The countdown is on to 11 May when the Treasurer will hand down the 2021-2022 Federal Budget.
With the potential that this will be the last budget before the next election (due in 2022), we are anticipating that the Government will seek to avoid rocking the boat. As the economy’s recovery is taking shape, we forecast that the Government will aim to deliver tax savings to the business sector with the aim of further growing the economic pie.
The “leaks” so far…
While we are not expecting major changes in this budget, we are anticipating that the following items will be raised on budget night.
Further support for childcare
It is anticipated that the budget will provide additional funding to lower the cost of childcare with the aim of increasing workforce participation. This may come in a raising of the childcare subsidy.
More tax cuts
We anticipate that individuals on low and middle incomes will continue to receive tax cuts and/or offsets through this budget. We expect that the low and middle income tax offset will be extended beyond its proposed retirement date of 30 June 2021.
The flattening of the income tax rates through the Government’s Stage 3 tax cuts is still a few years off and we do not anticipate that the Government will seek to bring this forward in this budget.
Additional intangible depreciation concessions
In addition, businesses can expect further depreciation concessions through accelerated rates of depreciation for intangible assets, such as software, patents and copyrights.
What we would like to see
Corporate tax rate inconsistencies eliminated
Declining corporate income tax rates and complicated rules relating to the calculation of franking credits has led to inconsistencies in the tax rate a company pays as opposed to the rate at which it can frank its dividends. In some cases, this has led to franking credits being “trapped” in a company. We would like to see an alignment of rates here to alleviate this inconsistency as corporate tax rates decline in the future.
Simplification of R&D tax concessions
A simplification and broadening of the application of the R&D tax concessions would be appreciated. Such changes could make it easier and more affordable for SMEs to navigate the complex waters of the R&D tax incentive.
More “black letter” law
More “black letter” law would be appreciated to remove some of the issues surrounding interpretation of complex law. This can often be a headache for businesses and advisors alike and the more certainty that can be provided, the better.
If you would like to discuss any of the issues raised above, contact Murray Howlett or your Pilot Advisor on (07) 3023 1300.