What’s the impact of company tax cuts on Australian businesses? Do companies hire more workers, increase wages and boost investment after tax cuts? Despite the importance of these questions, economists and policy-makers often struggle to answer them precisely, in part because of a lack of quality firm-level data. Using aggregated, anonymised data from Xero, this report answers these questions by directly observing how Australian businesses responded to recent company tax cuts.
From 1 July 2015, the tax rate for Australian businesses with a turnover of less than $2 million was lowered from 30 percent to 28.5 percent. At the time, over 90 percent of incorporated businesses fell under that turnover threshold. This report investigates whether the businesses that received this tax cut went on to hire additional workers, pay higher wages or increase business investment.
This report uses data from Xero Small Business Insights. Xero is a global small business platform with over half a million subscribers in Australia who use it to conduct their bookkeeping, accounting, invoicing, taxes and payroll. Xero Small Business Insights provides a snapshot of the sector’s health based on anonymised, aggregated data drawn from hundreds of thousands of Xero subscribers.