Federal Budget 24-25: Picking winners, neglecting reform

The government has chosen to pick a few winners instead of engaging in a holistic review of the tax system, says BDO in Australia.

Mark Molesworth, Tax Partner at BDO in Australia, says the government’s branding of its new Hydrogen Production Tax Incentive and Critical Minerals Production Tax Incentive as tax reform is a sign of its reluctance to look at the big picture.

"It’s light on detail at the moment but it is ultimately picking winners as there aren’t too many people in Australia processing and refining critical minerals or producing hydrogen at the moment," said Mark.

"The government is setting out its priorities by where it's spending its money but one of those priorities is not looking after the revenue collection side of the equation.

"The Treasurer is banging on about consecutive surpluses, but he's really banking on the benefits of high commodity prices and not using those funds as a bridge to reforming the tax system.

"Any reform of the tax system is potentially going to have a period of reduced revenue, particularly if you've got to compensate taxpayers who will be worse off under that reform. He could be choosing to use some of this additional collected revenue as a bridge to that reform, but has chosen not to."

Instead of tax reform, the government has turned its attention to a tax crackdown, with foreign investors set to face new capital gains tax rules.

"It looks like they're going to change the definition of what taxable Australian property is and what non-residents actually pay Australian capital gains tax on," says Mark.

"There are also additional notification requirements. At the moment, if you're selling land, you've got to tell the Tax Office before you sell, but if you're selling shares or units in a unit trust, you don't have to tell the ATO in advance. Now, if you're selling shares for more than $20 million, you will have to tell the ATO that you're doing it in real time."

Wealthy individuals, small businesses, multinationals and blatant tax evaders can also expect more visits from the Tax Office, with the government extending a range of compliance programs to claw back additional revenue.

"Instead of tax reform, we get a tax crackdown," says Mark.

"The key message is that the ATO is here to stay in your life. Having to deal with the Tax Office is just a cost of doing business. Everybody should be expecting to see them."