Federal Treasurer Scott Morrison’s third budget, released 8 May, should be reviewed in the context of an anticipated federal election in the next twelve months, accompanied by a more buoyant economy and an uptick in company tax collections.
This helps explain the focus on the commitments made to personal income tax cuts and increased spending on infrastructure (including what is billed as a 10-year $75 billion national infrastructure plan), healthcare and aged care. It may also explain why there doesn’t seem to be any current appetite for structural tax reform. However, the budget does include a number of specific taxation measures intended to protect its revenue base.
Here are some of the more significant measures that will impact on business and investment:
Company taxes
1) Company tax rate
2) Changes to thin capitalisation
3) Significant global entity definition
Trust taxation
1) Managed investment trusts and stapled structures
2) Integrity measures for private trusts
Discover more: Budget 2018 – A pre-election sweetener
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Much attention has focused upon the Government’s commitment to spending, particularly on infrastructure, health and aged care. The focus on increasing revenue is clearly upon a continued path of increased enforcement activity and additional integrity measures, rather than any structural reform that may otherwise increase the tax base. For a number of businesses, implementation of the proposed corporate tax cuts is likely to remain the key measure that they would like to see adopted. However, it appears unlikely that progress will be made on that front in the current political environment.
