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Rebuilding Together, With Tax

Businesses have not been on the receiving end of much good news over the last decade. When comparing the initiatives of 2020 to the business tax announcements included in Budgets 2010 through 2019, most Budget tax announcements have been base maintenance and extensions to the taxation of business. 

In fact, the negative business initiatives exceeded the business positive initiatives by over 3.5:1. If nothing else, the COVID-19 pandemic has bought new focus to the importance of business to our country’s economic wellbeing and recovery.

In the battle to reduce the economic harm caused by COVID-19, tax has been leading the way. Prior to Budget 2020, the Government introduced a range of overdue business tax initiatives, costing over $5.9 billion. 

In addition, there has been $10.6 billion spent helping businesses pay their employees through the Wage Subsidy Scheme (with a further $3.2 billion extension announced today) and an available pot of $6.25 billion to be lent to small businesses under the Small Business Cashflow Scheme (of which over $280 million has already been approved). Taken together, businesses should be feeling more appreciated than at any other point in the last decade.

Outside of confirming the already announced changes to allow deductions for feasibility expenditure, Budget 2020 did not contain any new tax news, instead it reaffirmed the commitment to having a broad base low rate tax system and to ensure everyone pays their fair share (including multinationals).

The Minister of Finance confirmed today that there will be no changes to tax rates in this Parliamentary term. However, perhaps a hint of what may be to come is included within the fiscal strategy that includes the following within the government’s long-term objectives for the tax system:

  • A progressive tax and transfer system for individuals and families
  • A system that treats all income and assets in a fair, balanced and efficient manner

Whether this should be interpreted as a nod towards higher tax rates or new taxes, is something that may become more apparent as we head toward the election.

The Government accounts show taxation revenues dropping from $85.7b (2019 actual), to $81.6b (2020 forecast), to $79b (2021 forecast), before rebounding from 2022 ($86.4b 2022; $95.7b 2023; $101.3b 2024).

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