“A $213 billion deficit and government debt peaking at $966 billion would normally provoke some discussion about the difficult budget repair task ahead and the ability of our tax system to meet growing demands on government. However, these are not normal times,” says CA ANZ Australian Tax Leader Michael Croker.
“The Treasurer has outlined that budget repair will not begin until unemployment trends below 6%, which could take a while.
“Unemployment and underemployment will be the COVID-19 legacy that lingers longest, as will the associated demand for an adequate Newstart allowance.”
Croker says reform is not just a federal issue, with states and territories warned to expect a drop in GST receipts of $21.1 billion over the four years to 2023-24.
“Their continued ability to deliver the services many take for granted will be tested,” he says.
“However, there is little progress to report on longer-term reform discussions at the National Cabinet and Council of Federal Financial Relations.
“For the time being, the Treasurer’s focus is clearly on the here and now.
“Chartered Accountants today will be talking to their clients about how they should factor in budget measures such as the personal tax cuts, JobMaker and the instant asset write-off.
“While business tax write-offs are attractive, they are one consideration when deciding to invest in new equipment, with demand for business outputs, cash flow and financing also important.
“For some companies, carrying-back current losses to a prior profitable year will be very beneficial.
“Tax incentives usually change taxpayer behaviour but in this COVID-induced recession, the economic impact this time may be muted. Time will tell.
“The uncertainty surrounding how individuals and businesses will respond partly explains why the Government has also stepped-up to spend big on infrastructure, urging state and territory governments to do the same.
“Lots of policy buttons need to be pushed in a bid to keep as many Australians engaged in work as possible. The ramifications extend far beyond dollars and into a host of important wellbeing issues, which include mental health, equality and social cohesion.
“This is why the Treasurer’s focus on mental health and suicide prevention as a national priority backed by the $5.7 billion commitment to mental health is increasingly important.
“Australians doing it tough need to be supported adequately by a compassionate society.”
2020-21 Federal Budget
Coverage on the Australian Federal Budget.