Grant Wardell-Johnson, KPMG Tax Partner, said: “The centre-piece of the Budget is the personal tax cuts – and it is welcome to see action for both lower and middle earners given sluggish wage growth. There is a reasonable mix of immediate relief for those groups and longer-term structural reform aimed at higher earners.
Personal tax cuts
The tax cuts have taken the form of Low and Medium Income Tax Offsets (LMITOs), so that lower and middle earners will be better off than under current arrangements. There is a rationale for this, given that personal income tax is now supplying its highest proportion of GDP since 1999/2000, via increasing bracket creep over the last 20 years.”
Gender equity
Grant Wardell-Johnson said: “KPMG would have liked to have seen more of a gender lens in this Budget. There are some helpful, fairly minor measures, but a lack of structural reform to address the gender pay pap – which is still $26,000 per annum on average – and a lack of affordable quality childcare is a major impediment to increasing female participation in the workforce. Addressing these problems could add billions to the economy.
Available money should be targeted to those people, mostly women, who are trying to work more hours but are stopped from doing so by the interaction of our transfer system and the tax system. Currently, many women experience very high effective marginal tax rates when moving from 3 or 4 days a week to 4 or 5 days a week due to loss of family and child benefits. There is a similar problem for older workers. Addressing these issues would have a short term cost but a long term benefit.”
Business tax
Grant Wardell-Johnson said: “Regrettably there is no movement on our corporate tax rate, which remains an uncompetitive outlier, internationally, and a drag on external investment into Australia. Company tax reductions for businesses of all sizes are vital in order to incentivise additional business investment and create jobs for the future. There is no sound economic basis for providing lower rates for smaller companies only.
There is a notable theme in the Budget of extra finance for regulators. Just over $1bn will be spent expanding the ATO’s Tax Avoidance programs with a view to bringing in an extra $4.6bn. But previous experience has shown a 1-6 ‘spend to save’ ratio is possible so this Budget estimate does not seem unreasonable.”
SMEs
