Extensions to existing schemes, a cut in fuel duty and a light touch elsewhere will mark this year’s budget, said the director of tax communications at H&R Block.
With small business in the spotlight, Mark Chapman expects the Treasurer to extend the popular temporary full expensing scheme, giving an immediate deduction for all capital items purchased through to 30 June 2024.
And small business might win elsewhere as well.
“I don’t believe that the government will give up on its aspiration for lower tax rates but it continues to be politically difficult to give tax cuts to big businesses,” Mr Chapman said.
“So I wouldn’t be surprised to see further cuts to the rate of tax for small businesses, accompanied with a possible increase in the turnover threshold – currently $50 million – to qualify.”
With businesses and consumers reeling from petrol prices, Mr Chapman expects the Treasurer to follow through on fuel duty cuts.
“This will be a drop in the ocean compared to recent price rises, but the Treasurer will want to be seen to be helping the great Aussie motorist,” Mr Chapman said.
But ordinary taxpayers will have to wait for personal tax cuts.
“Expect the low and middle-income tax offset (currently scheduled to end 30 June) to be extended for one more year through to 30 June 2023,” he said.
“This is an amount paid to people earning up to $126,000 when they lodge their tax return for the year. The amount varies between $255 and $1,080, with those earning between $48,001 and $90,000 in the ‘sweet spot’ where they get the full amount.
“This will be sold as a tax cut but really, it’s simply a deferred tax rise. When the offset does finally end, everybody earning up to $126,000 will lose the amount of the tax offset, which has been a feature of the tax system since 2018-19.”
But the timetable for stage three tax cuts was unlikely to change, he said.
Starting in 2024, these reduce the 32.5 per cent rate to 30 per cent for all incomes between $45,000 and $200,000. The 37 per cent tax bracket is abolished while the top 45 per cent bracket starts from $200,000.
And as work from home remains a feature of post-pandemic life, Mr Chapman expects the Treasurer to have one eye on the purported $22 billion in annual claims.
“Work-related deductions have been in the sights of Treasury boffins for years now but they have struggled to come up with a way of reforming the system that doesn’t either outrage taxpayers or end up costing more than it saves,” Mr Chapman said.
“We’re not convinced he has been able to work out a way of getting his hands on that pot of money without encountering the same hurdles as his predecessors.”
Philip King is editor of Accountants Daily and SMSF Adviser, the leading sources of news, insight, and educational content for professionals in the accounting and SMSF sectors.
Philip joined the titles in March 2022 and brings extensive experience from a variety of roles at The Australian national broadsheet daily, most recently as motoring editor. His background also takes in spells on diverse consumer and trade magazines.