October 13, 2021

The Federal Government is set to announce a major shift in its GST policy next year that will see it introduce a two-tier system for tax in 2019.

Key points:Treasurer Scott Morrison says a two tier system will make it easier to “drain the swamp”The plan will “add some certainty” to businesses”Businesses will have the option of a flat tax, but the Government will be targeting “higher-income earners”, Mr Morrison said.”

This is a fundamental change that will be driven by the need to reduce the cost of doing business, and to ensure the people and businesses that employ Australians are able to do so more efficiently and cost effectively,” he said.

Under the new system, businesses will be able to choose a flat or two-level tax rate, but they will be charged for a portion of the profits they make.

Under this plan, businesses can choose to set aside their tax to help fund a reduction in their GST bill, but not their share of the tax to cover the costs of running the business.

The Treasurer says businesses will have a choice of a 2.5 per cent rate, or a flat 2 per cent.

He says the new 2.25 per cent GST will allow businesses to invest more, “and give them the ability to spend more” on “new technologies, research and development”.

He says a “significant portion” of the 2.75 per cent levy will go towards reducing the amount businesses pay in taxes, “providing certainty for businesses”.”

This will mean more investment in infrastructure and better productivity across the economy, helping to lift people out of poverty, and reduce unemployment,” he says.”

I am confident the new GST will help deliver those positive outcomes.

“Under the previous plan, the Government paid a tax rate of 6.75 points per dollar of turnover, with a 1 per cent surcharge for high earners.

Under Mr Morrison’s plan, that rate will drop to 5 per cent for high income earners.”

Business owners and business operators will have greater flexibility to choose the tax and tax-free structure that best suits their business,” he states.

The Government says businesses can apply to be exempted from the two-tiered system by submitting a “business application form”.

Business owners will also have the opportunity to opt out of the two tier tax system by signing an affidavit.”

The Government is committed to a strong and secure Australia, and I believe we can ensure a fair and sustainable tax system for businesses,” Mr Morrison says.

But business owners have voiced concerns about the two tiers of taxation.”

In the past, we’ve had two tiers that were designed to provide the highest levels of tax certainty, but that is not the case anymore,” the Treasurer says.

He is due to outline his plan next week.


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