The Productivity Commission (PC) is the Australian Government’s independent research and advisory body on economic, social and environmental issues affecting the welfare of Australians. Their work is organised around five core functions:
Inquiries, research and advice requested by government
PC-initiated research
Ongoing performance monitoring and benchmarking
Competitive neutrality complaints
Safeguard action investigations
A key area of work for the Commission at present is Creating a more dynamic and resilient economy. Corporate tax reform is something they are focused on in a new effort to reverse Australia’s sluggish productivity, with major implications for small and growing businesses.
Australia’s labour productivity — which measures how efficiently workers generate goods and services — has stagnated over the past decade, despite significant technological advances.
In an attempt to revitalise national productivity, the Productivity Commission on Monday named corporate tax as one of 15 key areas worthy of reform.
“Australia would benefit from a simpler and more efficient tax system,” noted the Productivity Commission.
“This would improve after-tax returns available to businesses and support investment.”
Prior reviews have “repeatedly” singled out corporate tax reform as a potential driver of productivity, it added.
The Productivity Commission will now consider a range of potential reforms affecting both tax rates and the company tax base.
It has opened a fresh consultation to drive the investigation.
Small business owners and entrepreneurs can share their input with the Productivity Commission until June 6.
It will publish interim reports between July and August, with a final report tabled to the federal government by the end of December.
Heading up the government’s response is Andrew Leigh, who last week added ‘Productivity’ to his title of Minister for Productivity, Competition, Charities and Treasury.
“We’re not contemplating changes to the GST or to the headline company tax rate at the moment,” he said.
But a wide variety of options are on the table, with the government taking a broad view of the factors that hamper growing businesses.
“We’ll look at issues around ensuring that we’ve got a more dynamic and competitive environment that encourages people to start and grow small businesses,” said Leigh.
The Assistant Minister also reflected on policies federal Labor championed in the last term of Parliament, saying, “we do have a very big competition agenda which directly benefits small businesses”.
Its 12-month extension to the instant asset write-off will encourage business investment, he said, while cuts to the personal income tax will benefit those operating as sole traders.
A $900 million National Productivity Fund, aligning Commonwealth and state‑led reforms, will also assist businesses in the long run, said Leigh.
Tony Greco, general manager of technical policy at the Institute of Public Accountants (IPA), was broadly optimistic about the review and its focus on company tax.
Greco said tax policies that consider the stage of a business’ lifecycle will encourage investment — and eventually spur productivity.
The Coalition’s pre-election pledge to offset taxes over a business’ early years was a promising policy, said Greco.
“Particularly in the formative years, that’s where tax concessions should be front-loaded, to enable businesses to actually get off the ground and get a head start,” he said.
“Probably more than 60% of small business do not use a corporate structure, so in our submission, we’ll also be looking at ways they can achieve the same outcome for those entities that aren’t corporates,” said Greco.
To have your say on policy reform find out more here. Consultation process is open until 6 June 2025.