A Labor federal government would offer small business an easier path to incorporation.
Opposition Leader Bill Shorten used a speech in Melbourne on Thursday to make a pitch to the growing army of home-based and other small businesses that are also being wooed by the coalition government ahead of an election due in 2016.
Labor has begun consultation with the business community, representative bodies, accountants and the legal profession on ways to unwind the red tape behind becoming incorporated.
Mr Shorten told the Victorian Employers Chamber of Commerce and Industry business leaders lunch that a Labor government could legislate for a US-style S Corporation structure.
“More sole traders will see the benefits of incorporating their businesses under Labor’s plan to give small businesses the benefits of incorporation – which lowers tax rates and improves liability protection,” he said.
“We want to improve Australia’s current complicated and expensive arrangements with another stream of incorporation – one that provides a single, simplified structure, tailored for small business.”
In the US, an S Corp is different from a traditional corporation in that profits and losses can pass through to a personal tax return. The business is not taxed, only the shareholders are taxed.
But the shareholder must be paid fair market value or the tax office could reclassify any additional corporate earnings as “wages”.
Mr Shorten said modern Labor’s philosophy was to see government as an economic enabler.
“We support markets. Whereas once we sought to row, now we want to help steer,” he said.