Only 8pc of businesses will prioritise increasing wages if taxes are cut

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Only 8pc of businesses will prioritise increasing wages if taxes are cut

By Cara Waters & Eryk Bagshaw

Wage increases aren't on the agenda for textile business Walter G if company tax is cut.

"We would probably put it into advertising or areas to promote the business - we don’t do as much as we would like to," says co-founder Genevieve Hewson.

Lauren Emerson (left) and Genevieve Hewson are the founders of Walter G.

Lauren Emerson (left) and Genevieve Hewson are the founders of Walter G.Credit: Nikki To

Hewson started Walter G with her high school best friend Lauren Emerson in 2012 and demand for the pair's distinctive fabrics has enabled the business to expand to a team of four with a turnover of $1.3 million last year.

Small businesses have already received an initial company tax cut, reducing the tax rate to 27.5 per cent, but Hewson says it has had minimal impact at Walter G.

"If I’m being totally honest it hasn’t affected us day to day at all," she says. "It hasn’t been something that has made us viable as a business or not, it’s more something that is nice to have. Every little bit helps, I guess."

Hewson's attitude towards company tax cuts reflects the results of one of Australia's largest business surveys released on Thursday.

The survey by the National Australia Bank found 8 per cent of businesses would give workers a significant wage rise if they received a company tax cut, while one-in-five say they don't need a tax cut to secure their company's future.

Hewson and Emerson at work.

Hewson and Emerson at work. Credit: Nikki To

Of the 900 businesses surveyed, 32 per cent of operators would prioritise reinvesting the extra cash in their own business, while 90 per cent would at least increase their investment "somewhat".

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Up to 14 per cent of those surveyed put hiring more workers as their number one priority, particularly in the construction, transport and recreational services sectors, while 75 per cent said they would at least consider adding someone to their workforce.

A further 14 per cent of respondents to the survey reported they did not pay any tax in Australia.

By industry, businesses in manufacturing, mining, and construction suggested the largest tax cuts were needed to improve their prospects keep while those in service industries suggested smaller cuts.

Foreshadowing the results of the NAB's small-to-medium business survey next week, NAB's chief economist Alan Oster said smaller operators were looking for even larger tax cuts than those already delivered for businesses with turnovers of up to $50 million.

NAB chief economist Alan Oster NAB's chief economist  says smaller operators were looking for even larger tax cuts.

NAB chief economist Alan Oster NAB's chief economist says smaller operators were looking for even larger tax cuts.Credit: Bohdan Warchomij

"The guys at the small end are already down at 25 [per cent] and they are saying they want 20 for their tax rate," he said.

He said the responses mirror what economic theory would suggest – namely "that desired company tax reductions would show up via increased investment, with follow-on impacts to employment and subsequently wages".

But he said tax reform "was a lot more than just corporate tax," and that more needed to be done to make the economy more competitive, in line with the sweeping recommendations of the Henry tax review.

Treasurer Scott Morrison said the conditions are in place where workers can expect to see their wages grow.

"That's something the Reserve Bank governor said, the Treasury said, this is a product of the economy growing and putting people in work," he said.

Employment figures released on Thursday showed another 4900 jobs were added in March, keeping the unemployment rate steady at 5.5 per cent.

Shadow finance spokesman Jim Chalmers said the business survey "tore to shreds" the Liberals’ claim that their $65 billion tax handout will lead to higher wages or more jobs.

"All up, less than a quarter of businesses would prioritise putting on more staff or increasing wages if they received a tax cut," he said.

Hewson isn't holding her breath for a tax cut for Walter G but she is keeping a close eye on the tax owing for the business after a close call a few years ago.

"Our tax bills are pretty substantial for a small business and there was a time where we were not advised that well in making provisions for what tax we would need to pay and we got a $100,000 tax bill to pay in a month and that really nearly sunk us,' Hewson says. "That kind of bill can really screw you over."

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