FEDERAL BUDGET PROMISES MUCH – BUT CAN IT BE DELIVERED, ASKS CPA AUSTRALIA
2 April 2019
As predicted the Morrison/Frydenberg budget makes a strong election pitch with many proposals that will have wide appeal to many voting Australians.
However, CPA Australia’s Head of External Affairs Paul Drum FCPA said “their biggest test is whether they can get re-elected in the coming months to enable them to deliver on these budget commitments.”
“2019 is a year of uncertainty, with global trade tensions, weakening global growth and Brexit amongst other things, and these factors are having a negative impact on business confidence. Initial findings from CPA Australia’s soon-to-be-released Asia-Pacific Small Business Survey shows that less than half of Australia’s small businesses expect to grow in 2019, the second lowest result of the ten markets surveyed. Further, small business confidence in Australia’s economy is even lower, with just over a third expecting the economy to grow in 2019, the lowest result for Australia since 2011.”
“Against this background, the government’s income tax cuts – to be backdated to the start of the current financial year, as well as the proposed increase and extension of the small business immediate asset write-off are both welcome announcements. Further, expanding the eligibility of the write-off measure to businesses with a turnover of up to $50 million will also provide many more businesses with opportunities to invest and expand,” he said.
“While the economy is projected to be stronger, investors are circumspect, and their confidence remains low. In this regard, it is pleasing to see that the government is not proposing to further dent investor confidence by proposing any radical changes to how passive income – that is – income from rents, dividends and interest – are to be taxed” he said.
“The proposed income tax cuts are also well targeted and will ameliorate family financial pressures, and may also help stimulate consumption and savings.”
“As most businesses are unincorporated personal tax cuts are also directly beneficial to business” Mr Drum said.
Super and retirement savings
“Enabling those aged 65 and 66 to make both concessional and non-concessional contributions to their superannuation is also welcome, but it doesn’t start until July 2020, and it is really only more tinkering around the edge of existing rules. It does not address the complexity of all the various caps and limits in the super regime.”
“The more equitable, flexible solution would be to introduce lifetime caps and revisit abolishing the work test. However, this current announcement is more targeted by aligning it with the increasing age pension age” Mr Drum said.
The accounting profession
“From the professional accounting sector’s perspective, there are a number of additional proposals that, while they may not capture front page headlines, are nonetheless important. For example, ‘it is worth noting the additional $.8 million over three years for the Auditing and Assurance Standards Board to help audit quality in Australia” Mr Drum said.
“A second such example is the deferral of any changes to the treatment of private company loans to enable the development of a workable, appropriate and enduring legislative outcome” Mr Drum said. “We sought this deferral in our pre-budget submission and look forward to further discussions on this issue, including appropriate transitional measures to ensure taxpayers are not unfairly prejudiced” he added.
Drum said that “as trusted business advisers, the accounting profession is keen to see the full details of these announcements, and as always, assist to help shape their design and implementation so that they best achieve the policy outcomes and reduce unintended consequences.”
Encouraging small business in the digital economy
Mr Drum noted that “CPA Australia’s initial research findings also show that small businesses that are growing strongly are much more likely to have a stronger focus on technology than those that are not. In this regard it would’ve been most welcome to see some government support to assist small business to embrace technology more strongly, and the help them build their digital capabilities.”
Income tax savings discount
“It’s regrettable the government has not taken the initiative to introduce measures that would also encourage Australians to save outside the superannuation regime,” Mr Drum said.
CPA Australia welcomed the additional funding for both APRA, ASIC and the Federal Court given the findings of the Hayne Royal Commission into misconduct in the banking, superannuation and financial services industry.
“But unfortunately, the significant cost increases that the ASIC user pays funding model places on our members and others delivering services regulated by ASIC have not been addressed in this budget. This government-imposed cost pressure will not only negatively impact smaller accounting practices and others providing financial services, but also consumers in the future,” Mr Drum said.
CPA Australia previously recommended the government not pursue its full cost recovery model for funding ASIC’s regulatory activities, and that it reinstate funding previously cut from the ASIC budget.
“The government can expect to hear more from us on this,” Mr Drum added.
0414 760 385