Budget 2016 - 6 wins for business
Treasurer Scott Morrison said it himself: This is not your typical budget.
Unlike most years, almost the entire content of the budget has been put on the table. Morrison claims this is so he can spend more time explaining the reasons for the decisions, although the strategy of allowing talk-back radio hosts to fill the gap between now and 7.30pm looks risky at best.
Secondly, the Government is in a tricky place. It’s struggling to deliver a plan in line with its traditional claim to ‘economic management’ while trying to distance moving on from the legacy of the disastrous 2014 budget. Add in a few sweeteners for the forthcoming election, and this is looking like something of a Mission: Impossible for the Treasurer.
Still, for business there is plenty to get excited about. Under the Government’s theme of ‘Jobs and Growth’ much of the significant fiscal policy is directed at Small and Medium Enterprise (SME).
Here are six items we’ve identified a important for business across Australia.
1. Google Tax
Sam Dastyari must be feeling robbed or absolutely thrilled. The Government has taken on one of his favourite platforms in multinational tax avoidance.
While details are still scarce, it’s a shrewd strategy that removes claims that the government is delivering a fair budget and is not scared of going after big business. Just why the focus is on big international players while skipping Australian blue-chip companies is a question the Coalition will probably prefer not to answer.
2. Company Tax Cuts
Turn over less than $2.5 million dollars and your company pays 28% company tax. Earn over that and you’re up for the full 30%. Treasury has been keen for further cuts in company taxes, and this year the Government will deliver it.
The revised regime sees all business turning over less than $10 million getting access to a new 27.5% company tax rate. Available from 1 July, this will add another 5,000 businesses – albeit those with considerably greater scale of revenue and employment – to the scheme.
For everyone above the $10 million threshold there will be a slow path to reduce the company tax rate over time. Specific timelines will likely be in the Budget speech.
3. Expanded Instant Asset Write-off Scheme
One of the surprises of the 2015 Budget, the Instant Asset Write-off Scheme was designed to get SMEs out and spending money immediately. It’s a sensible scheme – money has never been so cheap to borrow and, by claiming the full depreciation rebates, it significantly reduces the cost of investing in new assets to grow a business.
For 2016, the threshold for access to the scheme will also be raised to businesses with turnover of $10 million, while continuing to run until June 30 2017.
4. Personal Tax Cuts
One of he most publicised aspects of the budget is a moderate tax cut for those earning over $80,000. Again, the details are also thin, however the strategy has come under criticism because of similarities to the ‘pie and a drink’ tax cuts of the Howard Government in the mid-2000s.
Stay tuned tonight to hear what the government has in store for those in the 37% tax bracket. This is the second highest rate of personal tax under the current structure, and clearly a demographic where the Government sees political benefits in granting some fiscal relief.
5. Superannuation
With so many proposals for tax reform suddenly appearing for public debate (then disappearing just as quickly – some in less than a day), it seems almost incongruous that changes to superannuation benefits has made it through to Budget Day.
This is an easy sell for the public, and those most impacted have already done very well out of the scheme. Again, it’s a clever way to instill a sense of fairness in the 2016 Budget, although critics will suggest that the amendments pull up short of what could still be done.
6. Cigarette Tax
With the cost of a pack of 25 smokes now set to hit $40.00 by 2020, business could receive an indirect efficiency dividend simply through a reduction in staff cigarette breaks!
Interestingly, this is another Labor policy that was recently trashed by the Government.
At the end of the day, this policy is another easy win and, regardless of whose modelling is used, the benefits to the community run a lot deeper than simply the tax revenue from cigarettes.
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The 2016 Federal Budget is broadcast live on ABC 1, ABC News 24, iView, Radio National and NewsRadio.