May 19, 2023 • 19 mins
Now the dust has settled on the Federal Budget (AU) – this episode takes Australian members through the impacts on them and their clients.
Senior Tax Advocate Susan Franks and Superannuation and Financial Services Leader Tony Negline CA have more detail than what was revealed on budget night. Hear about what the Australian Tax Office is planning to target this tax time, feedback from members on key changes, insights on non-arm’s length income and the realities of the payday super measure. Plus Tony’s team has some new research to share on the long-term impact of Labor’s new superannuation tax.
Read our budget analysis and watch our Sharing Knowledge webinar here
Find the Sharing Knowledge webinar on payment plans that Susan mentions here
Podcast episode: The ATO's New Working from Home Deduction Method
See omnystudio.com/listener for privacy information.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Gillian Bowen, Host (00:07):
Hello, my name is Gillian Bowen, the Australian Manager of
Public Affairs at Chartered Accountants ANZ, or CA ANZ. This is
Small Firm, Big Impact.
Susan Franks, Senior Tax Advocate (00:22):
The ATO came out with a press release outlining exactly what
they're actually looking at
on that and working from home deductions.
Tony Negline CA. Superannuation and Financial Services Leader (00:32):
To start with - NALI. Everyone's just waiting to see what
what actually comes about and what will actually finally get
legislated before I think deciding what needs to be done.
In relation to payday super, there's a fair deal of
angst of what it actually might mean, especially to smaller
businesses and certainly from a cash flow perspective.
Gillian Bowen, Host (00:52):
It's the podcast giving you and your clients the up
to date information you need to do your jobs. Each
fortnight I share resources, tools and expert advice provided by
ANZ and a range of people across our profession. So
make sure you're following the pod in your favourite pod app.
And if you've got an idea for the show email podcast@charteredaccountantsanz.com
(01:18):
This episode we're picking apart the federal budget, what it
means for you and your clients, the impacts, especially now
there's been a bit of time to digest what's in it.
I have with me Susan Franks, our senior tax advocate,
and Tony Negline, our superannuation and financial services leader. Welcome
to the podcast.
Susan Franks, Senior Tax Advocate (01:37):
Thank you. Gillian.
Gillian Bowen, Host (01:38):
Hi Gillian.
Look, let's dive straight into some key measures that are
relevant to our members. Susan, first to you. What what
are a couple of the tax measures that you really
want our members to know about?
Susan Franks, Senior Tax Advocate (01:52):
Well, the budget was quite light on tax measures. I mean,
from an individual perspective, limited to the low middle income
tax offset was not extended. There was no comment on
stage three tax cuts, but there were there was an
announcement in relation to the ATO getting extra funding in
relation to auditing personal tax returns. And on Mother's Day
(02:15):
the ATO came out with a press release outlining exactly
what they actually looking at. And what they're looking at
is short term rentals. They're really concentrating on that and
working from home deductions. Now they've chosen those two because
the working from home deductions has changed and our members
will need to do quite a lot of communication to
(02:36):
their clients about these changes. You know, what's in the
working home from deduction is quite different to what was
in working from home deduction in the prior year. And
the clients may not necessarily have kept all the receipts
for that. So they'll have to have a careful conversation
with their clients about that question.
Gillian Bowen, Host (02:55):
Question Without notice from me, I know we've done a
podcast episode on what was coming with Michael Croker at
the start of this series, so you can circle back
to that. But we would have information on our website
or that we've been putting in newsletters about those changes
for members to get the information they need.
Susan Franks, Senior Tax Advocate (03:10):
Yes. So if you look at the Cairns website and
go back to Gill's very first Small Firm, Big Impact,
you'll find a great analysis of the working from home
deductions from Michael Croker when he discussed it with Gill.
So I highly recommend people going to that podcast.
Gillian Bowen, Host (03:27):
All right, so we've covered off work from home. Talk
us through the short term rental focus from the ATO.
Susan Franks, Senior Tax Advocate (03:35):
Well, the ATO has highlighted that it's going to be
focusing on short term rental properties this year. It's traditionally
got a lot of income from social media platforms like
Airbnb and stay so it can get income coming in.
What it's really cracking down on this year is interest expense,
(03:55):
borrowing expenses and also the treatment of property once it's sold.
The house is now getting information from banks regarding property loans,
so it now knows what the interest expense is, what
the borrowing expense is, whether a property has been associated
with earning income. So people that are selling properties and
(04:16):
they've used part of that property to generate rental income,
they can't get the whole principal place of residence, CGT
discount exemption exemption. So they need to think about that
when they're talking to their clients. Think about the interest expense,
making sure it's apportioned appropriately between the owners of the
(04:36):
property and also apportioned appropriately between business expenses of rent
or rental expenses and private expenses. The show will be
looking at the payments and trying to figure out whether,
you know, the loan is for, say, a private car
and the property and expecting the apportionment to be there.
Gillian Bowen, Host (04:59):
That's an interesting point in regards to the fact that
the data doesn't lie. There's a lot of data in
our world these days, and there's a lot of sharing
of data between you, right, the bank and the ATO
that they're eventually going to know. So that's a very
good point. Is there anything else that you'd like to
add that we've we may have missed in regards to
the tax base?
Susan Franks, Senior Tax Advocate (05:20):
Well, sure. Small businesses will be pleased to know that
the uplift factor is now 6% instead of 12%. That
gives them a bit of relief from cash flow during
the year. The bad news for small business is the
full year. The amendment period has increased from two years
to four years. It's promoted as helping small business. But
(05:41):
of course everyone knows that that also helps the ATO,
so need to be careful in relation to small business
in amendment period times.
Gillian Bowen, Host (05:50):
And is there anything else then you wanted to highlight
in regards to to tax or what it is from
the budget that you want our members from your perspective
to know about?
Susan Franks, Senior Tax Advocate (05:59):
Well, small business has had the instant asset write off
extended for another year, but this time it's capped at $20,000.
So farmers and people with really expensive equipment, that 100%
depreciation deduction expires 30th June 2023. But if you've got
a smaller business with smaller items like fridges, air conditioning,
(06:22):
you can still get that deduction for another year. There
was also the small business energy boost, which comes effective
from one July 20th, 23 to 30 June 24th. So
small businesses can claim 120% of the cost of a
depreciable asset during that period. So that's covering things like
(06:43):
getting a more efficient fridge, getting a more efficient air conditioning,
putting heat pump, heat pumps into your business. So keep
an eye out for that and talk to your clients
about energy efficient ways to save costs in the long term.
Their business, particularly in light of the high energy prices
we're getting at the moment.
Gillian Bowen, Host (07:03):
Tony. Let's get a sprinkling on what it is that's
happening in regards to super. What is it that you
wanted to point out to members about superannuation that was
in the budget?
Tony Negline CA. Superannuation and Financial Services Leader (07:16):
Well, there wasn't anything new per se, because everything had
either been pre-announced or I guess to some extent had
actually been leaked. And two of those, obviously is the
better targeted super tax concession, otherwise known as the the
tax grab for those with total super balances above $3 million.
(07:38):
And the other one, of course, is moving the payment
of compulsory employer super contributions to when salary and wages
are actually paid from. And both one change that that
change that second change is going to start from one
July 26th and the other change is going to start
from the 1st July 25. So the key key date
(07:59):
there will be the total super balance on 30th June 2026.
Gillian Bowen, Host (08:05):
And so what? I mean, I know that you're passionate
about Gnarly. What is it that was either in or
not in the budget in regards to that?
Tony Negline CA. Superannuation and Financial Services Leader (08:17):
Okay. So so NALI There was an announcement about NALI,
and so APRA funds have been given a clear roadmap
that they are not going to be from an expense perspective,
NALI is no longer relevant for specific expenses in general
expenses for SMSF. There's been a slight adjustment for general expenses.
So there's a there's a two time penalty and there
(08:38):
is also something that will apply. Specific expenses will always
apply and there'll be a change to the start date,
but we're not quite sure how that marries in with
the ATO's practical compliance guide. And so this there's still
some unknowns. There's there's a funny, funny little announcement about
(09:02):
NALI not applying to contribution. So we just don't quite
understand how we're trying to clarify about how all that
fits together at this point in time.
Gillian Bowen, Host (09:10):
Um, look.
And I'll come back to you as well to Tony
to ask you about this as well. But Susan, I
know that after the budget you went down and had
a session at a post-budget lunch with members and the
Assistant Treasurer in the New South Wales Illawarra, and that
got me thinking about what is it that that members
have been telling you guys are asking you guys in
(09:31):
regards to the budget and any other sort of tax
measures or things going forward that they want to know about.
Susan Franks, Senior Tax Advocate (09:38):
The members are wondering where tax reform is at the
moment in relation to the budget. I mean, this was
a budget where it was dealing with cost of living
and it did it through the Social Security system, not
the tax system. And 82% of the $4.2 billion budget
surplus was baked. There was no talk of tax reform,
and members are very aware of the structural deficits and
(10:02):
the need to increase productivity in Australia and are looking
for answers about how the tax system is going to
change to give us a viable future going forward.
Gillian Bowen, Host (10:12):
And did Susan, the Assistant Treasurer, take any questions on
that or receive any or give any sort of tidbits
on tax reform?
Susan Franks, Senior Tax Advocate (10:21):
They were pretty much saying that it's steady at its go.
Mean there is the ideas around that before you can
tackle tax reform you need to tackle some of the
obstacles to tax reform. Like people don't want to pay
tax if expenses are out of control. So you see
the government beginning to try and bring us back under control,
(10:41):
relook at the expenses, infrastructure and defence and reviewing them.
People also don't want to pay tax, particularly when it
puts it onto lower income earners. If the social Security
system is not there to support them. So you've seen
the government do some moves in there. But I suppose
more importantly from our members is that you've seen the
government beginning to look at tax concessions. So you see
(11:01):
the tax expenditure statement and the distributional analysis and also
the addition of items into the tax expenditure statement that
traditionally should not be in there, like the deductibility of
work expenses, deductibility of rental expenses and how they are treated.
So the government is beginning to turn its mind towards it,
but it's pretty much steady as you go. They've made
(11:24):
a government commitment not to make tax changes in their
first period of government. So I think the election will
have some tax concessions well and truly in their sights
and probably one simulation to housing given the importance of
the housing crisis at the moment.
Gillian Bowen, Host (11:41):
Tony, how about you? What have you been hearing from
members post the budget and, you know, the measures that
were were were leaked in the lead up to it
on super?
Tony Negline CA. Superannuation and Financial Services Leader (11:52):
Uh, well, suppose to start with Nali. Everyone's just waiting
to see what what actually comes about and what will
actually finally get legislated before, I think deciding what needs
to be done. But I think amongst the SMSF members
who deal with SMSF or have one, there's there's still
a bit of angst and concern that APRA funds have
(12:13):
got a free kick or seem to be to go
to free kick again an SMSF seem to be to
be hit again. So there is definitely concern about that. Um,
but certainly a lot of people are grateful for the
amount of work that we have done in that space
in trying to get a reasonable result for everybody and
a fair result for everybody. So clearly there's more work
(12:34):
for us to do there. Unfortunately in relation to payday super, there's,
there's a fair deal of angst of what it actually
might mean, especially to smaller businesses. And certainly from a
cashflow perspective, there's, there's very, very few businesses in this
country that will not have cashflow concerns as a result
of result of this change. For the last 30 years,
(12:55):
they've had a concession that is about to fall away.
So there's going to be some adjustment there and it
will certainly lead to some levels of unemployment. So there's
concern there amongst our members in relation to that. And
in relation to the $3 million item, there's concern about
what needs to be done and when and what what
the calculation and what the impact is actually going to be.
(13:16):
So everyone's feeling their way in relation to that and
looking forward tentatively to the exposure draft release of legislation
as to how it might actually work. So then we
get a bit a bit better idea of what how
it might actually work. So I think overall, while while
(13:36):
some of our members actually support that measure, I think
once they see how it actually work at a fund level,
I don't think there'll be many people that will actually
support it because it's going to be a considerable amount
of work and a considerable amount of aggro for them
and for their clients regardless of which fund they're in.
And once people actually work that out, I think they'll
(13:56):
all think this is this is not a good thing
and they wish it would never have been thought of.
Gillian Bowen, Host (14:04):
Um, and so I know.
You and your team, Tony, as well, have done some
further research on that proposed new tax on super. What
is it that you've found out?
Tony Negline CA. Superannuation and Financial Services Leader (14:15):
Well, we've done two layers of research so far, Gill
We've got further work to go there. Our first our
first batch of work was to look at it solely
on asset price changes, taking into account no other taxes,
no other, no costs, no and so on and so forth.
And what that found was that the tax is incredibly
lumpy and over a 42 year period, just looking at
(14:38):
ASX 200 returns, um, what we found was that the
taxes paid in only around about 20 of those years,
so around about 50% of the time, and 50% of
the total tax paid was only paid in four financial years.
So that's an incredibly lumpy tax. And there are there
(14:59):
are vast periods of time where no taxes paid and
then other periods of time when when you have tax
on in successive years. Now the issue is, is that
you won't know until late in the financial year whether
or not you've actually got to pay this tax. So
then you come down to, well, what I said, am
I going to get rid of now? We then increased
our complexity and looked looked at the payment of tax,
(15:20):
taking into account dividend payments and made assumptions about franking
credits and what we did with those franking credits. And
we looked at two different scenarios. One where we where
the individual pays the tax if they've got the resources personally,
and another one where they actually take the tax out
of the fund itself. Now, let's look at that second one,
because that's probably what most people think are going to do. Now.
(15:43):
We also looked at, okay, let's index the $3 million threshold.
That's not government policy at the moment. And where we
take current government policy not to index it over time,
we didn't find too much difference between the results of
indexing the threshold and not indexing the threshold in terms
of the total amount of tax paid. But what we
(16:03):
actually did look, what we actually did find was that
the end benefits are lower because the incidence of tax
hits earlier when you have no indexation of the threshold itself.
So these are these are things that we're going to
think carefully about, whether or not we go to government
to say whether or not we actually want that indexed,
(16:25):
that that threshold indexed. My gut feel is that we
should take what we can get even it might be,
even though overall it might be a small win. A
win is better than it was. Win is better than
nothing or a loss. So think think that's probably where
we'll you know, you take what you can get. Yeah exactly.
You know. Yeah.
Gillian Bowen, Host (16:43):
And that that that research that's been emailed out hasn't it.
To people who are subscribers of your super and financial
advice newsletter. Is that is that where they can. Says that.
And if not, I'll definitely put a link to it
in the show notes.
Tony Negline CA. Superannuation and Financial Services Leader (16:55):
Yes. So it is there. And also it's on it's
in our opinion page on our website. So if you
go to, you know, our opinion page, which is under
our news and analysis area, then you'll you'll also find
it in there. So it's got the graphs and all
that sort of stuff. And, and but as I as
I as I mentioned earlier, there's more work that we
(17:16):
need to do. We've only looked at accumulation money, you know,
paying tax at 15%. So in other words, you know,
effectively it's either it's not pension money. So we haven't
looked at scenarios where we have a mixture of pension
money and accumulation money and then what you should do.
So so there's a range of things we actually haven't
looked at at this point in time. So there's further
analysis for actually for us to actually, you know, get
(17:39):
stuck into input over the next few weeks.
Gillian Bowen, Host (17:43):
Yeah. Great. I'll put the link to that in the
show notes in case some people aren't sure where to
head to on our website as well. Susan, we're almost
out of time. Is there anything else that you felt
you wanted to highlight for those listening along today that
are wondering about what's going on in in the space
that you cover?
Susan Franks, Senior Tax Advocate (18:00):
Well, we've been doing a lot of work with the
on tax debt because small business owes a lot of
money to the Tax Office in relation to tax debt.
And there has been a few surprises for our members,
like debts that were on hold, suddenly reducing refunds. So
we've worked with the ATO to increase visibility of that.
(18:21):
We also had a recent sharing knowledge session to try
and get some clarity about guidelines, about payment plans for
our members and the ease of doing them online. So
if people want to know how to get a one
year interest free loan for tax debt dealing with activity statements,
they should go and check out our Sharing knowledge session.
Gillian Bowen, Host (18:39):
I will also put a link to that in the
show notes as well. Look, that is all we have
time for. I appreciate both of your time helping me
take it through our members what it is that was
in the budget and anything else that's going on in
the areas that you two are experts in. If you
want to find out more, I will put a link
to everything in regards to our federal budget page as well,
which is on the CAC website, in the show notes.
(19:02):
And obviously there is a sharing knowledge recording of the
budget which the team did the day after it was
handed down. That will be available as well. In the
show notes, the podcast has an email, so feel free
to get in touch. Podcast at chartered accountants anz.com and
make sure you're following the pod in your favourite pod app.
So you are ready for next time. Let's start a conversation.
(19:23):
Thank you Susan and Tony for being my experts on small,
firm Big Impact.
Susan Franks, Senior Tax Advocate (19:29):
Oh you're welcome. Gill Thank you.
Tony Negline CA. Superannuation and Financial Services Leader (19:31):
Thanks very much.Gill
Gillian Bowen, Host (19:32):
Bye bye.
Hello, my name is Gillian Bowen, the Australian Manager of
Public Affairs at Chartered Accountants ANZ, or CA ANZ. This is
Small Firm, Big Impact.
Susan Franks, Senior Tax Advocate (00:22):
The ATO came out with a press release outlining exactly what
they're actually looking at
on that and working from home deductions.
Tony Negline CA. Superannuation and Financial Services Leader (00:32):
To start with - NALI. Everyone's just waiting to see what
what actually comes about and what will actually finally get
legislated before I think deciding what needs to be done.
In relation to payday super, there's a fair deal of
angst of what it actually might mean, especially to smaller
businesses and certainly from a cash flow perspective.
Gillian Bowen, Host (00:52):
It's the podcast giving you and your clients the up
to date information you need to do your jobs. Each
fortnight I share resources, tools and expert advice provided by
ANZ and a range of people across our profession. So
make sure you're following the pod in your favourite pod app.
And if you've got an idea for the show email podcast@charteredaccountantsanz.com
(01:18):
This episode we're picking apart the federal budget, what it
means for you and your clients, the impacts, especially now
there's been a bit of time to digest what's in it.
I have with me Susan Franks, our senior tax advocate,
and Tony Negline, our superannuation and financial services leader. Welcome
to the podcast.
Susan Franks, Senior Tax Advocate (01:37):
Thank you. Gillian.
Gillian Bowen, Host (01:38):
Hi Gillian.
Look, let's dive straight into some key measures that are
relevant to our members. Susan, first to you. What what
are a couple of the tax measures that you really
want our members to know about?
Susan Franks, Senior Tax Advocate (01:52):
Well, the budget was quite light on tax measures. I mean,
from an individual perspective, limited to the low middle income
tax offset was not extended. There was no comment on
stage three tax cuts, but there were there was an
announcement in relation to the ATO getting extra funding in
relation to auditing personal tax returns. And on Mother's Day
(02:15):
the ATO came out with a press release outlining exactly
what they actually looking at. And what they're looking at
is short term rentals. They're really concentrating on that and
working from home deductions. Now they've chosen those two because
the working from home deductions has changed and our members
will need to do quite a lot of communication to
(02:36):
their clients about these changes. You know, what's in the
working home from deduction is quite different to what was
in working from home deduction in the prior year. And
the clients may not necessarily have kept all the receipts
for that. So they'll have to have a careful conversation
with their clients about that question.
Gillian Bowen, Host (02:55):
Question Without notice from me, I know we've done a
podcast episode on what was coming with Michael Croker at
the start of this series, so you can circle back
to that. But we would have information on our website
or that we've been putting in newsletters about those changes
for members to get the information they need.
Susan Franks, Senior Tax Advocate (03:10):
Yes. So if you look at the Cairns website and
go back to Gill's very first Small Firm, Big Impact,
you'll find a great analysis of the working from home
deductions from Michael Croker when he discussed it with Gill.
So I highly recommend people going to that podcast.
Gillian Bowen, Host (03:27):
All right, so we've covered off work from home. Talk
us through the short term rental focus from the ATO.
Susan Franks, Senior Tax Advocate (03:35):
Well, the ATO has highlighted that it's going to be
focusing on short term rental properties this year. It's traditionally
got a lot of income from social media platforms like
Airbnb and stay so it can get income coming in.
What it's really cracking down on this year is interest expense,
(03:55):
borrowing expenses and also the treatment of property once it's sold.
The house is now getting information from banks regarding property loans,
so it now knows what the interest expense is, what
the borrowing expense is, whether a property has been associated
with earning income. So people that are selling properties and
(04:16):
they've used part of that property to generate rental income,
they can't get the whole principal place of residence, CGT
discount exemption exemption. So they need to think about that
when they're talking to their clients. Think about the interest expense,
making sure it's apportioned appropriately between the owners of the
(04:36):
property and also apportioned appropriately between business expenses of rent
or rental expenses and private expenses. The show will be
looking at the payments and trying to figure out whether,
you know, the loan is for, say, a private car
and the property and expecting the apportionment to be there.
Gillian Bowen, Host (04:59):
That's an interesting point in regards to the fact that
the data doesn't lie. There's a lot of data in
our world these days, and there's a lot of sharing
of data between you, right, the bank and the ATO
that they're eventually going to know. So that's a very
good point. Is there anything else that you'd like to
add that we've we may have missed in regards to
the tax base?
Susan Franks, Senior Tax Advocate (05:20):
Well, sure. Small businesses will be pleased to know that
the uplift factor is now 6% instead of 12%. That
gives them a bit of relief from cash flow during
the year. The bad news for small business is the
full year. The amendment period has increased from two years
to four years. It's promoted as helping small business. But
(05:41):
of course everyone knows that that also helps the ATO,
so need to be careful in relation to small business
in amendment period times.
Gillian Bowen, Host (05:50):
And is there anything else then you wanted to highlight
in regards to to tax or what it is from
the budget that you want our members from your perspective
to know about?
Susan Franks, Senior Tax Advocate (05:59):
Well, small business has had the instant asset write off
extended for another year, but this time it's capped at $20,000.
So farmers and people with really expensive equipment, that 100%
depreciation deduction expires 30th June 2023. But if you've got
a smaller business with smaller items like fridges, air conditioning,
(06:22):
you can still get that deduction for another year. There
was also the small business energy boost, which comes effective
from one July 20th, 23 to 30 June 24th. So
small businesses can claim 120% of the cost of a
depreciable asset during that period. So that's covering things like
(06:43):
getting a more efficient fridge, getting a more efficient air conditioning,
putting heat pump, heat pumps into your business. So keep
an eye out for that and talk to your clients
about energy efficient ways to save costs in the long term.
Their business, particularly in light of the high energy prices
we're getting at the moment.
Gillian Bowen, Host (07:03):
Tony. Let's get a sprinkling on what it is that's
happening in regards to super. What is it that you
wanted to point out to members about superannuation that was
in the budget?
Tony Negline CA. Superannuation and Financial Services Leader (07:16):
Well, there wasn't anything new per se, because everything had
either been pre-announced or I guess to some extent had
actually been leaked. And two of those, obviously is the
better targeted super tax concession, otherwise known as the the
tax grab for those with total super balances above $3 million.
(07:38):
And the other one, of course, is moving the payment
of compulsory employer super contributions to when salary and wages
are actually paid from. And both one change that that
change that second change is going to start from one
July 26th and the other change is going to start
from the 1st July 25. So the key key date
(07:59):
there will be the total super balance on 30th June 2026.
Gillian Bowen, Host (08:05):
And so what? I mean, I know that you're passionate
about Gnarly. What is it that was either in or
not in the budget in regards to that?
Tony Negline CA. Superannuation and Financial Services Leader (08:17):
Okay. So so NALI There was an announcement about NALI,
and so APRA funds have been given a clear roadmap
that they are not going to be from an expense perspective,
NALI is no longer relevant for specific expenses in general
expenses for SMSF. There's been a slight adjustment for general expenses.
So there's a there's a two time penalty and there
(08:38):
is also something that will apply. Specific expenses will always
apply and there'll be a change to the start date,
but we're not quite sure how that marries in with
the ATO's practical compliance guide. And so this there's still
some unknowns. There's there's a funny, funny little announcement about
(09:02):
NALI not applying to contribution. So we just don't quite
understand how we're trying to clarify about how all that
fits together at this point in time.
Gillian Bowen, Host (09:10):
Um, look.
And I'll come back to you as well to Tony
to ask you about this as well. But Susan, I
know that after the budget you went down and had
a session at a post-budget lunch with members and the
Assistant Treasurer in the New South Wales Illawarra, and that
got me thinking about what is it that that members
have been telling you guys are asking you guys in
(09:31):
regards to the budget and any other sort of tax
measures or things going forward that they want to know about.
Susan Franks, Senior Tax Advocate (09:38):
The members are wondering where tax reform is at the
moment in relation to the budget. I mean, this was
a budget where it was dealing with cost of living
and it did it through the Social Security system, not
the tax system. And 82% of the $4.2 billion budget
surplus was baked. There was no talk of tax reform,
and members are very aware of the structural deficits and
(10:02):
the need to increase productivity in Australia and are looking
for answers about how the tax system is going to
change to give us a viable future going forward.
Gillian Bowen, Host (10:12):
And did Susan, the Assistant Treasurer, take any questions on
that or receive any or give any sort of tidbits
on tax reform?
Susan Franks, Senior Tax Advocate (10:21):
They were pretty much saying that it's steady at its go.
Mean there is the ideas around that before you can
tackle tax reform you need to tackle some of the
obstacles to tax reform. Like people don't want to pay
tax if expenses are out of control. So you see
the government beginning to try and bring us back under control,
(10:41):
relook at the expenses, infrastructure and defence and reviewing them.
People also don't want to pay tax, particularly when it
puts it onto lower income earners. If the social Security
system is not there to support them. So you've seen
the government do some moves in there. But I suppose
more importantly from our members is that you've seen the
government beginning to look at tax concessions. So you see
(11:01):
the tax expenditure statement and the distributional analysis and also
the addition of items into the tax expenditure statement that
traditionally should not be in there, like the deductibility of
work expenses, deductibility of rental expenses and how they are treated.
So the government is beginning to turn its mind towards it,
but it's pretty much steady as you go. They've made
(11:24):
a government commitment not to make tax changes in their
first period of government. So I think the election will
have some tax concessions well and truly in their sights
and probably one simulation to housing given the importance of
the housing crisis at the moment.
Gillian Bowen, Host (11:41):
Tony, how about you? What have you been hearing from
members post the budget and, you know, the measures that
were were were leaked in the lead up to it
on super?
Tony Negline CA. Superannuation and Financial Services Leader (11:52):
Uh, well, suppose to start with Nali. Everyone's just waiting
to see what what actually comes about and what will
actually finally get legislated before, I think deciding what needs
to be done. But I think amongst the SMSF members
who deal with SMSF or have one, there's there's still
a bit of angst and concern that APRA funds have
(12:13):
got a free kick or seem to be to go
to free kick again an SMSF seem to be to
be hit again. So there is definitely concern about that. Um,
but certainly a lot of people are grateful for the
amount of work that we have done in that space
in trying to get a reasonable result for everybody and
a fair result for everybody. So clearly there's more work
(12:34):
for us to do there. Unfortunately in relation to payday super, there's,
there's a fair deal of angst of what it actually
might mean, especially to smaller businesses. And certainly from a
cashflow perspective, there's, there's very, very few businesses in this
country that will not have cashflow concerns as a result
of result of this change. For the last 30 years,
(12:55):
they've had a concession that is about to fall away.
So there's going to be some adjustment there and it
will certainly lead to some levels of unemployment. So there's
concern there amongst our members in relation to that. And
in relation to the $3 million item, there's concern about
what needs to be done and when and what what
the calculation and what the impact is actually going to be.
(13:16):
So everyone's feeling their way in relation to that and
looking forward tentatively to the exposure draft release of legislation
as to how it might actually work. So then we
get a bit a bit better idea of what how
it might actually work. So I think overall, while while
(13:36):
some of our members actually support that measure, I think
once they see how it actually work at a fund level,
I don't think there'll be many people that will actually
support it because it's going to be a considerable amount
of work and a considerable amount of aggro for them
and for their clients regardless of which fund they're in.
And once people actually work that out, I think they'll
(13:56):
all think this is this is not a good thing
and they wish it would never have been thought of.
Gillian Bowen, Host (14:04):
Um, and so I know.
You and your team, Tony, as well, have done some
further research on that proposed new tax on super. What
is it that you've found out?
Tony Negline CA. Superannuation and Financial Services Leader (14:15):
Well, we've done two layers of research so far, Gill
We've got further work to go there. Our first our
first batch of work was to look at it solely
on asset price changes, taking into account no other taxes,
no other, no costs, no and so on and so forth.
And what that found was that the tax is incredibly
lumpy and over a 42 year period, just looking at
(14:38):
ASX 200 returns, um, what we found was that the
taxes paid in only around about 20 of those years,
so around about 50% of the time, and 50% of
the total tax paid was only paid in four financial years.
So that's an incredibly lumpy tax. And there are there
(14:59):
are vast periods of time where no taxes paid and
then other periods of time when when you have tax
on in successive years. Now the issue is, is that
you won't know until late in the financial year whether
or not you've actually got to pay this tax. So
then you come down to, well, what I said, am
I going to get rid of now? We then increased
our complexity and looked looked at the payment of tax,
(15:20):
taking into account dividend payments and made assumptions about franking
credits and what we did with those franking credits. And
we looked at two different scenarios. One where we where
the individual pays the tax if they've got the resources personally,
and another one where they actually take the tax out
of the fund itself. Now, let's look at that second one,
because that's probably what most people think are going to do. Now.
(15:43):
We also looked at, okay, let's index the $3 million threshold.
That's not government policy at the moment. And where we
take current government policy not to index it over time,
we didn't find too much difference between the results of
indexing the threshold and not indexing the threshold in terms
of the total amount of tax paid. But what we
(16:03):
actually did look, what we actually did find was that
the end benefits are lower because the incidence of tax
hits earlier when you have no indexation of the threshold itself.
So these are these are things that we're going to
think carefully about, whether or not we go to government
to say whether or not we actually want that indexed,
(16:25):
that that threshold indexed. My gut feel is that we
should take what we can get even it might be,
even though overall it might be a small win. A
win is better than it was. Win is better than
nothing or a loss. So think think that's probably where
we'll you know, you take what you can get. Yeah exactly.
You know. Yeah.
Gillian Bowen, Host (16:43):
And that that that research that's been emailed out hasn't it.
To people who are subscribers of your super and financial
advice newsletter. Is that is that where they can. Says that.
And if not, I'll definitely put a link to it
in the show notes.
Tony Negline CA. Superannuation and Financial Services Leader (16:55):
Yes. So it is there. And also it's on it's
in our opinion page on our website. So if you
go to, you know, our opinion page, which is under
our news and analysis area, then you'll you'll also find
it in there. So it's got the graphs and all
that sort of stuff. And, and but as I as
I as I mentioned earlier, there's more work that we
(17:16):
need to do. We've only looked at accumulation money, you know,
paying tax at 15%. So in other words, you know,
effectively it's either it's not pension money. So we haven't
looked at scenarios where we have a mixture of pension
money and accumulation money and then what you should do.
So so there's a range of things we actually haven't
looked at at this point in time. So there's further
analysis for actually for us to actually, you know, get
(17:39):
stuck into input over the next few weeks.
Gillian Bowen, Host (17:43):
Yeah. Great. I'll put the link to that in the
show notes in case some people aren't sure where to
head to on our website as well. Susan, we're almost
out of time. Is there anything else that you felt
you wanted to highlight for those listening along today that
are wondering about what's going on in in the space
that you cover?
Susan Franks, Senior Tax Advocate (18:00):
Well, we've been doing a lot of work with the
on tax debt because small business owes a lot of
money to the Tax Office in relation to tax debt.
And there has been a few surprises for our members,
like debts that were on hold, suddenly reducing refunds. So
we've worked with the ATO to increase visibility of that.
(18:21):
We also had a recent sharing knowledge session to try
and get some clarity about guidelines, about payment plans for
our members and the ease of doing them online. So
if people want to know how to get a one
year interest free loan for tax debt dealing with activity statements,
they should go and check out our Sharing knowledge session.
Gillian Bowen, Host (18:39):
I will also put a link to that in the
show notes as well. Look, that is all we have
time for. I appreciate both of your time helping me
take it through our members what it is that was
in the budget and anything else that's going on in
the areas that you two are experts in. If you
want to find out more, I will put a link
to everything in regards to our federal budget page as well,
which is on the CAC website, in the show notes.
(19:02):
And obviously there is a sharing knowledge recording of the
budget which the team did the day after it was
handed down. That will be available as well. In the
show notes, the podcast has an email, so feel free
to get in touch. Podcast at chartered accountants anz.com and
make sure you're following the pod in your favourite pod app.
So you are ready for next time. Let's start a conversation.
(19:23):
Thank you Susan and Tony for being my experts on small,
firm Big Impact.
Susan Franks, Senior Tax Advocate (19:29):
Oh you're welcome. Gill Thank you.
Tony Negline CA. Superannuation and Financial Services Leader (19:31):
Thanks very much.Gill
Gillian Bowen, Host (19:32):
Bye bye.
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