The budget has come and gone, how far have we moved forward with tax reform?

History tells us the major elements of the budget are often leaked beforehand, and in typical fashion we had the leaks on the personal tax rate cuts and changes to Self-Managed Superannuation Fund membership.
Just under three weeks has passed and with the euphoria of the budget handouts wearing off, reality has now set in.

Early this week we had yet another blockade of legislation to pass last year’s announced company tax cuts, the culprit this time around One Nation. The constant negotiation with minor parties to pass key legislation is fast becoming the stumbling block for any government intent on meaningful tax reform. I can relate to the usually redoubtable Finance Minister’s frustration as he conceded publicly for the first time that "it might well be that we won't ever get there".

As budgets go we have the typical protocol of announcement, often with application from budget night, limited guidance in budget documents and the arduous wait for legislation to pass (in the case of company tax cuts more than 12 months). All the while leaving advisors unable to entrust businesses and investors­­­ with any real certainty, ­­­decisions are stalled or unable to be made and the economy suffers.

Whilst some of the announcements in the budget are welcome, others are potentially ill-considered and other long-awaited reforms have not been raised at all.

For example, whilst on the face of it the move to audit Self-Managed Superannuation Funds every 3 years seems a favourable cost saving measure, has adequate thought been given to how audits operate in conjunction with compliance issues - Does this mean members only need to observe the rules in the year the audit occurs? Will the auditor qualify their opinion based on an inability to check prior years (which effectively renders their opinion worth much less)?

A similar situation was demonstrated last year with regard to small companies and exactly who would qualify for a reduction in tax rates. Advisors waited no less than six months for clarity and we are still without certainty because a draft ruling may never be finalised, meanwhile small business owners may suffer the loss of tax credits they have already paid for.

Long awaited clarity on loans from private companies (to shareholders and their associates) is also long overdue.  A seemingly common sense set of changes is now nothing but a 3 year promise and small to medium businesses continue to struggle with an overcomplicated regime, hampered in their ability to reinvest working capital into their businesses.

As we embark on an election year, we can only hope the result will be a government that does not need to bargain with minor parties to instigate meaningful tax reform, and a government that is committed not to greater complexity and higher levels of tax, but true reform and simplification. Our competitiveness on the global stage depends on it.
For more information on the 2018/19 Federal Budget, click here to read our report.