ASF TAKEAWAYS: The first Labour budget in ten years was all about resetting the new government's policy agenda, with a focus on the delivery of election promises and targeting efficiency dividends in its operations. Treasurer Jim Chalmers outlined his five point plan to ease the cost of living – cheaper childcare, paid parental leave, cheaper medicine, housing affordability and wage growth. Amongst the big picture announcements, the Government outlined a cheaper childcare scheme aimed at getting more parents back into the workforce, with paid parental leave expansions supporting this further.
Reductions to the Pharmaceutical Benefits Scheme’s maximum general co-payment from 1 January 2023 will result in cheaper medicine for millions of Australians and entering the housing market will be made more affordable through the National Housing Accord between governments, investors and industry. The truth will be in the detail when legislation is actually introduced.
KEY CHANGES FOR BUSINESSES
Establishment of the National Reconstruction Fund
Aiming at partnering with the private sector to support investments capable of growing the economy and increasing employment. This $15 billion fund will focus on regional development in a form of loans, guarantees and equity.
Key sectors that will benefit from the NRF include:
Resources
Agriculture, forestry, and fisheries
Transport
Medical science
Renewables and low-emission technologies
Defence
Enabling capabilities.
ASF Comment: this is certainly a different approach to the former Liberal governments, with the delivery of the NRF funds via loans, guarantees, and equity. The main concern with this scheme is that the funds may only start flowing after the NRF is established over the next two years.
Depreciation of Intangible Depreciable Assets
The Morrison Govt. had earmarked the ability of taxpayers to self-assess the effective life of intangible depreciable assets as a key cog in its Digital Economy Strategy. The Labour Govt. has decided to reverse this measure and maintain the status quo, that is, the effective life would be determined by legislation.
The superseded measures (which were due to commence with assets acquired from 1 July 2023) would have allowed business operators to self-assess the effective life of intangible depreciating assets in calculating their annual depreciation. This would have applied to patents, registered designs, copyrights, and in-house software.
ASF Comment: the current Govt. was concerned about the imprecision and ambiguity surrounding the previous announcement, but it needs to ensure that Australia is well-positioned as a leading digital economy.
Fringe Benefit Exemption for Electric Vehicles
As previously announced, the Govt. will provide an exemption from FBT for electronic vehicles commencing from 1 July 2022. The FBT exemption will apply to battery, hydrogen fuel cell and plug-in hybrid electric cars that are below the luxury car tax threshold for fuel-efficient cars (being $84,916 for the 2022-23 financial year) and first held and used from 1 July 2022.
ASF Comment: this is a welcome measure as it focuses on the climate impact, but there are several disadvantages to consider:
The vehicle price is capped to the luxury car tax threshold.
The exempt electric vehicle will still be subject to reportable fringe benefits. This means it may impact on the individual employee’s entitlement to certain tax concessions or obligation to certain tax liabilities, depending on the individual employee’s circumstances.
There is additional administration required for employers. Employers will still need to calculate the fringe benefit for reportable fringe benefit purposes, even though the benefit is exempt from FBT.
Only employees can benefit from this exemption. Therefore, private individuals and sole traders are not eligible for any exemption.
It will be reviewed in three years’ time, which may provide uncertainty to employers setting up these arrangements if they only provide a short-term benefit.
SMALL BUSINESS OWNERS SUPPORT
Over the next two calendar years, extended support for the Small Business Debt Helpline and the NewAccess for Small Business program.
The Small Business Debt Helpline is a free service offered to small business owners in financial difficulty, allowing them to speak confidentially to qualified financial counsellors.
The NewAccess for Small Business Owners program is a free and confidential, guided self-help mental health coaching program. The program is developed by Beyond Blue and offers small business owners the opportunity to: X Talk through their challenges X Develop a problem statement X Create a plan based on their needs.
ASF Comment: programs supporting the mental health of business owners, and all Australians are welcomed.
HOUSING ACCORD AND AFFORDABLE HOUSING
The Government has announced a Housing Accord with a target to build one million homes in five years commencing from 2024-25. It has outlined three key measures it believes will assist to provide more affordable housing.
For five years from 2024-2025, the Govt. will commit $350m building an additional 10,000 affordable homes. This will be matched by the State and Territory Govt.'s also committing to building 10,000 homes collectively.
Establish the Help to Buy Scheme, which will assist low to moderate-income earners to purchase new or existing homes with an equity contribution from the Govt. It intends to take a proportionate ownership stake in the home, recoverable at the time of the sale of the property. The Govt. estimates costs of $324.6m for this measure.
The Government will invest $10 billion in the Housing Australia Future Fund, which will generate returns that will fund 30,000 social and affordable homes over five years.
ASF Comment: Whilst an ambitious target, whether it is achievable in the current market with its material supply constraints remains to be seen.
PREVIOUSLY ANNOUNCED BUT NOT LEGISLATED TAX MEASURES
There are several Morrison Govt. announced initiatives that have been scraped altogether or deferred. The more pertinent ones are the;
Cancelled Measures
Changes to a three-yearly audit requirement for SMSFs with a history of good record keeping and compliance to reduce red tape and compliance costs.
Recommendation by the Black Economy Taskforce to introduce a limit of $10,000 for cash payments to tackle tax evasion and money laundering.
Deferred Measures
Relaxing residency requirements for SMSFs to provide flexibility while temporarily overseas by extending the central control and management test safe harbour and removing the active member test. This will be enforced from the date this legislation receives Royal Assent.
ASF Comment: not surprising the Labour Govt. has tried to sweep some of the announced but not legislated measures out - some had been announced in the 2013-14 FY so their impact would be significantly different in today's climate.
KEY CHANGES FOR INDIVIDUALS
The Team at ASF will be happy to discuss these changes in more detail.