Promises Revisited (And Maybe Leaders)
In a recent speech Prime Minister Tony Abbott highlighted a range of issues that have been impacting Australia over the last year, as well as outlining his plan for the future. As part of this speech changes to previously announced policies were made, which could have significant impact on Australian businesses.
Yet again, the spectre of a review of the Australian tax system was flagged both from an income perspective and also from a GST perspective. It was emphasised that the GST will not change in scope or rate during this or the next term unless those changes receive support from the States and Labor.
Importantly, the flagship policy of a paid parental leave scheme has fallen by the wayside to be replaced by an improved families package. As you may remember the paid parental leave scheme was to be introduced at a rate of 1.5% on certain company profits with an offsetting reduction in the rate of corporate tax for all companies.
The legislation for the change has yet to be tabled and now will be unlikely to ever surface; however, in an attempt to drive the economy forward a “small business” jobs package has been announced. This also means that the potential impact to franking account balances is likely to be diluted.
What a small business actually looks like is yet to be confirmed, however, from 1 July 2015 it was announced that they would be receiving a tax cut of at least 1.5% being the previously flagged fall in tax rate. This then raises the potential for a tiered tax rate in Australia and impacts on franking accounts which could lead to increasing complexity and tax planning opportunities.
Also announced was a better review and scrutiny of foreign investment in agricultural land and foreign purchases of existing housing, again seeking to address a number of known areas of concern in the wider community.
When factoring in the above and the changes in the Employee Share Scheme rules, the announcements can be seen as a restatement of the traditional values for the Coalition focusing on small business and growth to generate wealth and the ‘feel good’ factor.
Announcements are all well and good, however, all governments whether Coalition or Labor need to be able to deliver on promises. In recent times, getting the legislation through Parliament has been challenging enough without having to deal with other issues like keeping promises.
When this is combined with leadership changes / potential changes the ability to make a positive lasting impact and change becomes difficult and it undermines confidence. Clearly we are in challenging times, however, a clear vision in respect of the taxation system or policies at large are needed together with stability.
When a consistent vision is laid out and a strategy is known, people and business are then able to plan and budget properly increasing certainty and ultimately confidence and the feel good factor can return. Constant political change breeds uncertainty and can result in a limitation of growth.
Should you wish to discuss how the above announcements may impact you and your business please contact your ESV Engagement Partner on 9283 1666.
Article by David Prichard