Australia's Federal Budget for 2021-22 reframes the economic credentials of the Coalition government.
Building on lower-than-expected COVID-19 outlays, the Budget banks on economic growth to gradually restore depleted coffers whilst simultaneously boosting spending to address a range of pressing social issues.
Getting unemployment down to 4.75% by 2022-23 is this Budget's key objective, a target which is also key to the Reserve Bank of Australia's deliberations on monetary policy.
All this can apparently be achieved without resorting to major tax reform, with all depending on rosy Budget predictions, particularly a stunning 4.25% GDP growth forecast for 2021-22.
With a federal election likely before another budget is delivered, Mr Frydenberg's speech had a distinct 'out on the hustings' tone.
There will, however, be fears that hard decisions have again been put on hold.
The absence of adverse tax changes will be welcomed by many CAs exhausted from COVID-19 stimulus measure workloads piled on top of their business-as-usual work.
Continuation of the low- and middle-income tax offset was expected: the taxpayer backlash to its cessation would have been politically unpalatable.
The main business tax change – a one-year extension to temporary full expensing of depreciating assets and tax loss carry-backs – will be welcomed by eligible businesses, although tax depreciation has in recent years become incredibly complex.
Taxpayer backlash to ceasing the low- and middle-income tax offset would have been politically unpalatable
The good news for the government is that tax collections have held up remarkably well, thanks to improving employment conditions and profitable Australian extractive industries.
Rather than acting to address worrying increased levels of tax debt (mostly owed by small business), the government has moved to pause ATO debt recovery actions but only in the rare circumstance where debt is being disputed in the AAT.
CAs will watch closely to see whether the millions to be spent on further 'digitalisation of the economy', including myGov, gives the ATO greater real-time line of sight over business operations and likely tax defaulters.
On the international tax front, the take-up rate for the ATO's new 'concierge service' for global investors will be interesting given the regulator's keen appetite for detailed information on offshore structures and tax planning.
Superannuation continues to attract policy interventions.
CA ANZ is pleased with some of the announcements which we have sought for many years, in particular:
- older Australians aged at least 67 and under 75 years of age will find it easier to contribute money into super with the removal of an annoying work test
- the ability to dismantle some older style legacy pensions
- relaxing the residency rules for SMSFs when fund members have temporarily moved overseas for work or family
The $17.7 billion 5-year plan in response to the appalling revelations of the Royal Commission into Aged Care Quality and Safety will hearten older Australians.
Many CAs in public practice are experiencing increased demand for advice on how elderly clients and family members should navigate the complex web of aged care entitlements and support packages. This complexity is highlighted by the government's decision to allocate almost $275 million over four years to help older Australians navigate their way around the aged care system and better access services.
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