Make or break tax breaks: BDO’s 2024-25 Federal Budget Predictions

The federal government will need to go beyond accelerated tax deductions to encourage business investment and boost productivity, says BDO in Australia.

Mark Molesworth, Tax Partner at BDO in Australia, says Treasurer Jim Chalmers’ hint at a form of business investment tax break in the Federal Budget should incorporate additional tax deductions instead of simply bringing forward deductions from future years to the current year.

“Accelerated deductions, like an asset-write off scheme, are not really going to incentivise a business to invest in something it otherwise wouldn’t,” says Mark.

“Additional tax deductions, however, would encourage businesses to invest in purchasing new equipment and potentially increase productivity.

“For example, former Treasurer Wayne Swan introduced a measure during the GFC where businesses received an additional 30% deduction for the new equipment they bought.

“It's a bit like the research and development tax incentive with additional deductions or benefits in addition to the deductions that you would have got anyway, because businesses are pretty good at dealing with timing differences.”

Mark says the government should ensure any support it provides is broad-based and avoid defining specific industries.

“We would hope that the support doesn't attempt to pick winners, that it is available to any taxpayer, and not just particular types of taxpayers where it might lead to a high likelihood of disputes between taxpayers and the Tax Commissioner,” says Mark.

While tweaks to the tax system might be politically palatable, BDO is urging the government to come to the table on tax reform if they are serious about the country’s economic security.

“It is a failure of our politicians to pick up the big picture challenges when it comes to the tax system,” says Mark.

“We would welcome a conversation around tax reform but both sides of politics see it as a toxic conversation, which is unfortunate.

“Our tax system is overly reliant on personal income tax receipts- something that has been repeatedly identified as economically-depressing by the OECD and IMF.

“Tax reform requires more than just the tinkering of tax thresholds and rates. We hope politicians of all political persuasions will be willing to commit to real reform of our tax mix if they are serious about securing our economic future.”

With the government keeping its cards close to its chest this year, Mark believes the Federal Budget will give us a glimpse of its election plans in the coming months.

“It’s been an uneventful budget cycle but if we start seeing a heap of sweeteners in this budget, you would expect an early election,” says Mark.

“If we don’t, then I believe the government is keeping its powder dry for next year and will run to term up to May 2025.”

Notes to journalists

For further comment or to organise an interview, please contact:

Jotham Lian
Manager, Media
BDO in Australia
jotham.lian@bdo.com.au

or

Jane Ward
Senior Manager, Media
BDO in Australia
jane.ward@bdo.com.au
0404 791 606