As we head towards budget night, scheduled for 11 May, predictions are emerging about the government’s first post-pandemic federal budget, following a fairly business-oriented, COVID-influenced October document.
And while the need for budget repair is expected to push the government in one direction, BDO predicts that the whiff of an upcoming election will pull them in the other.
“The government will be looking to spend money on the policies that will help them win at the polls in 2022,” BDO partner Mark Molesworth said.
While gender equality, a focus on aged care and climate change are tipped to play a big part, Mr Molesworth does expect the government to include a number of business-oriented policies.
- Changes to capital gains tax (CGT) rollovers to incentivise business restructures and changes to CGT discount to a lower amount.
- Targeted sector incentives to assist those still affected by the pandemic, such as a rejig of the JobMaker scheme to improve take-up.
- Higher-income earners and companies are likely to be the ones tapped on the shoulder to pay for some of this.
- Division 7A changes to bring currently grandfathered loans into the system and increase tax revenue as a result.
- Company tax rates in the rest of the world are rising, making Australia more competitive. The government would be wise to look at other incentives to have businesses set up in Australia, including potentially using some of the Research and Development Tax Incentive (R&DTI) levers.
Among BDO’s other budget forecasts is a possible review of the timeline for future super increases, with the accounting firm noting that the chances of stopping the superannuation guarantee increase to 10 per cent on 1 July are very low.
“While there are still risks for parts of the economy, in particular tourism and hospitality, and with some setbacks to the vaccine rollout, it’s certainly a rosier outlook than the Treasurer would have predicted when he delivered the last budget in October,” Mr Molesworth concluded.