Expert Commentary - Federal Budget 2021-22
Small business entity tax disputes – pause or modify ATO debt recovery action
“The Government has announced that it will enable small business entities (including individuals carrying on a business) with an aggregated turnover of less than $10 million per year to apply to the Administrative Appeals Tribunal (AAT) to pause or modify ATO debt recovery actions. This includes the recovery of the primary tax debt, related penalties and interest and application of garnishee notices..
"Under the current ‘Pay now, Fight later’ ATO debt recovery policy, taxpayers are expected to pay at least 50% of a disputed debt to defer recovery action. Where an agreement with the ATO can’t be reached, a stay on ATO debt recovery action, such as garnishee notices, can only be obtained through the court system which can be an expensive and time consuming process.
"This measure will provide an avenue for small businesses to ensure that they are not required to start paying a disputed debt until the matter has been determined by the AAT. For small and family businesses with a genuine tax dispute, this measure will help relieve the financial burden of challenging an ATO assessment.”
Expanding existing programs in real estate and construction sector
“Is the Federal Government doing enough for the Australian housing shortage by banking on last year’s Budget winners and extending and expanding on existing programs?
"Last year’s Homebuilder scheme was a welcome reprieve for the anxiety-laden construction sector during a pandemic. Over 120,000 Australians have since applied for the Government grant to assist in building a new home or substantially renovate an existing dwelling. While applications closed, concerns were raised early on as to whether the six-month requirement for construction to commence was reasonable. The 2021 Budget measure to extend this requirement from 6 months to 18 months is a helpful clarification but noticeably falls short of allowing further applicants to take advantage of the scheme. The estimated costs of $2.5bn to the Federal Government for the scheme are set to add $30bn to the residential construction sector and are seen as a much-needed boost for an important sector in our economy.
"The First Home Loan deposit scheme, which was first announced in the 2020 Federal Budget, whereby 10,000 successful applicants only require a 5% deposit for the purchase of a new dwelling without requiring costly mortgage insurance, has now been extended to another 10,000 applications in 2021-22. The deposit scheme has also now been expanded under the new Family Home Guarantee scheme to single parents with dependants that acquire a new or existing dwelling. Under this scheme, single parents will require only a 2% deposit, with 18% being guaranteed by the Federal Government. In a housing market where the initial deposit seems less and less attainable by more and younger Australians, this measure is a welcome and workable step in bridging the gap. One would hope that as the Government obtains a greater clarity of the true cost of these measures over time that more places could be made available in the future.
"Under tonight's Federal Budget announcements the First Home Super Saver Scheme will be amended to allow first homeowners to access their superannuation savings to the extent that they have made voluntary contributions up to a maximum of $50,000 – increased from $30,000. The new limits come into place from 1 July 2022. Surprisingly absent from tonight’s Budget was any substantial spending on social housing and any policy measures around rental schemes or land access schemes.”
National Leader, Real Estate & Construction
Welcome measures for agribusiness and regional communities
“The 2021 Federal Budget contains some practical 'on the ground' measures that agribusiness and regional communities will welcome. The announcement to extend the temporary full expensing of depreciating asset measures to include assets installed up until 30 June 2023 will be a welcome relief for agribusinesses facing lengthy lead times on new equipment orders.
"For the vast majority of Australia’s agribusinesses, seasonable variability and exposure to global commodity markets are business as usual. However, with global supply chains, there comes exposure to the threat of pests and disease, such as African Swine Fever, that can potentially destroy entire sectors. In this Budget, the Government announced investments in practical and technology-based programs to tighten Australia’s biosecurity protections even further. In making this investment, the Government noted a significant return on investment due to the economic importance of the agriculture sector to the Australian economy.
"BDO also welcomes the announcement of programs and research into Australian soils and the implicit recognition of the importance to the agricultural sector of maintaining and improving soil resources.”
Focus on larger operators within tourism sector
“The Government’s focus for the tourism sector in this year’s Budget has a heavy focus on the larger operators to remain viable so they are ready to go when borders reopen. However, this may not immediately assist smaller operators and the broader hospitality sector. The Federal Budget did little to support the broader tourism, leisure and hospitality sector recover from the economic shocks of closed international and domestic borders. Whilst some specific measures include delivering a $1.2 billion package for aviation and tourism connected businesses, including 800,000 half-price airfares to domestic destinations, of which more than 660,000 have been sold already, and an allocation of $274.6 million to expand and extend current programs that are supporting hard-hit businesses - there is limited practical support being provided to assist sustainable cash flow management.
"No specific commitment to the reopening of international borders, seemingly optimistic assumptions about the vaccine rollout and limited investment in a return to both skilled and educational migration - will continue to impact the successful recovery of the sector currently struggling to find sustainable levels of business activity with reduced demand and key labour shortages.
"The sector will turn to maintained measures around business investment such as the extension of the loss carry back provisions and temporary full expensing however, these are likely to have little direct impact.”
National Leader, Tourism, Hospitality & Leisure
Government backs key recommendations from Aged Care Royal Commission
“The Federal Government has provided an itemised response to a number of key recommendations from the Aged Care Royal Commission. This provides an important signal to the aged care sector of the Government’s stance and financial commitment to those recommendations.
"The Budget is also silent on a number of important recommendations and the impact those recommendations are likely to have on aged care providers.
"The Government has had limited time since the release of the Royal Commission’s recommendations, so the specific amounts of funding for each category is likely to be the subject of much debate in the coming weeks.
"As noted in BDO’s report presented to the Aged Care Royal Commission, ‘Research Paper 12 – Report on the profitability and viability of the Australian aged care industry’, major announcements of this nature may have significant investment or divestment implications for current and prospective service providers. A collaborative approach from the Government in working with key aged care sector stakeholders, underpinned by reliable data, will be important to ensure quality service delivery to care recipients.
"BDO will release our comparison of the measures outlined in the Federal Budget to our detailed analysis of the Royal Commission Recommendations which we released in March 2021. Please contact us to be kept informed of further developments.”
Recovery in the international student market
“Last October, the Government recognised that “International travel restrictions have disproportionately affected services trade, such as tourism and education.”^, and has now committed $903.5 million in support for the recovery of the sector in the 2021-22 Federal Budget.
"The Government continues its focus on attracting domestic students to upskill, with the non-university portion of the higher education sector set to receive $26.1 million through the provision of an additional 5,000 Commonwealth-supported short course placements.
"For English language course providers, grants of up to $150,000 will provide welcome relief, given their heavy reliance on international students, and the significant impact on their businesses through the ongoing closure of Australia’s borders. The grants will provide support to transform operating models to invest in developing their offshore and online delivery.
"But the key question for the sector as a whole is when international borders will open, what the appetite will be for international students to return and what the lasting impact will be on the once-flourishing international education market? ”
^ Budget 2020-21 Overview
Partner, Audit & Assurance
Cyber security investment into Critical Infrastructure
“The Government continues to deliver on its commitment to invest in strengthening our national security, defence and law enforcement capability. The 2021-22 Budget includes a $51.8 million investment into the Australian Intelligence Commission to combat serious and organised cybercrime. This investment is welcomed given the four-fold increase in cyber scams and related payment fraud reported in the last 12 months, as highlighted in our latest Cyber Security Survey.
"The Budget also included $42.4 million to improve the security arrangements for critical infrastructure providers, assisting critical infrastructure owners and operators in responding to significant cyber attacks. This is an important area of investment as our survey found that just over 60% of organisations have a cyber security incident response plan or capability to respond to cyber incidents.
"These are relatively small investments but important ones, and we encourage organisations to work collaboratively with the Government to build a Cyber Smart Nation.”
National Leader, Cyber Security
Providing Business Stability
“While the 2021 Federal Budget has provided great news to the large end-of-town with significant investments in infrastructure and aged care, there are also major positives provided to the SME sector which will provide continued business confidence and a focus on employment and innovation. The top three measures include:
- The government has extended the temporary full expensing of depreciable assets for businesses with aggregated turnover below $5 billion through to 30 June 2023. This is a welcomed initiative as we have seen many SME businesses invest in new capital equipment to support business growth and continue to innovate in their industries.
- An extension of the Boosting Apprenticeship Commencements wage subsidy will see $2.7 billion spent over four years, to reimburse employers for wages of new apprentices by up to 50%. This will give SME businesses the support and business confidence they need to make longer-term decisions to build capacity for growth.
- Important changes in superannuation have also been announced and SME businesses. Employers will need to be aware of these changes, which will see the Super Guarantee increase on 1 July 2021 to a minimum of 10%, from 9.5% on 1 July 2021. The previously announced uplift will come into effect from 1 July 2021; whilst a budget night announcement of the removal of the $450 minimum earnings threshold will take effect from 1 July 2022.
"Overall a pleasing outcome for the SME sector and one that can provide confidence for business to continue to invest and innovate.”
National Leader, Business Services
Increased regulatory framework for NFPs
“The Australian Taxation Office (ATO) will be funded to build an online system enhancing the transparency of income tax exemptions claimed by Not-For-Profit entities (NFPs).
"Currently non-charitable NFPs self-assess their eligibility for income tax exemptions, without an obligation to report to the ATO. From 1 July 2023, the ATO will require income tax exempt NFPs with an active Australian Business Number (ABN) to submit online annual self-review forms with the information they ordinarily use to self-assess their eligibility for the exemption.
"NFPs will need to ensure that as part of their governance processes they satisfy the requirements to retain their income tax exemption.
"The ATO has in recent times established the role of the Assistant Commissioner – Not-for-Profit Centre and Government Relations.
"This requirement for all NFPs to submit an annual report is consistent with the increased regulatory framework and to ensure the integrity of the Australian tax system.”
Consultant, Business Services
Healthcare continues to be a major focus
“The healthcare sector remains a focus in tonight’s announcement, with investments into remote healthcare practices, mental health, women’s health, a $13.2 billion boost for the National Disability Insurance Scheme (NDIS), and continued COVID-19 support.
"To keep Australians safe, the Government is allocating more than $3.4 billion to ongoing COVID-19 support, including $1.9 billion toward the vaccine roll-out, and $1.5 billion in further COVID-19 related services of testing, tracing and telehealth. Mental health services will also receive a $2.3 billion commitment.
"Additional incentives include funding of new medicines to the Pharmaceutical Benefit Scheme (PBS) and tax incentives for medical device innovation and development.
"Addressing healthcare needs in rural and remote areas, the Federal Government has committed to boosting the bulk billing rebates for regional, rural and remote GPs. The driver being not only to enhance the financial viability of their healthcare practices but to also incentivise doctors and healthcare workers to those areas, reducing current workforce pressures and enabling more affordable healthcare to patients in those regions. A commitment of more than $65 million has been budgeted from 1 January 2021.
"Although a step in the right direction of addressing the long-standing challenge of how to get doctors and healthcare workers to regional, rural and remote areas, this proposed incentive is unlikely to make much of a dent in access to care inequities experienced in the bush.”