In a few days, the Treasurer will present a budget that few of us expected.
While in the shadow of the upcoming Federal election, it’s important that the Government takes the opportunity to set a platform to support Australian business in an environment of major global uncertainty, as we live in a world of tariff wars, real wars, and wild stock market fluctuations.
From our perspective, there are many actions that we believe the Government should be considering. These include:
Real tax reform to support the local economy
This topic has had much traction during the current term through the voices of the independent members. While we hope the Budget will feature much needed tax reform, this is unlikely in an election year. With direct taxes (income and corporate tax) currently accounting for 74 per cent of total tax revenue, any tax measures are expected to build on incentives already familiar to the industry.
However, we encourage the Government to be bold and set forward a plan to improve efficiency and equity in the tax system, as well as reduce administrative requirements on business. As tax advisers, we see first-hand the burden of extra administration being imposed on taxpayers, and this is only a small part of what organisations need to deal with as they operate their businesses.
Instant asset write-off (IAWO)
In FY24, the Government extended the $20,000 instant asset write-off limit for small businesses until 30 June 2025. A similar measure in this year’s Budget will provide welcome relief to small businesses.
However, this would only benefit a segment of the business community. While small businesses make up over 97 per cent of all businesses in Australia, medium and large businesses employ the majority of the Australian workforce and contribute the greater majority of company tax revenue, and are equally dealing with increased costs of business – from increases in utility prices, cost of labour and uncertainty surrounding trade.
If this were to be extended, Treasury should consider applying the measure to all businesses and increase the threshold to $30,000 to account for increased costs.
Low Value Pool deductions (LVP)
An additional (and more equitable) cost-of-living relief measure for businesses could be to increase the LVP threshold from $1,000 to $5,000, and increase the immediate deduction for low cost assets from $100 to $1,000. This change would offer upfront tax relief to a broader range of businesses with the added benefit of reducing ongoing compliance costs.
Unlike the instant asset write-off, the LVP can also apply to existing assets with a written-down value below the new threshold, providing upfront benefits without stimulating new economic investment – a key consideration when trying to address cost-of-living pressures without putting pressure on inflation.
Ultimately, both measures wouldn't cost the government additional revenue over time, but would bring forward relief at a time when businesses could use the assistance.
Government grants and industry support
We encourage the Government to ensure the financial benefits of announced measures flow through faster to recipients. It is imperative that budget allocations for incentives and government grant opportunities are made available in the forthcoming financial year, instead of being deferred to future years where market forces are likely to shift so significantly that the allocations may become ineffective. As an example, the impact of the recently legislated Critical Minerals and Hydrogen Production Tax incentives, announced in May 2024 but effective from 1 July 2027, remains to be seen.
Additionally, the timing and communications of future programs would benefit from efficiencies being introduced. When funds are allocated to grant programs, businesses need transparent and timely guidance on program opening dates, eligibility criteria and eligible project costs.
ARENA’s Battery Breakthrough Initiative, slated to open in January/February this year is yet to open. Given current market volatility, there is a significant opportunity for government support to be clearly defined and readily accessible to ensure its impact and effectiveness. Cooperative Research Centre and Cooperative Research Centre Projects grant programs offer this surety, and this approach could be rolled out across the whole grant system.
Supporting Australian business impacted by tariffs
From a budgetary standpoint, domestic businesses and industries impacted by tariffs require government support to navigate international trade challenges. Reviewing tariff policies is crucial to ensure Australian businesses can compete fairly with overseas imports, particularly in growth-targeted sectors. For retailers, this might involve reassessing the Low-Value Goods rules (or De-Minimus) to enhance competition in domestic markets. Such measures could also increase government revenue through additional duties and GST.
While the Government has suggested there will be no surprises in this Budget, with much of the spending already announced – there are still important initiatives and measures that could be introduced next week to mitigate business challenges in a volatile market. These are just some thoughts on the direction we would like to see from next week’s announcements.
Stay turned for our Budget coverage on the night, and make sure you’re registered for our Federal Budget Virtual Seminar.
Wed, March 26, 2025
Federal Budget Virtual Seminar 2025
