Make or break tax breaks: BDO’s 2024-25 federal budget prediction
Ahead of the budget, Mark Molesworth of accounting firm BDO says tax reform requires more than just the tinkering of tax breaks, thresholds and rates.
With just a week to go to the federal budget, there are growing whispers that the government will be considering some tax breaks aimed squarely at businesses.
Based on the rumours to date, this will include tax incentives for businesses that invest in local manufacturing capability – but perhaps only in chosen industries such as green energy or advanced manufacturing.
These tax breaks are predicted to come as an accelerated tax deduction, like an asset-write-off scheme where you bring forward deductions from future years to the current year.
That alone is hardly enough to move the needle as businesses are pretty good at dealing with timing differences.
We’re hoping the government will instead consider tax breaks that are additional, like former treasurer Wayne Swan’s GFC measure that saw businesses receive an additional 30% deduction for the new equipment they bought.
Additional tax deductions stand a better chance of encouraging businesses to invest in purchasing new equipment and potentially increase productivity.
We would also like to see business support packages that are industry-neutral, so the government is not trying to pick winners but instead is encouraging development in all of Australia’s industries. Industry-specific tax incentives are often tricky to administer because it is difficult to determine which businesses fall into a particular industry category.
And while tax breaks or incentives might provide a shot to the economy in the near term, we are urging the government to come to the table on tax reform if they are serious about the country’s economic security.
Our tax system is overly reliant on personal income tax receipts, and there are a number of existing taxes that hurt both individuals and businesses.
The fringe benefits tax, for example, is ripe for abolition, with its complexity and administrative burden a headache for many small businesses.
Likewise, small business tax rules are also increasingly complex for both advisers and taxpayers, and falling foul of these rules can present very real commercial risks to these businesses.
Tax reform requires more than just the tinkering of tax breaks, thresholds and rates.
We need politicians of all political persuasions to be willing to commit to real reform of our tax mix if they are serious about securing our economic future.
Let’s see what the Treasurer says next Tuesday night.
Mark Molesworth is a tax partner at the accounting firm BDO.
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