Grant Wardell-Johnson, KPMG Tax Partner
This was a budget of few surprises. The main revenue raisers are through the black economy measures – which we welcome. The extra money for ATO compliance is expected to gain a 10-fold return, and the crackdown on illicit tobacco and extension of the reporting regime to other industries is right – and necessary for the integrity of the system. People will pay their tax if they believe others are paying their share.
On bracket creep the measures to counter this are positive – bracket creep is currently low given low wage inflation, but assuming the Government’s projections on wage inflation are correct, it will increase in the future. Bracket creep as a solution to solving a structural deficit is a poor and deceptive one.
We also welcome the government’s determination to stay the course on company tax cuts for businesses of all sizes – which is vital in order to incentivise additional business investment and create jobs for the long term future. There is no sound economic basis for providing lower rates for smaller companies only. Inaction at the larger company sector make us unattractive in attracting inwards Investment in an era of globally mobile capital. A 30% tax rate makes Australia an outlier, especially after the US rate cuts.”
Brett Mitchell, KPMG Enterprise Partner
“We welcome the extension of the $20,000 instant asset write-off scheme in the Budget, but it was perhaps surprising it was only for 12 months, which could act as a cliff-edge.
KPMG’s recent survey of small and medium-sized enterprises indicated the scheme has not provided the hoped-for shot in the arm for many small businesses. More than two thirds of respondents indicated they had not utilised the increased threshold.
I suspect that the concessions are either poorly understood in the market, or regarded – fairly or not – as too complex and that the costs of compliance do not justify the potential benefits. Having only a 12-month extension may not help generate that clarity.
The same could probably be said of other incentives to encourage innovation in the business sector -nearly half our respondents believed the R&D incentives were not applicable to their businesses, and only 20 percent of the rest deemed them sufficient.
Lastly, the deferral of the introduction of Division 7A integrity amendments until 2019 is welcome so that businesses have the opportunity to consider the proposed legislation and its implications before its commencement date.
Damian Ryan, KPMG Superannuation partner says: “After the significant reforms to the taxation of superannuation in the past few years, particularly the changes that applied from 1 July 2017, it was pleasing that there were no changes to the income tax settings this year.”