Prime Minister Scott Morrison has called the federal election for 18 May. Here’s a wrap of the key policies and themes for Australian businesses.
Labor will look to introduce the Australian Investment Guarantee, a 20 per cent immediate deduction of any new eligible asset worth more than $20,000, with the remaining 80 per cent depreciated over the effective life from the first year.
In comparison, the current federal government has increased the instant asset write-off threshold to $30,000 and expanded it to medium-sized businesses with a turnover of up to $50 million.
Under the radar
One of the policies which hasn’t had much air time is Labor’s plan to cap how much can be claimed in the cost of managing taxes.
Labor plans to cap deductions for the cost of managing tax affairs to $3,000, a move which has unsurprisingly outraged the accounting profession, the primary advisers to the Australian business community.
The Tax Institute’s senior tax counsel, Professor Robert Deutsch, revealed that 87.6 per cent of its membership either disagreed or strongly disagreed with the proposal.
“It seems to me that measure has come about because there is a handful, perhaps two handfuls, of people who have done the wrong thing by overclaiming deductions in this space,” he said.
“I think they need to be addressed head-on, but I don’t think it is fair to penalise the entire community by limiting deductions in this way to a particular figure.
“It is distortionary.”
Trusts in focus
Small businesses who use discretionary trusts will be impacted by Labor’s plan to introduce a minimum 30 per cent tax rate for discretionary trust distributions to adults.
You can read about this policy in detail here.
Cap on migration
Treasurer Josh Frydenberg released plans to reduce placements from 190,000 to 160,000 in its Migration Program in the federal budget last week.
For the 2019–20 Migration Program, there will be 108,682 places in the skill stream, 47,732 places in the family stream, with a combined 3,586 places for child and special eligibility streams.
MYOB chief executive Tim Reed said that any move that would reduce the number of skilled immigrants could ultimately translate to poorer outcomes for the business community.
“The reduction in the cap on migration is something that is more likely to create a challenge [in the business environment],” Mr Reed said.
You can read more about this policy here.
The projected surplus: Is it all it’s cracked up to be?
A projected surplus typically inspires confidence in the business community, and Mr Reed said that it’s “certainly not a bad thing” for business that the national accounts are predicted to be back in the black.
However, the real-world impact of a surplus is questionable when other key economic indicators — like wages growth and house prices — are not strong.
The nation’s top economists are concerned about the state of the national accounts, and voiced their cautions in the months leading up to the budget’s release, when it became clear a surplus would be projected for the 2019–20 budget.
“The concern is that, in an election year, both sides of politics will have an incentive to spend this windfall. But the projected surpluses are so small as to be mere rounding errors in the context of the total budget,” said PwC chief economist Jeremy Thorpe.
Further, Deloitte Access Economics’ Chris Richardson pointed out that a surplus budget is not necessarily a sign of a healthy economy.
“The economy is getting better, but the budget is getting worse,” he said.
Others, like AMP Capital’s Shane Oliver, noted that Australia has been in a per-capita recession for the last two quarters for the first time since 2006.
It’s also important to note that, while the government is touting it’s “back in the black,” such will be true of the 2019–20 financial year, if the surplus materialises. As it stands, Australia remains in the red, and will finish this financial year in deficit.
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