Budget: the tax profession delivers its verdict

The tax industry has been underwhelmed by a budget long on cost-of-living measures and compliance, but bereft of big picture tax reform and with some devil in the detail.

CPA Australia senior policy manager Gavan Ord said federal government had struck a balance between cost-of-living relief and not overheating the economy, but had largely overlooked one vital sector.

“It’s a prudent budget but there’s no long-term vision – it’s very much a budget for addressing short-term challenges,” he said.

“The surplus has allowed the government to delay some hard decisions. It’s dealing with immediate issues. We're still waiting for that vision from the Treasurer around how he wants to use our tax system to make Australia a more productive and successful economy.”

BDO tax technical leader Lance Cunningham said the government could afford to focus on relief and just tinker with tax at the edges.

“They've got a surplus, so they don't really have to talk about increasing taxes or changing taxes too much,” he said. “So they're kicking that can down the road till next year when the they're expecting to get back into deficit.

“I wouldn't even be surprised if we're not going to see a lot right through this term of government on the assumption they get back in for a second term.”

CA ANZ senior tax advocate Susan Franks said the revenue side of the budget relied heavily on enhanced compliance activity by the ATO “in the absence of any real tax reform to address ongoing structural funding problems”.

“The measures indicate the government will be working the tax system harder to extract more revenue from those the ATO considers to be non-compliant,” she said, with $9.1 billion in revenue expected to be raised through extending the personal income tax compliance program, the GST compliance program and revamping the Serious Financial and Serious Crime Taskforces.

 “The key question for the Treasurer is will the Albanese government have the courage to take an ambitious tax reform agenda to the next election?”

IPA general manager of technical policy Tony Greco more money for compliance meant more time spent by members dealing with the ATO.

“When there's more money given to the ATO that means more interactions, that means more requests for information, that means more scrutiny that can lead to adjustments, and our members get caught up in that sort of process.”

“Those fishing expeditions could or could not result in adjustments but generally based on the data they have, it looks like Treasury decided it's an easy target.

The budget papers specifiy two of the key targets as short-term rental properties “to ensure they are genuinely available for rent” and GST, with compliance activity expected to reap $7.6 billion over five years funded by $589 million extra to the ATO to help it “develop more sophisticated analytical tools to combat emerging risks to the GST system”.

Most observer lamented discontinued programs that help small business and Mr Ord said the sector had been largely overlooked.’

A $20,000, one-year instant asset write-off was “better than nothing” but not as good as full expensing, which ends this financial year.

“It’s a temporary measure – it should be permanent,” he said.

Mr Greco said the timing would cause a stampede to qualify for the full expensing write-off before the end of the June while Mr Cunningham said both the $20,000 instant asset write-off and energy incentives for small business were “good things” but relatively modest initiatives.

Mr Cunningham also highlighted changes for the build-to-rent sector, with an increase to the capital works depreciation from 2.4 per cent to 4 per cent per year and a reduction in the withholding tax rate managed investment trusts from 30 per cent to 15 per cent, bringing the rate into line with other MITs.

Grant Thornton tax partner Vince Tropiano said two programs that merited continued support had been discontinued, and the instant asset write-off changes tightened the eligibility criteria.

“The threshold to be able to claim it has been reduced to companies with $10 million turnover or less, and that's one that we would have liked to have seen continue for companies of all sizes, not simply for small or medium business,” he said.

“Coming out of the whole COVID market, there's still challenges there.”

“The other one I was disappointed to see was the removal of the loss carry-back rules, that winds up being 30 June 23. That's where companies can, if they make current year losses, claim them against other income years over the last three years.”

“I think it's a useful one to support business.

H&R Block director of tax communications Mark Chapman said most of the budget “heavy lifting” was done on the spending side with programs to boost incomes for the lowest paid and most vulnerable.

“Increases in Jobseeker for all claimants, a package of rent assistance for those on low incomes, energy bill relief and a huge boost to Medicare will all be welcome,” he said.

“But there was no news about the Morrison government’s Stage 3 tax cuts – which remain legislated to come into effect on 1 July 2024 and which will largely benefit the most wealthy.

“There was no reprieve also for the Low and Middle-Income Tax Offset, which expired last year and leaves millions facing an effective tax increase in the current year of up to $1,500.”