Tax reform, business and personal tax
Grant Wardell-Johnson, Leader, Australian Tax Centre
It seems from the Budget that substantial tax reform is still off the table – though the moves on the black economy are important for the integrity of the system. People pay their tax if they believe others are paying their share.
With the US now embracing significant tax cuts, there is a clear need to extend company tax cuts to companies of all sizes – there is no sound economic basis for providing lower rates only for smaller companies.
Inaction at the larger company sector does not help Australia’s competitiveness in attracting Foreign Direct Investment.
It is welcome that the government has confirmed that the Temporary Deficit Levy is ending on 1 July. Even though that was the plan in 2014, there has been speculation it may be extended due to ongoing Budget repair. But it has had a damaging effect on those very groups which are already highly taxed and has dampens down economic activity.
Damian Ryan,Tax Partner
There are two welcome superannuation moves in the Budget.
The extension of the CGT rollover relief for super fund mergers until 2020 is an excellent move. Ending this in July 2017 would have been contrary to the regulatory and government exhortations on funds to merge.
From next year, non-concessional contributions up to $300,000 per individual selling their principal residence, if held for 10 years or more, will not be subject to a cap. Allowing older couples who are downsizing to contribute to their super funds is welcome news. This will allow some older Australian to sell the family home and contribute some of the proceeds into superannuation. Those on the age pension are unlikely to take up this initiative.
Thirdly, the impact on housing affordability of contributing the proceeds of downsizing to superannuation will be interesting.
This measure will be attractive to those who would like to sell their family home but due to contribution caps have been prevented from topping up their superannuation balance, essentially transferring funds from one tax-preferred asset to another.
Kate Law, Indirect Tax Partner
From 1 July 2018 the government will require purchasers of new residential premises to remit the GST directly to the ATO as part of settlement.
This announcement comes as a surprise and is a significant divergence from the way the GST system currently operates, where GST is collected from the supplier. The government has announced this change as a tax integrity measure.
Simon Thorp, Partner, Enterprise
We welcome the extension of the small business instant asset write-off. This will provide a much needed shot in the arm for many small businesses across the country and will stimulate the economy and increase the investment and productivity of small business.
This is particularly important, as KPMG’s pre-budget survey indicated that the recent small business cuts had not been sufficient to boost economic activity. 40 percent of small business said the tax cuts would make no difference and 24 percent indicated further tax cuts would be need to be truly effective. So the extension of the asset write-off is very significant.
Paul Foxlee, KPMG National Sector Leader, Transport & Infrastructure
The government’s new ‘good debt/bad debt’ classification will help pave the way for funding of nationally significant projects. But to avoid the spending on unproductive assets incorrectly falling into the ‘good’ debt basket, we encourage tightening of project selection governance.
The new terminology does not alter the need for robust project selection criteria. Given Australia’s fiscal constraints, our focus needs to shift to getting the most from our existing investment in infrastructure. We need to ensure we fully investigate and invest in demand management and capacity enhancement opportunities, not just deliver new mega projects. A proper assessment of asset management requirements is also key.
Project selection must include full assessment of options and economic benefits to support funding announcements. In cases where the government opts for an equity investment, we look forward to further insights on the mechanics for capturing revenue sources to secure returns on these investments.
The government’s commitment to investing in productive infrastructure supports its agenda to drive national growth and generate increased productivity benefits. But we need to improve our project selection procedures to get the best from this additional investment.
Mike Kalms, KPMG Defence Partner
The Federal Budget Defence Implications can be summed up as good news for the defence industry, but bad news for defence consultants.
The Budget makes much of $200 billion for the Defence industry, particularly in Australia, for major defence projects. But at the same time the government will reduce by $300m over 4 years the amount spent on consultants and contractors.