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Put your tax cards on the table, ALP urged
26 May 2022
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An “interesting landscape” confronts new Treasurer Jim Chalmers as he prepares for an October budget with rising inflation and interest rates, residual issues from the previous Coalition budget in March and uncertainty about where the ALP stands on tax reform.
So said the head of tax policy and advocacy at the Tax Institute, Scott Treatt, and senior advocate Robyn Jacobson as they gave voice to concerns widely held across the tax profession about how close to its chest the ALP is playing its tax cards.
Speaking on the latest Accountants Daily podcast, Mr Treatt and Ms Jacobson said one concern was uncertainty over the 120 per cent deduction incentive for training and digital uptake aimed at small businesses and unveiled in the March budget.
“The new government needs to send out the signals of where they actually stand now and what it’s all going [to] mean,” Mr Treatt said. “What some of these previously announced but unenacted measures – where do they stand? What are they actually going to do with it? – so that the business community can move forward with a bit more confidence.”
Ms Jacobson said doubt about the measure made the accountants’ job harder.
“It becomes very difficult in practice for advisers to advise when they don’t have certainty around what the law is going to do for their clients,” she said. “And as we know, this policy is supposed to take effect back from 7.30pm on the 29 March.”
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She said another outstanding measure from the previous budget was a change to the patent box regime, which was extended to cover certain agricultural and environmental protection activities.
“So given we’ve effectively got these measures in limbo, together with those small business boosts, we’re waiting to see where the Labor government stands on these issues,” she said. “And if they are still committed to them, how quickly they can progress them through Parliament.”
Mr Treatt said the ALP’s general support for innovation made support for the measure likely.
“I think they need to with the fact that they want to push all the climate change initiatives,” he said. “There’s a lot of industries that can benefit from this and there’s an opportunity to expand it.”
He said another issue needing attention was a tidying up of the NALI – non-arm’s length income – rules that apply to super, with the Coalition recently flagging a fix.
“Senator [Jane] Hume came out in April just before the election and said we’re going to change this. Certainly some of the discussions they’ve been having in the background indicate there’s bipartisan support for changes – and the underlying issue is it’s not operating as intended,” Mr Treatt said.
In terms of new tax initiatives, the incoming government announced only a couple of measures in the election campaign, including more incentives for electric vehicles and more effective taxation of multinationals.
Mr Treatt said that widening the tax net for multinationals would make only a small contribution to revenue.
“Some of the numbers I’ve seen are somewhere between $1 billion to $1.5 billion a year. Now when you’re looking at the broader deficit, when you’re looking at our broader tax collections, it’s quite a small number. It doesn’t make a huge dent on or huge impact to the overall cash collections coming through,” Mr Treatt said.
“Also, they’re looking at doing a 30 per cent cap on debt-related deductions outside of the cap rules already there. That is something that has been put forward by the OECD, but when you look through some of the OECD commentary themselves, they do look at it and say, well, it’s not really the big stick when it comes to combating multinational tax avoidance.”
Meanwhile Ms Jacobson said the electric car discount had the potential to be an effective initiative in increasing the uptake of battery-powered vehicles.
“If you drive an electric car which is below the luxury car tax threshold – and that’s just over $79,000 at the moment – then the government is going to waive or exempt the 5 per cent import tariff and also FBT,” she said.
“So not only would those two imposts not apply, but it also makes salary packaging more attractive because this would be one more exempt benefit that could be packaged up by employees without having any FBT imposed.”
The latest Accountants Daily podcast will be available on the website from Friday (27 May) afternoon.
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