- Lack of political appetite for big tax reform
- Low- and middle-income tax offset likely to be extended
- Future superannuation guarantee levy increases to be delayed yet again
Major tax reform and tax increases are unlikely to be on the table in a year that may have a federal election and is still experiencing the impact of COVID-19.
Instead, this year’s Federal Budget is likely to feature small reforms and some additional support. CA ANZ’s wish for the 2021-22 Budget is for it to contain policies that promote fairer, stronger and more sustainable outcomes.
Despite the lack of political appetite for big tax reform, the Budget will need to initiate discussion of some of the more immediate issues Australia is facing, such as an aging population and reform of the aged care system.
While the employment figures have been improving, the biggest rise has been in part-time rather than full-time work and many Australians are still struggling financially.
The low- and middle-income tax offset is due to expire on 30 June 2021. Extending the up to A$700 offset for those earning less than A$66,667 for at least another year, possibly longer, is likely to be on the Government’s agenda.
Self-funded retirees have had to fend for themselves to date and have experienced low dividends and interest rates. In an election year, the Budget may offer support beyond the low and middle tax offset.
In its pre-budget submission, CA ANZ called for a permanent increase in the JobSeeker payments, as this would be an example of one of the long-term responses the country needs. The government has answered this.
The future of work is a continuing focus for CA ANZ as workers will continue to face disruption in their careers due to advances in technology, climate change, globalisation and changes in consumer demand (for example, with the introduction of the share economy).
CA ANZ would like to see Government assistance in the form of grants/scholarships or lower education costs to help the unemployed, the under-employed and low-income earners achieve better employment outcomes.
COVID-19 assistance packages have helped many businesses. As restrictions ease and the assistance packages are wound back many businesses are looking to restructure, and in some cases exit.
The small business capital gains tax (CGT) concessions are notoriously difficult to understand, yet they allow small businesses to exit gracefully and place funds in super. CA ANZ supports the Board of Taxation’s reform recommendations that the:
- 15-year exemption, active asset reduction and retirement exemption be replaced with one capped CGT exemption
- the aggregated turnover threshold be increased to A$10 million per annum
- the maximum net asset value test be repealed.
The Board of Tax (BoT) is currently considering how other CGT business rollovers can be simplified and consolidated. It hopes to design a single, principles‐based rollover relief that provides clear and consistent outcomes that are also aligned with commercial practices while preserving the important integrity function of CGT. This is a worthy but complex task and there is no guarantee that an answer can be found in time for the budget.
Resetting intergenerational fairness
The Government has the Retirement Income Report and will receive the final report of the Royal Commission into Aged Care Quality and Safety (Royal Commission report) on 26 February 2021. The next Intergenerational Report (IGR) which was due early 2020 but postponed due to COVID is now expected to issue mid-2021. The interlocking issues raised by these reports will need a response.
A key Budget issue will be the future percentage of the superannuation guarantee (SG). Given the need to stimulate demand in the economy and recent academic analysis that concludes that increases in the SG result in lower wage growth, it is likely that future SG increases will be delayed yet again.
Housing prices have continued to rise despite the impact of COVID and there have been calls to allow people to access their superannuation to fund a house deposit. The Prime Minister, Scott Morrison, however, has ruled this out and it is unlikely to be in the Budget.
The Government currently funds more than 90% of the cost of home aged care and up to 81% of the costs of residential aged care. The final report of the Royal Commission into Aged Care is likely to recommend changes that will substantially increase the cost of aged care. With an eye-watering Budget deficit and the Retirement Income Review highlighting that most retirees, including those on the aged pension, die with more assets than they had when they first retired, accessing equity in the family home is likely to be on the table.
Good financial advice will be key for the many businesses and individuals recovering from the effects of the pandemic and it’s time to ditch the unworkable policy settings preventing them getting this.
CA ANZ, along with the five other professional bodies, has developed a strategic advice model for the entire industry to ensure businesses and consumers can access appropriate good financial advice.
CA ANZ calls on the Government to use the Budget to move to a policy that positions us to help Australia in its recovery.
Read CA ANZ's Pre-budget submission
An opportunity for Australia to not only respond and recover from the pandemic, but to also reset and build a sustainable, productive and resilient economyRead more