The good, the bad, the missing and the surprise.
The "missing" is that there is no outward move to attract foreign capital consistent with the 2001 McLeod report. Not surprising given this is a hard topic ... but not even a mention?
Migrant matters are the only real exception to
this rule in terms of something new in the Budget.
For corporates, it's a steady-as-she-goes Budget, nothing more.
For individuals, indexation is now the three-year norm, funnily enough to be undertaken in each election year.
In short, those earning more than $10,081 will pay $35 less tax each year, those earning more than $40,324 will pay $314 less, and the wealthy earning more that $63,672 will pay $534 less.
Carbon tax for the average household of $4-$5 a week in extra costs ($200-$250 a year) quickly erodes or eliminates the above gains. Further, the number of taxpayers subjected to the 39 per cent rate is not expected to materially drop.
By contrast, ignoring exchange rates, Australians earning below $110,000 will still be better off than their New Zealander counterparts.
But at least it was a change. It would have been a brave Government to ignore public opinion. Time will tell whether the measures will soothe the savage beast.
Under this Government the 39 per cent rate is not a priority and is likely to remain permanent, as is the 33 per cent corporate rate.
While the depreciation changes are positive, they are unlikely to have a material impact for many. The changes are largely recognition that for short-lived assets, the historic rates were too low given the speed at which they depreciate.
Note also that the changes are prospective, applying to acquisitions after today or April 1 of this year.
Being able to scrap fixed assets costing less that $500 (now $200) should be viewed as relevant, beneficial and a real compliance cost-saving measure, albeit the hope was that this would rise to $1000, not $500, which would have materially increased the benefit to many corporates.
The removal of FBT (fringe benefit tax) on minor benefits is welcome. It means most small businesses will now be outside the FBT net or just pay FBT on cars.
The promised $1 billion package of tax breaks for business over the next four years is, however, actually only a net $709 million if you take into account that over the same period carbon tax revenue of $721 million is expected.
The depreciation tax gains of $977 million over the same period are the cash cost of increasing depreciation rates, not the present value cost of the changes, with the present value amount being considerably less, as taxpayers would in any event already get the deductions.
If there's a real winner from a business standpoint, it's the savings industry. Relieving gains made by collective savings vehicles is a welcome move which will ensure that investors do not lose the ability to make capital gains by investing in such funds, also the "flow-through" regime for certain collective investment vehicles.
The complex minefield surrounding taxation of foreign investments has been kicked back into consultative touch.
The biggest business losers have to be those exposed to carbon tax.
* Thomas Pippos is a national tax partner of Deloitte Touche Tomatsu
Thomas Pippos
The good, the bad, the missing and the surprise.
The "missing" is that there is no outward move to attract foreign capital consistent with the 2001 McLeod report. Not surprising given this is a hard topic ... but not even a mention?
Migrant matters are the only real exception to
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