$11.4 billion boost: Why small biz tax cuts make economic sense

By Cec Busby April 23, 2025 8:35 am

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A new report shows slashing the small business tax rate could deliver a huge economic payoff — and small business advocates say now’s the time for action.

A win for small biz, a win for everyone

Cutting the small business tax rate from 25 per cent to 20 per cent could pump an extra $11.4 billion into the economy and create over 3,000 permanent jobs, according to independent modelling commissioned by the Council of Small Business Organisations Australia (COSBOA).

Key points

Cutting the small biz tax rate from 25 per cent to 20 per cent could deliver $10 in GDP gains for every $1 in lost tax revenue.
The tax cut could create over 3,300 permanent jobs and add $11.4 billion to the economy.
COSBOA says the policy would ease financial pressure on small businesses and unlock cash flow for investment and growth.

COSBOA CEO Luke Achterstraat says the report backs what small business owners have been saying for years.

“A tax cut would boost small business cashflow, re-ignite investment and increase output, wages, jobs and economic growth,” he said.

“In aggregate, national income would rise appreciably, indicating that the policy provides a net benefit to the Australian community.”

A big return on a small investment

The modelling, by Tulipwood Economics, Qaive and Bellchambers Barrett, found that for every $1 in lost tax revenue, the economy would gain $10 in GDP. If introduced in the 2025–26 financial year, the tax cut would cost $800 million but deliver a $10.6 billion boost to GDP over five years.

Achterstraat called the policy “fiscally prudent” and urged major parties to take notice ahead of the upcoming federal election.

“The numbers are in – we can’t afford not to cut the small business tax rate to 20 per cent,” he said. “It is not just a win for small business, it’s a win for all Australians.”

A much-needed shot in the arm

COSBOA argues the tax cut would help small businesses recover from years of challenges — from the GFC and COVID, to today’s high inflation and interest rates. Improved access to cash flow and credit could help reignite investment and productivity.

Whether the cut is rolled out immediately or phased in gradually, the modelling shows a consistent boost to business confidence and economic activity.

“Small businesses comprise 97.7 per cent of all Australian businesses, employ more than 5.1 million people and contribute $500 billion a year to the economy,” Achterstraat said.

“This tax cut is the one policy that can provide instant respite to Australian small businesses and let them focus on what they do best – running their businesses and serving our communities.”

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