- Government expenditure will drive the road to recovery and must encompass sustainable development goals
- The personal tax burden should not increase, and the proposed increase in the Superannuation Guarantee levy should be delayed
- Carry back of losses for sole traders, partnerships and companies should be considered to aid business recovery
The Australian economy is unlikely to recover immediately from COVID19, so continuing government assistance is essential.
The threat of a second or third wave of infections and the uncertainty of what the ‘new normal’ will be mean consumer expenditure and business investment is unlikely to pick up for a substantial time.
Industries that have been affect the most, such as restaurants and live theatre, may never be the same. Adding to the uncertainty is a lack of knowledge about when border restrictions will end – which is particularly important for the airline and tourist industries.
Given the uncertain environment, extending JobKeeper ̶ albeit in a revised way ̶ seems appropriate.
CA ANZ’s discussions with Treasury about this was addressed in greater detail two weeks ago. It is also likely that greater government support of both individuals and business will be needed.
CA ANZ believes that substantial, well-targeted government expenditure programs are required to kickstart the economy.
Consumer confidence is low, so increasing the personal tax burden would not help this rise. Decreasing the personal tax burden does not seem equitable when so many are facing structural unemployment and need financial help from those that still have a job.
However, delaying the proposed increase in the superannuation guarantee levy and temporarily reducing the taper rate on the age/DVA pension asset test taper from A$3.00 per thousand to A$2.00 per thousand may help boost consumer confidence.
When it comes to supporting business, it is difficult from a policy perspective to distinguish between businesses that are facing temporary difficulties from those facing permanent difficulties.
A tax loss carry back provision, however, may assist in this process. Loss carry back provisions allow an entity to carry back current year losses to prior tax years and for the tax paid in prior years to be released to the entity.
The advantage of loss carry back is that only entities that were previously profitable (and thus have a track record of running a successful business) can access this benefit.
The extent to which they can access the benefit will depend on how successful they have been in the past (the more successful the greater the potential benefit).
Australia had enacted loss carry back provisions for companies but it was removed when the minerals resource rent tax was removed. So, there is already a legislative framework that can be quickly dusted off and reused.
The Board of Taxation in its report on small business tax concessions recommended the re-enactment of the loss carry back provisions.
New Zealand has gone this route with a temporary measure, but unlike Australia, has extended it to sole traders. CA ANZ has started thinking about how this could be extended to sole traders and partnerships.
We are also considering how those facing structural unemployment could be encouraged to be retrained. Ideas include:
- reviewing HECS
- extending the COVID-19 apprenticeship wage subsidy scheme
- amending the income tax and FBT regime to further encourage employer scholarships and/or fee reimbursements for full-time undergraduates
- an incentive deduction for employers that subsidise post-graduate study for employees in subject areas relevant to the employer’s business
- a very low, incentive personal tax rate for Australians who commit to working in the rural sector during harvest season.
CA ANZ believes that substantial, well-targeted government expenditure programs are required to kickstart the economy. CA ANZ is currently developing a list of initiatives and would appreciate member input.
In compiling this list, CA ANZ will be considering not only the impact on employment but how this expenditure could assist Australia meet sustainable development goals.
Weaning businesses off JobKeeper
CA ANZ has given Treasury our thoughts on possible JobKeeper wind back options – all have major ‘Pros’ and ‘Cons’Read more