Federal Budget Report
Who has scored a podium finish in the October 2022-23 Australian Federal Budget?
The ‘mini-budget’ provided some clarity on the intended mechanics and operation of the following measures from the Government’s Plan to Ensure Multinationals Pay Their Fair Share of Tax (the “Plan”)
- Amendments to Australia’s interest limitation (thin capitalisation) rules;
- Denying income tax deductions for certain cross-border payments to related parties; and
- Improved tax transparency (eg, public disclosure of certain country-by-country information, and specific requirements for Government contract tenderers).
Amidst significant economic headwinds faced domestically and abroad, and consistent with rhetoric in the lead up, Treasurer Jim Chalmers’ so-called October 2022-23 ‘mini budget’ has focussed heavily on counteraction of the perceived avoidance of tax by multinationals.
Whilst the measures are thematically consistent with the Plan, they follow a very limited period of consultation.
The thin capitalisation amendments, which arguably transcend what was anticipated, are likely to be met with dismay by taxpayers belonging to asset-intensive, highly-geared sectors such as infrastructure, property, and resources, although there was some potential upside of intellectual-property based businesses that do not recognise internally-generated assets on-balance sheet, and the welcome ability to carry forward denied ‘excess’ deductions for up to 15 years. However, it is noted that those intellectual-property based business may be adversely affected by the scrapping of announced measures that would have permitted them to self-assess the tax effective life of intangible depreciating assets.
But it wasn’t all negative, with a number of groups benefiting, including the Australian Taxation Office (ATO), which has received funding for additional headcount, as well as the enhancement and extension of compliance programs, including its Tax Avoidance Taskforce.
The centrepiece of the mini-budget, from a spending perspective, was Treasurer Chalmers’ ‘five-point plan’ for cost-of-living relief, which focussed on:
In summary, a budget that delivers on many of the Government’s pre-election commitments from both a payments and receipts perspective.
If you would like to discuss how these changes will affect you or your business, please contact your nearest RSM office or representative.
- $4.7 billion to deliver cheaper childcare;
- $532 million to expand Paid Parental Leave;
- A new National Housing Accord to deliver up to 20,000 new affordable homes;
- $787 million to reduce the co-payment under the PBS from $42.50 to $30 per script; and
- Various measures to real wage growth.
The measure to align the tax treatment of off-market share buy-backs with on-market share buy-backs, caught everybody by surprise and arguably sounds the death knell for off-market share buy-backs by removing shareholders’ potential willingness to sell at a discount.
