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But the government has been silent on small-business incentives left over from the March budget.
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Labor following through on tax pledges, says IPA
16 August 2022
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11 minute read
Labor has acted quickly on key election tax pledges regarding multinationals and electric vehicles, but kept everyone guessing about a popular incentive for skills and digital uptake left over from the March budget, said the IPA.
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Speaking on the latest Accountants Daily podcast, general manager of technical policy Tony Greco said the government was sticking to its word but neither initiative would make much impact on the deficit.
The government said its multinational tax package aims to “close loopholes and improve tax transparency” but its revenue goal of $1.89 billion was insufficient to close the budget gap, Mr Greco said.
“They’ve acted fairly quickly – they’ve got a discussion paper out there, they’re looking at what they said they would and that is thin capitalisation, tax transparency, intangibles and royalties,” Mr Greco said.
“In addition to the BEPs (base erosion and profit shifting) changes that could be implemented in the short term, I think that number is problematic. Some are saying it’s on the light side, or some are saying it’s on the high side.
“So I think because of all those things not being in place, it’s difficult to put a number on it, and we’ve got no control over the BEPs stuff. But we can control the thin cap rules, we can control the transparency rules, we can control the interest and royalty deductions. They were the target areas.
“What labour took to the election was the budget over four years will be $7.4 billion different to what the government was proposing – now over four years, that’s almost negligible.”
Meanwhile, removing the FBT on EVs, which the government says will save thousands on an entry-level battery car, was a move in the right direction but only a few would benefit, Mr Greco said.
“Essentially, it’s a subsidy for those who can afford EVs through salary packaging – I want to call it out for what it is,” Mr Greco said.
“Yes, we have to move in that direction ... and you’ve got to start somewhere. I think it’s not going to move the dial because they are expensive vehicles.
“Even based on their own numbers, we’re talking 2,000 vehicles in the first year so we don’t expect this to be mainstream.”
He said the legislation would be retrospective to 1 July and agreed the savings were worthwhile.
“On a $50,000 car, if you can find one in that price bracket, you’re talking $9,000 of FBT. And if you move up to $60,000, you’re talking $12,000 of FBT. So it’s a quite a significant saving,” Mr Greco said.
However, individuals and sole traders were excluded and supply of EVs was an issue.
“It’s a quite an attractive option to salary package – if you can. You have to have an employer-employee relationship, the vehicle must be owned or leased by the employer – so it can be under a novated lease arrangement,” Mr Greco said.
“So I think you have to be realistic here – can you get your hands on one? And also the price that you will pay – there’s not a lot in that price category.”
Mr Greco said some Treasury amendments bills passing through Parliament already were picking up on loose ends from the previous government, such as a reduction to 55 in the qualification threshold for the downsizer super scheme.
But Labor had been silent on the skills and technology investment boosts for small businesses.
“Both these measures do the same thing: they give you $1.20 of deduction for $1 of money spent on either skills and training, or digital uptake,” Mr Greco said.
“It relates to an initiative that the previous government included in the federal budget.
“We’ve got absolute silence on this one – whether it will form part of the October budget, we just don’t know.
“We haven't heard anything in relation to whether they [Labor] support this measure or the details.
“Everyone’s looking – if it is going to go ahead we’re getting lots of questions – what’s in, what’s out? So there will be some consultation required to put those parameters in place. But that’s one in particular that we just don’t know if the current government will support.
“Whether they pick up this measure or not, or upsize it, that that remains to be seen. But the silence is deafening.”
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