In the lead-up to the 2025 Federal Election, Inside Small Business is breaking down what the major parties have promised to deliver across some key areas of interest to small businesses.
Earlier today, we summarised how the major parties plan to cut red tape for small-business owners.
In this article, we’re outlining all the tax-change promises relevant to small-business owners.
Here’s what the major parties have pledged:
Labor:
Labor’s tax sweeteners were less directed at small-business owners specifically than the Coalition’s. Nevertheless, it has promised to:
Renew the $20k Instant Asset Write-Off (IAWO) for another year: Labor has promised to revive the popular tax write-off for another year, which will allow businesses to immediately deduct eligible assets up to a ceiling of $20,000.
A new $1k automatic tax deduction: The party has also promised a new automatic $1000 tax deduction for work-related expenses – and no receipts or audits would apply. Those wishing to claim actual expenses, with full substantiation, could choose to do so instead of receiving the flat $1000 deduction.
Modest tax cuts: Labor has promised modest tax cuts for all taxpayers over the next few years. To help calculate the difference this would make for you, Labor released a tool on its Budget website.
Coalition (LNP):
The Coalition has been heavily courting the small-business vote this election campaign. It’s promised entrepreneurs that it will:
Introduce a new Entrepreneurship Accelerator: This would be a new tax offset initiative for businesses in the first three years of operation. New ventures would get a tapered tax offset starting at 75 per cent of their first $100,000 of taxable income, and 50 per cent for their second $100,000 of income in their first year of operation.
Raise the IAWO to $30k (and make it permanent): The LNP will slightly raise the IAWO cap and has pledged to make the scheme permanent to give business owners more certainty around investment.
Deliver a $2k ‘tech booster’ deduction: For the first two years of a Coalition Government, the party would make some tech purchases over $4000 eligible for a bonus $2000 tax deduction.
Make business-related meals tax deductible: Peter Dutton has also promised to make business-related meal and expenses tax deductible for small businesses, with a cap of $20,000. This policy was subject to a costings clash between the two major parties earlier this year, with Treasurer Jim Chalmers alleging the scheme would cost $1.6 billion.
Introduce a one-off $1200 tax offset for taxpayers earning between $48,000 and $104,000.
How much do tax incentives really benefit small businesses?
Some of the tax promises above revolve around tax deductions. These types of policies are popular with businesses and advocacy groups alike – COSBOA, for instance, is advocating for a $150,000 permanent IAWO.
But a recent discussion paper by the Reserve Bank of Australia concluded that evidence for tax incentives is “mixed at best”, in terms of encouraging additional business investment. After all, it’s all well and good to be able to deduct a new business investment, but you need to have the cash to make that investment in the first place.
Businesses want more
Though there are some promising policies, neither party has promised anything close to the major tax reform that business owners and advocacy groups are crying out for.
They’ve been asking for measures like company tax rate cuts, a rightsized GST system, and the overhaul or removal of payroll tax.
COSBOA, for instance, wants the company tax rate to be decreased to 20 per cent from the current rate of 25 per cent for businesses with an annual turnover of up to $20 million.
“Cutting the tax rate would have an instant impact and provide Australian small businesses with the fair go they deserve,” said COSBOA CEO Luke Achterstraat.
“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.”
