Mark Molesworth

The Government has written an election manifesto dressed up as a budget as it looks ahead to the double dissolution on 2 July.

“A year ago there was a lot of optimism that this budget might begin the process of genuine tax reform, but political expediency has reduced it to more tinkering at the edges,” BDO Tax Partner Mark Molesworth said.

“This is very much a budget from a Government whose first, second and third priorities are to get re-elected.

“It’s now more than a decade and a half since our tax system has seen any meaningful reform and it’s hard to feel too positive about the chances of anything significant occurring in the near future.”

Mr Molesworth said although measures like further cutting taxes for small business, winding back superannuation concessions, and progressively moving the corporate tax rate to 25% were positive, they didn’t do enough to address the broader structural issues facing Australia’s tax system.

“Providing further tax relief to small businesses – and raising the eligibility for that relief to turnover of up to $10 million is admirable, but a more holistic approach to tax could have achieved so much more,” Mr Molesworth said.

“Certainly no business is going to say no to a tax cut, but that doesn’t mean we haven’t missed an opportunity to truly address the way our tax system holds business back.”

Mr Molesworth said while some of the Government’s changes to reduce superannuation concessions were positive, others will disadvantage those who have planned their retirement around the existing rules.

“Limiting the amount of pension assets to $1.6 million is understandable,” he said.

“But lowering the concessional contributions cap to $25,000 and introducing a lifetime cap on non-concessional contributions to $500,000 will be huge blow to many who are close to retirement, especially given the lifetime cap is being backdated to 2007.”

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Lance Cunningham

As the tax reform debate reaches fever pitch ahead of this year’s Australian federal election, businesses of all sizes have been invited to weigh in as part of the fifth annual BDO Tax Reform Survey.

Open until 11 March, the survey gives businesses around the country a cumulative voice to highlight the tax measures most in need of change, such as those stifling local investment and growth.

BDO National Tax Director Lance Cunningham said the effects of tax reform would reverberate far and wide throughout the business community, across all sectors and from solo operators through to SMEs and large corporations.

“It’s been more than eight months since hundreds of Australian individuals, businesses and groups made formal submissions in response to the Federal Government’s tax discussion paper, and frustration has continued to build that a reform package has not been forthcoming,” Mr Cunningham said.

“With the Federal Government now ruling out a tax reform white paper, opting instead to present its long-awaited tax reform package as part of the 2016-17 federal budget, the BDO Tax Reform Survey will provide a pre-budget opportunity for Australian businesses to have their say on reforming tax measures like the GST, stamp duty, superannuation, company tax rate, fringe benefits tax and capital gains tax.

“The business environment has evolved exponentially since most of the current measures were put in place, and not only are Australian businesses looking for simpler and fairer tax solutions, they are seeking a tax system that helps them thrive within a more globally competitive and digitally-driven economy.

“Last year, respondents pointed to GST and state taxes as the two most vexing issues, with 90.3% of respondents agreeing that GST must be considered in any tax reform discussion and 71% agreeing the GST rate should be increased to fund the abolition of state payroll taxes and stamp duties.

“65.6% of survey respondents also suggested Australia’s tax system wasn’t competitive with those of international counterparts, while just 4.2% believed the tax system promotes Australia as a desirable location for regional headquarters and investment.”

This year’s survey responses will be released in April 2016.

Past responses – from hundreds of Australian businesses – helped form BDO’s submission to the Australian Government’s Re:think Tax Reform Discussion Paper process last year.

Results from the 2014-15 BDO Tax Reform Survey are available here.

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