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The Federal Budget was another missed opportunity for productive tax reform and instead favoured cost of living relief measures that were likely to be inflationary in the medium to longterm, according to experts from national professional services firm RSM Australia.
RSM Australia - which has a strong middle market business client base - said while the announced tax cuts, new $300 energy rebate for all households and further rental assistance would be welcomed, the relief measures could work against Australia’s best interests.
RSM’s economic, tax and industry experts described the Federal Budget as “unsurprising, underwhelming, and counter productive in some areas”.
RSM Australia National Tax Technical Director Liam Telford said disappointingly the Budget did not include any substantive tax changes or hint at the potential of a future reform agenda despite industry crying out for change.
“Instead there are a handful of technical amendments, including a welcome discontinuation of a measure related to intangibles, about which RSM had raised serous concerns, but also a concerning new provision applying penalties to the mischaracterisation of royalty payments that could catch out a lot of companies,” he said.
Mr Telford said Australia’s 2.6 million businesses - particularly the 97 per cent of which are small businesses with less than 20 employees - received some cost of business relief, but not enough to make a significant difference.
“The one-year extension of the $20,000 instant asset write-off and $325 energy bill relief for eligible small business will be welcome,” he said.
“However this Budget could have gone further in areas such as company tax reform and the permanent incorporation of business loss carry back tax offset rules to encourage investment and bolster business resilience during economic downturns.”
RSM Australia Economist Devika Shivadekar said the Budget focused on the continuation of costcutting measures, rather than delivering fresh thinking or targeted strategies towards long-lasting inflation reduction.
Speaking on the overall Budget, Ms Shivadekar feels that it is notable to provide cost of living relief to all, but doing so through predominantly stimulatory non-targeted measures could prove artificial rather than transformational.
“To say this is not inflationary would be to deny the obvious,” she said.
“It is unlikely the Reserve Bank of Australia (RBA) will see the effects of this stimulus activity for another two quarterly CPI cycles, or until at least November 2024, at which point interest rates could go either way.
“Even if the RBA feels that the current 4.35 per cent interest rate is sufficiently restrictive, the RBA may be compelled to contemplate interest rate hikes, with the intention of directing the surplus funds toward mortgage repayments rather than discretionary expenditures.”
RSM Australia Tax Services Director Rick Kimberley said wage compliance appeared to be a minor theme within the Budget with limited funding measures supporting workplaces to introduce payday superannuation and targeting non-compliance by large corporate employers with the Fair Work Act.
Other RSM Australia expert comment:
Manufacturing National Leader, Jessica Olivier
“Rather than the manufacturing sector as a whole, the Budget focused on Critical Minerals, Clean Energy and Green Technologies, however it was pleasing to see the announcement of $500 million for the tertiary sector to increase skills in manufacturing and clean energy, as well as the announcement of various initiatives to lift private investment and workforce skills, and boost local supply chains.
“Beyond that announcement and as expected, we saw the Federal Government set out their agenda for the recently announced Future Made in Australia Act and highlight their priorities by focusing investment on transformational opportunities. Last year’s $15 billion National Reconstruction Fund has been rolled into the Future Made in Australia policy, which on a positive
note saw a 51 per cent increase in the overall funding allocated to Future Made in Australia totalling $22.7 billion.
“We also saw the Government demonstrate their commitment towards a cleaner, greener future in Australia with funding towards green energy, critical minerals and renewables in Australia – in particular $13.7 billion in production tax incentives for green hydrogen and processed critical minerals.
“In terms of grants (both new and extended programs), it should have been a significant part of the new measures announced to bolster Manufacturing, however there was little specifically targeted at this sector. In relation to other incentives and over eight years since Finkel-Ferris- Fraser 2016 review of the R&D Tax Incentive program, the Budget announced it would undertake
an independent and strategic examination of Australia’s Research and Development system to strengthen its alignment with Australia’s priorities and improve innovation and research and development outcomes.
Agribusiness National Leader, Ross Paterson
“With the continual challenges of climate change impacting Australia’s regions, our regional communities and farmers welcome the Government’s $519 million commitment towards improving drought resilience.
“Unfortunately, it appears most of these funds are just going into existing programs rather than being new initiatives.
“Labour shortages remain a critical issue for many farmers and regional areas, and it’s disappointing to see a lack of incentives to encourage people to relocate to our regions for employment opportunities. The Treasurer said this Budget would bring jobs of the future to every corner of the country but I question the impact within the regions. Especially when net migration is
halving, exacerbating already high labour shortfalls within the agri sector.
“I was hoping that the Future Made in Australia initiative might help the supply chain for our farmers who are quite vulnerable in that a lot of their inputs are imported from overseas.
“Unfortunately, there seems to no appetite for helping agriculture – the government is picking
winners and with the focus on emerging industries such as renewables and critical minerals,
traditional sectors such as agri have been bypassed.
“Confirmation by the Federal Government that live sheep exports will be completely phased out by May 2028 has been met with widespread anger from farmers and livestock exporters.
“The $107 million assistance package announced pre budget by Agriculture Minister Murray Watt will do little to address the main issue facing WA farmers which is the lack of a viable alternative to live exports.
“Increasing the processing capacity of abattoirs in WA, that are already stretched, within a four year timeframe to replace live sheep exports would appear to be wishful thinking.”
Property & Construction National Leader, Adam Crowley
“The announced budget measures, along with the previously announced National Housing Accord, aim to deliver 1.2 million new homes in the next five years, increase the supply of skilled workers to the sector, and remove planning impediments at a state and territory level.
“It’s a positive response from the Government to a key issue for many Australians. State and Territory cooperation is going to be key in delivering on the announcements and there is still a lot of work to be done.
“Labour shortages have been a significant issue impacting the property and construction industry and we are pleased to see an investment by this Government to support fee-free training places for new construction workers. It does not solve the immediate labour shortages faced by the industry, and this, coupled with the increased cost of materials and the current State and Territory planning and approval roadblocks make it difficult for the industry at present. Whilst these announcements are encouraging, we would have liked to see more from the government to ease the immediate issues faced by the industry.
“Other positive announcements include investments in the provision of social housing and homelessness services, funding for community housing providers and lower fees for foreign investors when purchasing existing Build-to-Rent properties.”
