- CAs in practice welcome the boost to $30,000 of the instant asset write-off for small and medium business, but say the measure should be permanent, not a year-by-year proposition.
- Income tax cuts for low and middle income earners are a good move, but some CAs say delivering them through a tax offset is needlessly complex.
- In general, the Budget’s short-termism and lack of any major reforms is a concern.
By Sally Rose
Acuity asked four chartered accountants in practice to share their views on the Australian Federal Budget 2019-20. The overall assessment was that the Budget’s focus was on the short term, and was a pre-election budget designed to win votes.
And as RSM Australia director tax services Steve Healey CA notes, the projected budget surplus is “relatively skinny at $7 billion” and is largely the result of revenue collected due to relatively high commodity prices.
“The budget does not consider the longer-term needs of the nation,” says Healey. “The government continues to place too much reliance on income tax collections without considering the changing demographics of the nation and, once again, there is no mention of [raising] the GST.”
PKF Melbourne managing partner Timothy Bow CA says the Budget failed to deliver and critical reform or improve certainty around taxation. “Rather than a particular measure, it is the lack of one that I believe is the greater failing.
“Without any GST measures to counter the forecast loss of GST revenue, I expect overdue reform to state-based revenue, such as transfer duties and payroll tax, to be further deferred,” Bow says.
“The announcements funding the various compliance measures are likely the other area of great impact. Our regulators already pass on an overwhelming compliance burden to Australian business. While the justification for funding integrity measures is unchallenged, reform as opposed to increased compliance obligation would be more welcome.”
Tax breaks welcomed
While the Budget failed to inspire with any major reforms it did include some well received measures. Planned personal income tax cuts and an extension of the instant asset write-off threshold for small to medium businesses are two initiatives that were welcomed by CAs.
Findex tax partner David Keane CA singled out the government’s “bold plans” for personal income tax cuts for low to middle income earners as worthy of praise. “While this is a cost to the Budget, Australia does have some of the highest tax rates in the world and this is a welcome announcement – if it passes,” he says.
HLB Mann Judd partner, taxation services, Peter Bembrick CA agrees, but laments the complexity involved in the low and middle income tax offset measures.
“While the use of tax offsets is understandable to achieve the government’s aim of targeting the relief only to individuals in the lower income brackets, the use of two different offsets is confusing, and I can’t help thinking that similar outcomes might have been achieved in a simpler way.”
For Bembrick, the stand out Budget initiative was the increase in the instant asset write-off threshold for small businesses from the current $20,000 up to $30,000, as well as the expansion of the concession to medium businesses with an annual turnover of up to $50 million.
“Apart from the change to the instant asset write-off, there were no other substantive measures in this Budget that will assist businesses.”
“Since it was originally introduced this measure has provided a much-needed boost to capital investment by small businesses, which has flow-on benefits throughout the economy,” Bembrick says. “It has also helped to reduce compliance costs for small businesses by eliminating the need to separately record and depreciate small capital purchases.”
RSM’s Healey also welcomes the move to extend the instant asset write-off. “It will provide a stimulus to the economy more generally in addition to encouraging tax-effective investment by these businesses in the short term,” he says.
However, CAs remain concerned that this concession – which has been extended on a year-by-year basis over the past few years – is now scheduled to end on 30 June 2020.
“I would add my voice to the chorus of advisers and business owners who have repeatedly called for this measure to be made a permanent feature of the tax rules applying to small and medium businesses,” Bembrick says.
Start-ups and unemployed need support
“It is also worth noting that apart from the change to the instant asset write-off, there were no other substantive measures in this Budget that will assist businesses or encourage business investment – in particular, there was nothing aimed at encouraging start-ups or fostering innovation, which could be particularly welcome in the current difficult economic climate,” notes Bembrick.
PKF’s Bow also criticised the Budget for not doing more to help start-ups.
“Australian innovation and start-up support has taken a hit and the funds saved via the government’s crackdown on Research and Development Incentive claims haven’t found their way back to innovation,” Bow says.
“The treasurer flagged threats to our economic future in his closing remarks on Tuesday night but this Budget offered little to an already under-funded but desperately important sector.”
Keane says the biggest failing of the Budget is its lack of assistance for the Newstart program. “Newstart is designed to get people back into the workforce... but the payments are ineffective to support workforce re-entry, especially in regional areas,” he says, echoing the Business Council of Australia’s position that Newstart payments need to rise as a matter of urgency.