Tax cuts dead, but Turnbull bats on

Company tax cuts have been jettisoned following defeat in the Senate, as Prime Minister Malcolm Turnbull mounts a defence of his leadership, while an eligibility cloud hangs over challenger Peter Dutton.

Mr Turnbull was forced to drop the signature policy to further reduce tax for business after the Labor Party, Greens and One Nation united to block the legislation.

Passage of the policy would have cut the corporate tax rate for companies with turnovers of more than $50 million from 30 per cent to 25 per cent.

Speaking to journalists in Canberra, Mr Turnbull said that, in the current political climate, there was no longer a consensus in politics for lowering company tax.

“(Australia) used to have a broad bipartisan consensus - as you heard from so many Labor leaders and treasurers - that lower company tax creates more investment, higher productivity, more jobs and higher wages, a proposition that has been proved again and again,” he said.

“While that consensus used to be there, it is there no longer and there is a lot more work that needs to be done.

“So we will not be taking the tax cuts for larger companies to the next election. 

“We are going to review our enterprise tax plan insofar as it applies to small and medium businesses and focus on how we can provide enhanced support, or perhaps an acceleration of the tax cuts for the small and medium businesses, and the treasurer and I with the finance minister and the expenditure review committee will be working on that.”

Existing reductions for businesses with turnovers of up to $50 million will remain legislated, however.

The tax plan had broad support from business, and mirrored a similar proposal made by the Labor opposition in 2015.

EY chief economist Peter Crone warned that the company tax rate would remain uncompetitive internationally.

“It will be harder to attract the new investment needed to drive innovation and the creation of more and better paying jobs,” Mr Crone said.

“The government’s enterprise tax plan to lower the company tax rate for all businesses was a sound policy and a policy necessary to bring about a stronger economic future for Australia.  

“Australia’s strong growth prospects can’t be taken for granted.  

“Economies everywhere need to be alive to bouts of volatility and abrupt shifts in global financial sentiment.  

“Policy announcements that damage confidence are not helpful in this climate.”

Also today, Mr Turnbull committed to keep the Energy Supplement, a welfare payment created when the carbon tax was first legislated.

“It is absolutely clear to us that with the issue of energy prices being so prominent, we will not move to repeal the energy supplement,” Mr Turnbull said.

“Now, as you can imagine, this is not a rash decision. 

“We have provided for that in the contingency reserve, so there is no adverse budget impact by that change in policy that I'm announcing now.”

Treasurer Scott Morrison and Finance Minister Mathias Cormann were among those ministers who pledged support for the prime minister.

“Me, this is my leader and I'm ambitious for him,” Mr Morrison said when asked if he had any leadership ambitions.

Senator Cormman similarly gave backing.

“I support the Prime Minister Malcolm Turnbull,” he said.

Other ministers who had yesterday offered resignations pledged in parliament to support the prime minister, including Trade Minister Steve Ciobo and Health Minister Greg Hunt.

Duelling Dutton 

A snap Roy Morgan poll to be released tomorrow shows Bill Shorten is seen much more favourably by voters than former Home Affairs Minister and leadership aspirant Peter Dutton.

Of about 1,200 voters, 59 per cent prefer Mr Shorten while just 36.5 per cent back Mr Dutton.

Conversely, when comparing Mr Turnbull and Mr Shorten, Mr Turnbull leads 52 per cent to 44.5 per cent.

It comes as Mr Dutton hit the phones in an attempt to increase his numbers, following his losing tilt at the top job by 48 votes to 35 yesterday.

But he will have one big cloud over his head, after Attorney General Christian Porter asked the solicitor general to review Mr Dutton’s eligibility to continue to sit in parliament.

Mr Dutton owns two childcare facilities through a trust that has reportedly received more than $5 million in subsidies after changes were made to the childcare payments system starting earlier this year. 

That might mean he falls afoul of Section 44 of the constitution, which has famously knocked out more than a dozen politicians for varying reasons in the past year.

One example was former South Australian senator Bob Day.

His electorate office was in a building he owned, and the High Court ruled in April 2017 that he should have been disqualified from election.

Nonetheless, Mr Dutton was on the campaign trail.

Speaking on radio, he made a commitment to abolish the GST on electricity to reduce power bills.

That adds to commitments he made yesterday including to increase spending on healthcare and water.

Mr Morrison shot down the GST move, which would be the first major shrinking of the consumption tax’s base since it was implemented in 2000.

“The cost of that, based on the work that the Parliamentary Budget Office did on Senator Leyonhjelm’s proposal, would be around over $7.5 billion over four years,” Mr Morrison said.

“So the prime minister is right. 

“Any change to the GST, as you know, to its rate or its base has to be agreed by all states and territories and I'm sure that they would say, 'well, if you want to do it, that's fine, send us $7.5 billion'.

“Now, that would be a budget blower, an absolute budget blower and on top of that, or the alternative would be to scuttle the WA GST package.”