The federal government’s small business tax relief plan is an admission that Labor has mismanaged the economy, the federal opposition says.

The opposition’s small business spokesman Steve Ciobo has accused the government of eroding Australia’s economic growth and placing 2.4 million small businesses under cash flow stress.

Treasurer Wayne Swan and Small Business Minister Craig Emerson announced the $720 million cash flow boost to small business, self-funded retirees and small superannuation funds struggling due to the global recession.

Under the plan, pay as you go (PAYG) instalments will be cut for about 1.5 million taxpayers in the 2009/10 financial year.

The cut would allow what “would otherwise be overpaid tax collections” of about $720 million to stimulate the economy and help protect Australian jobs, Mr Swan and Mr Emerson said in a joint statement.

But Mr Ciobo said the government was “addicted to it’s own spin” in admitting it was about to charge Australian small businesses millions of dollars in extra tax.

“Only Labor would seek to make a virtue of admitting it was seeking to grossly overtax Australia’s small businesses,” he said in a statement.

The announced changes left a sting in the tail of businesses who still lacked confidence to adjust their PAYG instalment payments to match falling revenue, he said.

Mr Ciobo said increasing the allowable margin of error from 15 to 30 per cent for instalment variations would allow many small businesses confidence to adjust their payments down without being hit with a penalty from the tax office.

“Small business owners are worried that if they get their tax instalments wrong, the ATO is going to slug them with a tax penalty.

“Labor should adopt the coalition’s proposal which provides tax relief for small businesses, but ensures the small business owner is in charge of the process, rather than being dictated to by the ATO,” he said.

AAP