| Budget.... Missed Opportunity |
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Once again, the Government had missed a great opportunity in the Federal Budget to initiate real reform on personal tax and superannuation in small business. While we would all applaud the changes in tax, family payments and superannuation - as they mitigate the difficulties of high effective marginal tax rates and low superannuation savings - the changes don't go far enough. Further, small businesses are again largely ignored! It would have been better that the Government introduced wide-scale reform of the personal tax system and encourage Australians to save more for their retirement. Most of us would like to see a much better environment for Australians to work hard, save hard and invest in the future and provide for our elderly. However, there is some good news for women, aged care and investing in Australia's future. The initiatives to invest $5.3 billion in science and innovation and $3.1 billion for land transport infrastructure are very positive. For business generally, the Government has announced a new $1 billion Commercial Ready business assistance program (Sounds promising… but let's wait for the detail!) and a $100 million extension to the Commercialisation Emerging Technologies program. Taxation The tax cuts announced, costing some $14.7 billion over four years, are fine but they're not a long term solution to personal tax reform. With bracket creep running at around $2 billion per annum, year one will really only give back some of what was taken away over the last 12 months. The tax cuts and the proposed More Help For Families measures will be welcomed by many individuals and families. And, to the extent that they address the problems of;
But there is much more to be done to reform the personal tax system, including a further reduction of marginal rates and avoiding bracket creep. Superannuation Changes announced to the co-contribution incentives - 150% contribution, softer withdrawal or taper rate and increased thresholds - will provide further opportunities for many to save for their retirement, but only those who can afford it. The proposal to further wind back the controversial super surcharge tax to 7.5% by 2006/07 is again welcomed but we believe should be eliminated completely if they were really serious re encouraging more saving etc. The changes announced do nothing for the average worker only receiving the standard contributions, who with everyday expenses struggles to make additional voluntary contributions. It is disappointing that no changes to the contribution tax have been announced. For these people, a large proportion of their contribution is still going to tax instead of their retirement. Many will see the measures as tinkering around the edges with superannuation, and not fully addressing the fundamental issue - the lack of encouragement for savings. Superannuation is a tough issue and it will get tougher if it is not addressed vigorously. There is a missed opportunity to do something that will make a significant difference. Australia has an aging population that needs action now if it is to live comfortably in retirement. Small Business The Government needs to be backing small business, not whacking small business with compliance and regulation. This budget does precious little for small business. There is much more to be done, like reducing small business compliance burden. Small Business Advisory Groups would like to see these issues being dealt with by an independent office. Funds and resources could have been directed to the establishment of a Small Business Advocate Office. There is no payroll tax or stamp duty relief, both of which still remain significant impediments for growth and entrepreneurship. Changes to the wine equalisation tax rebate is however good news for some small business. Summary In summary, the Government has tried to cover all bases and should be applauded in its attempt to engage the whole community from individuals, families and the elderly. It tries to influence small business via personal tax cuts instead of opting for real reform directly aimed at this important group. However, perhaps a little closer to election time the Government may hand out some more "goodies" to low income earners and small business. All in all, it has left us $2.4 billion surplus which appears to be very responsible but reactions since their announcements have been mixed, which means much more will need to be done if this Government wants to remain in power! Comment: Tony Martin - Director |
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