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UPDATED: Accounting firms and organisations offer their verdicts on the first test of Labor’s economic credentials.
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Budget: what it means for the tax profession
25 October 2022
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Accountants will be busier than ever over the next few years with a huge increase in funding for the ATO’s crackdown on the shadow economy and compliance, as well as additional funding for the Tax Avoidance Taskforce.
CA ANZ senior tax advocate Susan Franks (pictured above) said the extra revenue from this funding put the gains from tighter restrictions on multinationals in the shade.
“While the headline for most people will be multinational tax changes, the real money is coming from you and me – individuals and small business in Australia through extra ATO enforcement.”
She said the extra money for the ATO, which includes $240 million to take on the shadow economy and more than $1.1 billion for the Tax Avoidance Taskforce, was expected to reap over $5.5 billion in revenue, or five times the amount from changes to multinational rules.
“They're expecting to raise 2.1 billion over the next four years through giving extra funding to the ATO to support their shadow economy activities,” she said, “and when you look at shadow economy activities that's within the small business segment – so our membership is certainly going to be kept busy there.”
“When it comes to the Tax Avoidance Taskforce, the increased funding they're expecting to raise $2.8 billion over four years and that's your high wealth individuals and private groups.”
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IPA general manager of technical policy Tony Greco said there were “some land mines ahead for the tax profession with increased funding to the ATO for more compliance work in personal tax space, particularly around over-claiming deductions, shadow economy income.”
“The Tax Practitioner Board will also receive extra funding for compliance into high-risk practices and unregistered preparers so the bad apples in the profession can expect some unwanted love.”
CPA Australia senior policy manager Gavan Ord (pictured left) said the ATO funds were extensions of existing programs and unsurprising given the revenue position.
“Given some of the financial difficulty the government finds itself in, we’re going to see more of this sort of focus on ATO compliance measures.”
“They were going to fund the ATO to clamp down on multinationals as well, and there a few other changes to law to increase the tax take for multinationals, so they're trying to strike a balance between multinationals, small business and individuals.”
But he said it was disappointing that there was very few positives in the budget for small business and a grand vision was absent.
“We didn't expect to grand vision but we'd like to see that come through in the next budget and beyond.”
“One of the things really missing is that support for small business to get through these difficult times. They talk up how badly the economy's going, but then don't give business anything to help them through this period.”
The National Tax and Accountants’ Association said the absence of policy assistance for small to medium businesses could “alleviate some of the pressure that has been placed on tax agents over the past few years who have had to assist with the implementation of the vast array of Covid-19-driven tax incentives and government support payments”.
But it said the budget had left tax agents and their clients “hanging” with continued “radio silence” relating to the government’s approach to long-awaited Division 7A reforms and the proposed simplification of the individual tax residency tests.
“The Treasury-related budget announcements provided more information on what the government was not proceeding with rather than giving us a glimpse of their true tax reform intentions.”
PwC chief executive Tom Seymour said the changes to paid parental leave, which enable parents to split 26 weeks between them, along with the childcare funding were “transformational” for the nation.
“These reforms are about more than just cost-of-living relief for families,” Mr Seymour said. “We know that Australia as a country is smarter, more productive, more competitive and more prosperous when women have the
same opportunities as men to participate in the economy.”
Grant Thornton tax partner Vince Tropiano (pictured right) said the extension to childcare, which will cost $4.7 billion over four years and is expected to allow women to work an extra 1.4 million hours in the first year alone, would be welcomed by businesses struggling to find staff.
“Anything that provides some financial benefit in getting back into the workforce is going to be a huge positive,” he said.
Another measure, to increase the supply of affordable housing, could cut both ways with positives and negatives.
“The 1 million homes over the next few years obviously will provide a benefit to real estate and construction, which should have a knock-on effect again in employment.
“The challenge there is we have what seems to be historically low unemployment. So the investment is a great opportunity. Finding the workforce to build them might be a little bit challenging, and in finding the workforce to build them there may be other projects that fall by the wayside.”
From the perspective of multinational companies, tax partner at HLB Mann Judd Sydney Peter Bembrick said the changed regime might affect some groups that were playing by the rules.
“I could definitely see the thin capitalisation changes being of impact to some clients. I've been speaking to an overseas client tonight who would definitely be have debt funding … There will be groups that aren't really doing anything out of the ordinary which would really have look at these. The formula is quite different to what we're used to.”
Any group with commercial property, for example, would be relying on substantial debt funding.
“They'd be satisfying the current requirements but now we’ve got a whole new set of tests to apply from 1 July 2023.”
Most agreed that there were few surprises in the budget and the big questions over fundamental tax reform remained to be answered.
The Tax Institute’s general ,anager of tax policy and advocacy, Scott Treatt, said there were no winners nor losers.
“All Australians are losing, and will continue to lose until there is a commitment to a better, fairer tax and transfer system,” Mr Treatt said.
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