- CA ANZ is cautious about Australia’s economic outlook and would prefer a Budget with a small surplus rather than an election year cash splash.
- It recommends making the instant asset write-off for small business threshold a permanent feature of the tax system.
- Reforming the super contribution cap and having a clearer path to a low emissions economy are also on CA ANZ’s wish list.
Given the impending federal election in Australia, the nation’s Budget has been brought forward to 2 April 2019. As an election year Budget, it will likely reflect policies designed to find favour in the electorate – tax rate cuts and new expenditures.
But irrespective of the electoral cycle, CA ANZ is cautious about the economic conditions Australia may face in the short to medium term. We would prefer a Budget that looks to accumulate a surplus in case it’s needed to fund fiscal stimulus measures in the future.
In our pre-Budget submission to the Australian Treasury, CA ANZ supports proposals to provide a tax offset to small businesses for the costs of obtaining business advice from approved accounting providers.
We have also called for the instant asset write-off for small business threshold to be made a permanent feature of the tax system. This is because decisions on capital expenditure shouldn’t be hostage to year-by-year decisions on their tax treatment.
“Irrespective of the electoral cycle, CA ANZ is cautious about the economic conditions Australia may face in the short to medium term.”
A pathway to a low emissions economy
Importantly, in our pre-Budget submission CA ANZ urged the government to provide a clear direction for Australia’s pathway to a low emissions economy. Developing a stable long-term policy environment will enable businesses to plan ahead and take advantage of the opportunities and investment available.
In addition, existing corporations law requires directors to disclose a company’s material climate-related risks. Policy measures such as an explicit carbon price would assist companies to better quantify the carbon risk in their financial accounts.
Climate change policy should not be subject to political changes but rather provide certainty for the future to enable business and households to transition to a low carbon economy.
A lifetime super contributions cap
Given the findings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry and the Productivity Commission’s review of superannuation, it’s also important the Budget puts in place measures to support sustainable retirement incomes.
To that end, CA ANZ calls for the replacement of annual super contribution caps with lifetime caps to smooth administration and better reflect the contribution cycle. CA ANZ also recommends introducing joint spousal accounts within superannuation funds to provide a much clearer indication for couples of how they are tracking towards their retirement goals.
In addition, capital gains tax relief for super fund mergers, due to expire in July 2020, should be made permanent. This is particularly important in light of the Productivity Commission’s report into the superannuation sector, which recommended this policy to encourage and facilitate fund mergers and hopefully reduce administration and other costs for fund members. CA ANZ agrees with this recommendation but believes it should be expanded to allow fund restructures.
Less red tape and more dialogue
CA ANZ also asked for a more effective dialogue between government and the Australian business community. It’s our view that federal ministers dealing with taxation, small business and digital transformation should use the Budget as an opportunity to paint a picture for the modern ways in which business will be done in Australia. There are many beneficial online services, such as Single Touch Payroll, which are being implemented.
We suggested to Treasury various options to streamline processes and to foster closer economic relations between Australia and New Zealand by reducing red tape. For example, why is it necessary for companies that operate only in a trans-Tasman environment to do so much tax and transfer pricing reporting, given the excellent working relations between the Australian Taxation Office and Inland Revenue?
In our pre-Budget submission, we also outlined the need for government vigilance on the implications of Brexit for Australia, and ways our politicians can engage with the Australian community on living standards.
It would be good to see CA ANZ’s practical advice melded into the April Budget, but with an election looming, that’s probably whistling in the wind.
Are you offering cutting-edge tax strategies? Find out more at CA ANZ’s Strategic Tax Planning Day on 31 May in Sydney, or stream it live online.Register at store.charteredaccountants.com.au
2019-20 Federal Budget
For the latest on the 2019-20 Federal Budget.Find out more