benefits and minimal budget impact.

Adopt the policy

As the 2025 election campaign progresses, Achterstraat called on major parties to consider adopting the policy, highlighting its potential to support small businesses, particularly following challenges from the GFC and Covid-19.

The modelling evaluated three scenarios for tax reduction implementation: an immediate cut in 2025-26, a phased approach to 2027-28, and another to 2029-30. Each scenario showed substantial benefits for small business cash flow, investment, and job creation.

Under the immediate reduction scenario, Australia’s GDP could increase by about $11.4 billion over five years, with net gains of roughly $10 for each $1 of lost revenue. This tax cut could provide essential relief for small businesses, allowing them to focus on their operations and community service.