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The accounting profession has outlined the critical measures it would like to see handed down in tonight’s federal budget.
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Business tax incentives, tax reform top of budget wishlist
14 May 2024
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Accounting firms and associations have stressed the importance of addressing the rising cost of business and undertaking tax reform ahead of the release of the federal budget tonight.
RSM Australia said it would like to see the government permanently incorporate the business loss carry back offset rules into Australia’s income tax regime to encourage investment and bolster business resilience.
This forms one of the six tax reforms the professional services firm would like to see included in the 2024–25 federal budget.
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RSM Australia tax services director, Tony Fulton, said the recent COVID-19 pandemic demonstrated the importance of tax measures, such as the loss carry back rules, that supported business cashflow and continuity.
“Permanently incorporating this refundability measure into income tax legislation, which was intended over a decade ago, would assist in building business resilience by providing firms with additional liquidity when they most need it,” said Fulton.
“Currently, a number of countries such as Canada, France, Germany, Singapore and the United Kingdom allow carry backs for between one and three years.”
Under Australia’s temporary loss carry back regime, eligible entities were allowed to claim losses in 2019–20 to 2022–23 against tax paid in income years from 2018–19.
Between 2021–22 and 2023–24, Treasury estimated that revenue foregone from this tax measure was $6 billion.
However, Fulton said lost revenue would be short-lived and likely to be more than offset by the economic benefits and tax generated from businesses continuing to trade and employees continuing to work.
RSM Australia national tax technical director, Liam Telford, said he backed calls by state and national business representative groups for targeted, efficient, and productive tax reform to boost Australia’s sluggish economy.
“We have recently seen developments at the level of the executive and legislature that have created business uncertainty and made Australia less attractive for investment which is counter to tax reform objectives to expand the economy and improve living standards,” Telford said.
“While understandably this Budget is expected to provide cost of living pain relief for Australian households who are doing it tough, measures that also address mounting ‘cost of business’ pressures should also be prioritised.”
With the Treasurer and Prime Minister announcing plans to build Australia’s sovereign capability through initiatives such as increased investment in manufacturing, Telford said it was vital these initiatives were underpinned by tax measures that promote business resilience, stability and continuity.
The accounting firm said it would also like to see the corporate tax return reduced to 25 per cent for all corporate tax entities, consistent with the former government’s enterprise tax plan.
It is also calling for tax incentives for businesses that embrace clean energy and their investors as well as incentives to encourage business investment in research and development.
RSM is also pushing for the government to increase the GST rate and broaden its base and for other employment tax reforms to improve productivity.
CA ANZ is also hoping to see substantive tax reform in the budget tonight, along with a roadmap and timeline to achieve it.
CA ANZ group executive, advocacy and international development, Simon Grant, said the association made it clear in its pre-budget submission that it is time for a wider discussion about the tax system.
The CA ANZ pre-budget submission also outlined productivity improvements, red tape reduction and small business support measures the federal government should consider.
“We appreciate the economic headwinds the country is facing, so that’s why we shouldn’t be looking at sugar hits but rather substantive and sustainable reform,” said Grant.
“We need to make it easier for businesses to be in business – that includes having a skilled and educated workforce, so we will be looking for the Budget to extend the 120 per cent training boost.”
The Tax Institute similarly would like to see the government undertake holistic tax and superannuation reform to reduce complexity, improve equity and increase efficiency across the system.
The association would also like to see the government address the significant backlog of announced but unenacted measures that remain outstanding from previous budgets, reviews and announcements. This would provide certainty to taxpayers and their advisers, the Tax Institute said.
“Many decades of isolated measures, knee-jerk reactions and tweaks without consideration of the broader system have resulted in a tax system that is complex, inefficient and unfair,” the association said.
“A constructive, mature conversation is needed to explain the need for reform, and garner universal support from political, business, professional and community stakeholders.”
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