This year in tax: Accounting experts, professional bodies break down budget tax takeaways

The budget included a range of tax reforms, including personal Stage 3 cuts, new tax incentives to fuel the Future Made in Australia package, an extended instant asset write-off scheme for small businesses, and a range of integrity measures including an additional $187 million in funding for the ATO. While the changes were largely welcomed on the night, the general sense from experts and industry groups was that they would fail to move the needle on the country’s more fundamental tax issues.

Others, however, found nothing to celebrate in the budget.

“Worst budget I have ever seen”

Professor Peter Swan, UNSW Business School said, “If you are not into uneconomic green schemes, you get nothing out of the budget.”

“Even if you are into green business, you still get very little as even huge, promised subsidies are insufficient to justify large scale investment.”

“Additional compliance and tax outlays indicate a massively increased tax take and burden due to inflation pushing everyone into higher tax brackets.”

Swan added that the RBA will “see through the spin” and will likely raise rates again to deal with inflation that will likely rise under the budget.

“Subsidies to renters and energy is simply a device to use taxpayer funds to buy votes. These subsidies and the $200 billion additional expenditure by Labor have created the home-grown inflation. These subsidies increase expenditure but do nothing for supply.”

“Bracket creep and absence of indexing will see rapidly falling per capita living standards.”

“This is the worst budget I have ever seen,” he concluded.

Temporary relief, but ignores the “big elephant”

CPA Australia welcomed the tax reforms in the budget, adding that it will not go far enough in meeting long-term economic challenges.

Gavan Ord, business investment and international lead at CPA Australia, said “major [tax] reforms are fundamental to raising our productivity and achieving strong economic growth that will lift future living standards.”

“Dr Chalmers was understandably keen to focus on the stage 3 tax cuts as the most notable tax reform in in budget. While adjusting the brackets may provide some temporary relief, the changes ignore the big elephant in the room – the Government’s dependence on personal income tax for revenue,” added Ord.

“Without proper GST reform, Australia will be stuck with a mediocre and inefficient tax system that disincentivises personal effort. And that’s without even considering the broader picture of state budgets and tax systems.”

Ord welcomed the funding boost to the ATO, noting the extension of its compliance programs will help to improve tax integrity and taxpayer confidence.

He added that the broader tax integrity measures were light on details so it was difficult to gauge their significance.

Ord also questioned the use of targeted tax incentives, such as those used in the budget to help producers of critical minerals and hydrogen.

“Picking sectors for favourable tax incentives is not risk-free – it may lead to solid investments in non-favoured industries losing out to more speculative, lower performing investments in the selected industries. The government should make such investment allowances broadly accessible,” he said.

“We want to see a budget where the entire business sector is at the centre of the government’s strategic thinking.”

Welcomed integrity boosts, insubstantial tax reform

CA ANZ welcomed the funding boost for the ATO, and the broader tax integrity supports in the budget while urging that the need for substantive tax reform had not gone away.

“In the wake of the Operation Protego scandal, combating fraud is the tax centrepiece of this budget,” said Susan Franks, CA ANZ senior tax advocate.

“Businesses expecting fast business activity statement refunds may be in for a shock. The ATO has been given the power to retain those refunds for 30 days, rather than the current 14 days, to give the ATO time to ensure that its systems are appropriately preventing fraud.”

The peak accounting body added that the Inspector General of Taxation and Taxation Ombudsman (IGTO) should have been given similar support to soften the ATO’s heightened collection activities.

“While the ATO has been allocated extra resources, the Inspector General of Taxation and Taxation Ombudsman (IGTO), the key agency which helps taxpayers deal with the monolithic ATO has not received any significant additional funding,” said Franks.

“With taxpayer disputes with the ATO likely to escalate as the ATO commences the huge job it faces in collecting $100 billion of outstanding tax debt, it is concerning that the IGTO has not received a significant funding boost and the outgoing IGTO has not been replaced.”

Ainslie van Onselen, CA ANZ CEO, also welcomed boosts to ASIC’s headcount, noting that having a strong regulator is “in the interest of the auditing and accounting professions.”

Van Onselen once again urged policymakers to consider the “international competitiveness” of Australia’s tax system. The body will continue to push for substantive tax reform.

Nothing for the mid-market

Vince Tropiano, Grant Thornton tax partner, said medium-sized businesses and larger ones not involved in the green transition were largely overlooked in the budget.

"I think a lot of [the relief] is targeted to particular industries rather than supporting the economy in general ... It's not just individuals struggling to pay the rents, it's businesses struggling to pay their wages and having to increase prices which may impact on sales and all sorts of things. I didn't see a lot of support in that sort of area or encouraging further investment," he said.

"I think if you ask most tax advisors, conceptually we think [the instant asset write-off scheme] is a good idea but it needs to be extended to have to medium-sized businesses.”

Asked whether the budget achieved the kind of substantive tax relief called for by CA ANZ, Tropiano answered the budget was "more of the same."

"Certainly, the biggest bug with our clients and business generally is the lack of appropriate tax reform. Government still relies substantially on personal income tax," he said.

"But what our clients would want to see is a more efficient tax, less administration, less red tape. Not sure we saw anything today or tonight that's going to head down that path."