Some of the things I'm hoping for:The government will be eager to show its commitment to cracking down on multinational tax avoidance.
With July 2 effectively locked in as election day, speculation on what's in the budget is the new game in town.
It's already spawning leaks. Deliberate or accidental, we know leaks are a standard part of the tactical playbook. We also know that holistic tax reform is off the agenda and most of the usual fiscal levers have been ruled out. What tricks could the government possibly have up its sleeve?
Here are our prognostications on what business, investors, workers and retirees can expect.
After the ructions of the Panama Papers and the repeated instances of cultural failures in the banking sector, the community expects to see government action. An about-face on previous budget cuts to the Australian Securities and Investments Commission and the Tax Office seems inevitable, along with new "integrity measures" to crack down on multinational tax avoidance.
This would allow the government to get ahead of any recommendations that come from Labor Senator Sam Dastyari's inquiry into the matter – his report is due shortly.
At a time when the government is seeking to enshrine the purpose of superannuation in law, expect changes on this front which will be more about revenue than retirement. All roads point towards ensuring super is not used as a de facto estate planning tool.
We could see new rules around retirees running down their capital in retirement and not just living off the income from those retirement savings – should they be so fortunate. We could also see cuts to tax concessions for high earners in pension phase and reductions in the contributions threshold.
On the positive side we may see the introduction of lifetime contribution caps. Allowing large, one-off contributions will give people flexibility to contribute more to their super when they are most able – it would be good news for low and middle income earners.
There have been too many hints about the importance of reducing the corporate tax rate for there to be no movement. We wouldn't rule out a moderate shaving of the corporate rate by up to 2 per cent from 1 July this year – to demonstrate the government's commitment to its work, save and invest mantra.
Further, we expect there could be some channelling of the UK experience, with a road map to an even lower corporate tax rate to be revealed. When David Cameron took office in 2010, his government laid out a plan to reduce the company tax rate from 28 per cent to 20 per cent. It has taken six years, and now it has flagged a further cut by 2020 to 17 per cent.
Affordability and equity are usually raised as reasons why this won't happen. Here's how these concerns might be addressed.
The government, perhaps prudently, underestimated the price of iron ore in its budget assumptions. It anticipated $US39 a tonne whereas producers are currently getting about $US60 a tonne. This "fiscal slack" could translate into something of a windfall in corporate tax collections which the government could use to fund tax cuts and generally sweeten up this pre-election budget.
When it comes to providing a cut for more than the big end of town, there are signs we could get a flow-on in the form of a moderate tax cut for unincorporated business income. After all, the vast majority of businesses in Australia are unincorporated and pay their tax at personal income tax rates. They should not be disadvantaged merely because of their chosen structure.
We're also expecting further initiatives under the umbrella of the government's innovation agenda. For all the rhetoric and television ads about the ideas boom, we still need to find ways to encourage home-grown talent to develop their next big idea – and business – in Australia.
An idea floated in the now forgotten Re:think tax discussion paper – that of a new business entity for small to medium sized enterprises – is drawing interest. The introduction of an "SME-Corp", if done properly, could be a boon for start-ups, potentially eliminating the need for up to three separate entities, all with their own tax file numbers.
And then there are the ever-present "sin" taxes – "cigarettes up, beer up", just like in the 1980s. It means there will be no repeat of the 2014 budget cigar smoking incident, but watch out for a possible sugar tax.
It might not be a typical budget, or even a typical election budget, but it's nonetheless shaping as a critical economic statement that will set the baseline for campaign promises.
Alex Malley is chief executive of CPA Australia.
* government to leave CGT and negative gearing alone (PM has pretty much confirmed this already..)
* sugar tax - big thumbs up
* superannuation legislation changes
* company tax rate cut
It will be interesting to see what the government does with tax on windfall profits from iron ore production..
What is everyone expecting from this budget?
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27-04-2016 10:47 #1
What tricks has the government got up its sleeve for the budget?
27-04-2016 11:57 #2
The sugar tax scares me a little.
I used to work in a supermarket and people on a budget didn't always have their priorities right. One moment in particular always comes to mind when fast food or sugar taxes come up is a family that came through my register. Their trolley was loaded with junk, including a dozen bottles of Pepsi. When the total came up, they were a little short and, instead of ditching a few bottles of Pepsi or other crap, they put back bread and milk.
27-04-2016 11:57 #3
I am hoping they don't remove the Child Dental Benefit Scheme.
27-04-2016 12:21 #4
27-04-2016 12:36 #5Senior Member
- Join Date
- Jun 2015
the idea of a 'sugar tax' is absurd, it WONT make healthy food any cheaper!
fact is when youve got 20$ left to your name sometimes you CANT make the best choice (although 20 $ for me would be pasta, mince, bag of carrots and some frozen veggies + some fruit under 3$ a kilo -grapes or apples preferably, they'll last longer) but if its got to last more then a few days of course some will choose 'junk' (noodles, sausages etc)
My kids go to the hospital dentist, they get in quickly there
suggested changes to childcare sound like theyre going to make the entire system confusing AND make already low payed childcare workers less wanted
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27-04-2016 12:45 #6
27-04-2016 14:12 #7
I'm disappointed they won't touch CGT discount nor negative gearing.
No gvt is courageous enough to go there as they only care about the next election.
I wish that they'll reign in money spent on our military forces/assets and rather increase our spending in education, health and research.
Hopefully leave company tax alone, just get more people in the ATO working towards collecting it!
27-04-2016 16:05 #8
Regarding negative gearing, I think the PM's blog post about misconceptions in very interesting; he makes some good points, in particular:
Daley estimates that his proposed negative gearing changes would raise an additional $2 billion in tax revenue each year from negatively geared investors.Just think about that number for a moment.
Tax revenue always has to come from somewhere. In 2013-14, negatively geared investors earned gross rental income of $20.5 billion. So using Daley’s revenue estimate, we see that the effect of his proposed change would be similar in magnitude to a permanent 10 per cent fall in gross rental income for each and every one of Australia’s 1.26 million negatively geared property investors.
Mr Shorten and Labor argue that a shock of this size would have little or no adverse impact on confidence, investor willingness to pay, or the housing market more generally.
In contrast, the Coalition is of the firm view that it would significantly reduce investor demand and house values and lead to a range of other undesirable impacts.
To offset such a significant change, investors will seek to increase their pre-tax cash flows – and this will place upward pressure on rents.
Negatively geared investors would also seek to cut back on maintenance and repairs and would reduce other costs in an effort to reduce their net rental losses. Over the longer term, as the market adjusts to the fall in investor demand, there would be fewer rental properties, as existing dwellings fall into disrepair and are withdrawn from the market. In the UK and the US, which have removed negative gearing, the resulting crisis in rental markets has caused serious hardship and forced governments to spend billions of dollars in subsidies.
27-04-2016 16:11 #9
We never buy softdrinks or even processed juice (we occasionally make our own juice). Any government policy which discourages bad food choices (e.g. the regulations that forced fast food companies to label all their food with nutritional information and calorie content) is a good thing as far as I'm concerned, so a sugar levy, which is heralded by health experts, is a good thing for our country and our children.
ETA: This is an interesting article recently published..
"A 20 per cent tax on sugar-sweetened beverages could save more than 1600 lives and raise at least $400 million a year for health initiatives, new Australian research shows."
"According to the study, a tax in Australia could lead to a 12.6 per cent reduction in consumption of sugary drinks, the largest contributors of added sugars in Australians' diets."
"Money raised by a tax can be used in many ways, like subsidising health food for the poor, or fitness education programs."
Last edited by witherwings; 27-04-2016 at 16:19.
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27-04-2016 16:27 #10Senior Member
- Join Date
- Jun 2015
just because you prefer not to and you choose not to does not mean others should be forced to fall in line with your beliefs,
Money raised by a tax is highly unlikely to be spent on health OR education :/
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