This year’s approach to the Budget has seen the new Coalition Government pull very tightly on the fiscal reins against a backdrop of hard choices and even harder decisions. The Government says it has acted to ensure it is not hobbled by galloping domestic debt and an economy that has been up and down like a rodeo ride.
Despite many of the Budget’s key measures being released prior to Budget - which may have softened the blow to the public - BDO considers that while there will be some pain, the impact will not necessarily be the hard whipping previously imagined. However, there will be a number of issues that both business and individuals will need to face as we focus ‘less on consumption and more on investment’.
There are a number of key issues from this year’s Federal Budget including:
- Increases in the tax rates applying to high income individuals and fringe benefits
- A reduction in the corporate tax rate for smaller companies, but a non-creditable levy on larger companies that will increase the tax paid by all shareholders
- A reduction in the value of the R&D tax incentive
- Significant reductions in welfare programs and an increase in the cost of higher education for most students.
The budget measures continue to tinker around the edges of real tax reform. BDO has persistently called for holistic tax reform to be debated and then implemented. It is to be hoped that real reform will come out of the proposed White Paper process later this year. In that process, BDO encourages the Government to seriously consider remedies previously identified, including a review of the GST, to ensure sustainability of the economy and stability in taxation policy into the future.
Just as it is not easy to break in a wild horse, repairing the budget was never going to be an easy task. Only time will tell if the impact from the 2014 Federal Budget will reduce the economy to a slow trot, or ease it in to a comfortable canter.
“….there will be a number of issues that both business and individuals will need to face as we focus ‘less on consumption and more on investment’. ”