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The Political Landscape in 2022 and what this means for Tax & Business

Written by Adam Birrer . February 22, 2022
4 min read

In case anyone hasn’t noticed the proliferation of politicians bobbing up for photo opportunities in recent times, 2022 is going to be a Federal Election year. As at the date of writing this in mid-February 2022, the Morrison Government are yet to call a date for the election, however the Australian Parliament House website notes that the election day must be no later than 21 May 2022 under the relevant law.

In the meantime, the Government has flagged its intention to hand down the 2022-23 Federal Budget on 29 March 2022.

Contents


Budget Changes

Considering the short turn-around between the expected budget date and election day, we can expect that the Morrison Government will be looking to use the budget as a platform to bolster its chances of an election win – and Labor’s budget reply is likely to be no different.

In ordinary times, conventional thinking had generally held that Labor are the party of higher tax and spend whereas the Coalition are in favour of ‘small government’.

But, these are not ordinary times. In the intervening period between the last election in 2019 and today, there has been the small matter of a global pandemic which has wrought havoc on economies worldwide. While Australia may have been spared the worst, this has been in no small part due to unprecedented government intervention, including massive outlays on the JobKeeper stimulus payments to support businesses through the earlier stages of the pandemic. In addition, the recent Omicron wave has hampered the economic recovery that was forecast in the December 2021 mid-year budget update.

Accounting & Tax Services

State of the Current Budget

There is some irony to the fact that the Liberals up to 2019 loved to talk about the ‘debt and deficit disaster’ allegedly inherited from Labor when they took Government in 2013, considering the budget will now take many years to return to surplus (if ever?) thanks to the Coronavirus. Of course, it was totally necessary for the government to intervene even if some question the exact manner in which this was delivered. But there is now the challenge of trying to get the budget back in shape whilst not providing a disincentive to productivity and growth.

In 2019 Labor campaigned on a platform of aggressive tax reform, most notably including proposed amendments to the dividend imputation system (limits on franking credit refunds), restrictions on ‘negative gearing’ of investments and the introduction of a minimum 30% tax on trust distributions. Having been punished at the polls, it appears they are keeping their head down this time around.

Political Party Proposals

So, the landscape has changed and it would appear that there are unlikely to be any radical tax measures proposed from either side in the current climate and in the lead up to an election.

At the time of writing this neither party has given much away, but it will be interesting to see what the 2022-23 budget and the opposition reply have in store for small to medium businesses. On a purely speculative basis, below are a few points to watch out for:

  • Instant asset write offs – will we see an extension to ‘temporary full expensing’ and/or Small Business Entities (SBE) Depreciation concessions? This would be an easy pro-business measure for either side and in real terms has an impact to the budget in the short term only (i.e. as tax revenue is decreased by deductions being claimed up front rather than over a period of years, a position which reverses over time).
  • Will the Lower and Middle Income Tax Offset (LMITO) finish in the 2022 FY as planned? In recent weeks the Treasurer has been making some noise about this being a ‘temporary’ tax offset so it is quite possible this measure (worth up to $1,080 p/a for eligible individual taxpayers) will be wound back – this may not be popular, but the Coalition could point to the cuts already made to individual marginal tax rates (some of which are still to begin from 1 July 2024).
  • While Anthony Albanese in 2021 announced that Labor had officially abandoned their former policies around negative gearing and franking credits, I am unaware of any such announcement around their previously proposed policy for the taxation of discretionary trusts. Could a minimum rate of tax on trust distributions still be on Labor’s agenda?

Of course, you can rest assured that any upcoming announcements will be covered by BLG Business Advisers - and should you have any questions about what a budget or policy announcement may mean for your business please don’t hesitate to talk with us.

Whatever you decide we wish you every success!

*This information is correct at the time of publishing and is subject to change.*
Written by Adam Birrer . February 22, 2022
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