The Treasurer Joe Hockey has flagged that a structural overhaul of the economy is required to prevent a “decade of deficits.” The Mid Year Economic and Fiscal Outlook released in December stated that the Budget wouldn’t get back into surplus “even if there are no tax cuts for the next 10 years.” At the very least, you should expect the May Budget to be more like a renovation than a refresh with all options on the table. Welfare is a likely target, so are any concessions or benefits out of alignment with the overall tax system.
In addition to the big picture tax changes flagged during the election to repeal the mining tax and carbon tax (both Bills are currently before the Senate), you can expect a focus on: how money moves between individuals, companies and trusts and the tax paid; non-residents; and, a renewed attempt by the ATO to try and recover the almost $18b of tax that is currently owed.
While there will be a heavy focus on revenue raising over the next few years, there will also be structural change. The Abbott Government has adopted the American concept of a ‘repeal day,’ and plans to axe more than 8,000 redundant Federal laws to reduce red tape.
The repeal day is scheduled for the House of Representatives on 26 March, following the introduction of an omnibus red tape reduction bill and a series of specific deregulation bills on 19 March.
The repeal day follows the scrapping of 71 unlegislated and unresolved tax and super announcements late last year. Among the items scrapped were the Gillard/Rudd Government’s announcements to cap self-education expenses at $2,000, remove the statutory method for car fringe benefits, and change tax on earnings on super assets.
For small business, many of the concessions encouraging you to purchase motor vehicles or invest in business assets have either already gone, or are likely to go. If the mining tax is abolished, a number of small business tax concessions will also go. For example, the immediate deduction for depreciating assets costing less than $6,500 will be reduced back to the old rate of $1,000. The start date for this was intended to be 1 January 2014.