A five per cent cut in the small business company tax rate could inject up to $11.4 billion into the economy and create more than 3,300 permanent jobs, according to fresh modelling commissioned by the Council of Small Business Organisations Australia (COSBOA).
The analysis, which COSBOA says is based on independent and widely accepted economic forecasting methods, puts forward a strong case for lowering the small business company tax rate from 25% to 20%. The proposal is framed as not just affordable, but essential, with economic returns outweighing lost tax revenue ten to one.
COSBOA CEO Luke Achterstraat said the report gives hard numbers to what small business owners have long argued—that cashflow constraints and tight credit conditions are stifling growth.
“This modelling confirms what we’ve heard on the ground from small businesses across Australia,” he said. “Cutting the tax rate would increase cashflow, drive investment and lead to higher output, wages and jobs.”
The numbers tell a striking story: the projected $800 million in lost tax revenue is expected to be offset by a GDP gain of $10.6 billion over five years. According to COSBOA, that equates to an economic boost of $10 for every $1 the government gives up.
Mr Achterstraat described the current tax rate as a brake on small business recovery, especially after the financial pressures of COVID and the GFC.
“Improving access to capital and giving small businesses more room to breathe is simply good economic policy. This reform is targeted, it’s prudent, and it’s overdue.”
Three policy paths were considered in the modelling: an immediate drop to 20% in 2025–26, or phased approaches that reach the target by 2027–28 or 2029–30. Across all scenarios, the outcomes remained strong: higher post-tax earnings, better credit access, and an uptick in national income.
The immediate cut delivers the most dramatic results: a $11.4 billion lift in GDP and 3,370 new jobs created. Mr Achterstraat said these gains wouldn’t just be confined to boardrooms, but would ripple across every corner of the country.
Estimated state-by-state benefits include:
- $3.4 billion for New South Wales
- $2.5 billion for Victoria
- $2.3 billion for Queensland
- $620 million for South Australia
- $2 billion for Western Australia
- $177 million for Tasmania
- $151 million for the Northern Territory
- $232 million for the ACT
“These aren’t abstract figures,” he said. “They’re tied to real livelihoods. Small businesses employ more than 5.1 million Australians and generate $500 billion annually. In remote and regional areas, they are often the economic backbone.”
With just a fortnight remaining in the 2025 federal election campaign, COSBOA is calling on both major parties to take notice.
“This is a ready-made policy that offers a clear path forward. There’s been precious little talk of real economic reform so far, but here’s one staring our politicians in the face,” Mr Achterstraat said.
COSBOA’s call comes amid broader warnings about weakening small business confidence, with interest rates, energy prices and insurance premiums all biting into margins. The sector makes up 97.7% of all registered businesses in Australia, and the lobby group argues that leaving them behind would mean leaving the economy behind.
“The message is simple: we can’t afford not to cut this tax,” Mr Achterstraat said.
The final pitch from COSBOA is not to ideology or party loyalty, but to economic logic: “This policy doesn’t need to be argued anymore. The numbers speak for themselves.”
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