Next Tuesday evening the 2021 Federal Budget will be handed down by Treasurer, Josh Frydenberg. The Government have already been out and about spruiking some new initiatives and reminding us of previous announcements that are now imminent.
The economy is doing well in this ‘new Covid world’ – much better than expected – however the Government recognises the need to drive growth so that the deficit can be repaid. The Government appear to be seeking to do this by trying to drive down unemployment which will help our economy into the future. Not to mention being voter friendly with an election slated for 2022.
What we know …
- There will be commentary on superannuation changes. The Super Guarantee is scheduled to increase from 9.5% to 10% on 1 July 2021 – but this new date has not been officially committed to as yet (although I don’t believe it will be pushed back further). I also expect changes to concessional thresholds – allowing people to increase their personal contributions without being penalised.
- Increased investment in defence – Australia will spend A$747 million ($580 million) to upgrade four northern military bases and expand war games with the United States.
- A $1.7billion childcare boost is planned which aims to remove disincentives for women returning to work.
I expect to see …
- Further funding to support the findings of the Aged Care Royal Commission and the Royal Commission into Violence, Abuse, Neglect and Exploitation of People with Disability.
- A focus on gender equality initiatives.
- Projects to help combat domestic violence.
- Extension of the Low and Middle Income Tax Offset.
What I’d love to see …
- Changing the rules on FBT and entertainment. The hospitality sector has been one of the hardest hit during Covid – we should allow companies to take clients and staff out without FBT being applied.
- Simplifying the rules surrounding employee share schemes.
- Changing the JobMaker scheme. It appears only 609 young people have been hired through JobMaker – far short of the expected 450,000 jobs. A tweak of this scheme which generates jobs (as was promised) would be good to see.
- Clarification on the proposed Division 7A changes – ongoing uncertainty continues to impact on private investment and therefore understanding what are we actually going to end up with and when, will help drive investment and growth.
- Tweaks to company tax rates – including changes to the R&D Tax Incentive.
- And the big one …. planning for comprehensive tax reform to make Australia’s tax system more efficient and effective. This would likely see a change from direct to indirect taxation and should include a change in State taxes (eg payroll tax – a tax on jobs!). The OECD’s recent review of our tax system signalled the need to review the GST rate when our post pandemic recovery is underway. The Government should start planning for this now.
I’ll be watching Josh next Tuesday evening and will deliver my insights into what the 2021 Federal Budget means for individuals and businesses on Wednesday morning – if you’d like a copy delivered straight to your inbox simply email firstname.lastname@example.org to request a copy.