BDO warns Federal Government is about to squib on tax reform
Australia needed a fundamental overhaul of its tax system but was likely to end up with a merely “performative” Budget from the Morrison Government, according to accountancy firm BDO.
Federal Treasurer Josh Frydenberg (Photo: Steven Saphore/AAP PHOTOS)
The timing of the federal election was likely to mean that any proper tax reform would not occur in the current Parliament, BDO partner and national head of tax Neil Billyard said.
However, BDO expected there would be increased tax measures in areas where few votes would be lost. This included large multinationals and possibly temporary residents.
It said it expected the Budget to be much like many of its predecessors in that it would contain narrowly-focused, piecemeal tax announcements and put big-picture, economy-enhancing tax reform measures off to another day.
“Australia is due for a full root and branch review of our tax system to ensure that it deals with the modern, decentralised and digital economy,” he said.
“Any such review could only be done in the next term of Government and it was unlikely that any Government would commit to such a project in an election year. Hopefully I am wrong and we will see something in the Budget but I expect we will continue to wait on this front.”
BDO tax partner Marl Molesworth said predicted an “all carrot, no stick” Budget with potential tax cuts done through extensions of the low- and middle-income tax offsets. There could also be a commitment to maintaining the small business tax concessions that were introduced to assist businesses through Covid.
“From a tax perspective, this is likely to be a purely performative Budget with nothing enacted before Parliament rises for the election,” Molesworth said.
The low- and middle-income tax offset provides a tax cut of up to $1080 to everyone earning less than $126,000 a year. It has already been extended twice and is due to end in June.
Molesworth expected integrity measures and additional funding to the Australian Tax Office so the Government could show that it was tough on tax avoidance, but the measures would be at the margins.
Molesworth said both major parties were trying to run small target campaigns.
He said BDO’s wish list included changes to the capital gains tax s that the tax treatment of a gain did not skew economic decisions and to make CGT consistent with international competitors.
BDO also wanted to see the introduction of permanent investment allowances to encourage business to invest in income-producing assets.
It also wanted to see the removal of the two-rate system of company tax.
