BDO’s Mark Molesworth sets out what to expect in the 2021 Federal Budget

How will the Federal Budget impact local firms? BDO’s Mark Molesworth takes a look at what businesses can expect across key areas.

With the Federal Budget on May 11, people are asking me what we can expect. There’s been a substantial reopening and recovery in the economy and the outlook must be rosier now than it was last October.

Interestingly, budget repair is going to pull the Government in one direction and the upcoming Federal Election, which has to be held before May 2022, is going to pull in the other.

Gender equality issues are currently sensitive so we may see superannuation being required on paid-parental-leave.

There are also the recommendations of the Aged Care Royal Commission, the Disability Royal Commission and Climate Policy which are to be considered.

The Government is also going to be incentivised to provide tax sweeteners to those who vote. Middle income earners, particularly those earning up to $120,000, are actually in for a tax rise unless the law is changed. We expect that to be dealt with in this budget.

We still have a 20th century tax system trying to operate in a 21st century economy.

The Government should change the settings to provide a stable tax base even during downturns.

Big ticket, but unlikely, reforms include broadening the base of GST and financial supports to the States to remove duty on land and business purchases.

More likely, we could see changes to the CGT rollovers to encourage efficient business restructures. JobMaker could be rejigged due to low take-up.

Higher income earners and companies will be the ones who are tapped on the shoulder to pay for some of this. Will we see a change to the CGT discount to reduce it from its current level (50 per cent to some lower amount?

The company tax rate in the rest of the world is coming back up. The Government might be wise to provide further incentives to companies bringing business on-shore.

Finally, the Superannuation Guarantee increase to 10 per cent from 1 July 2021 will go ahead. There isn’t sufficient time left for the Government to defer it. Perhaps the Government would be wiser to renegotiate the future increases above 10 per cent by offering, as a trade-off, the requirement for employers to superannuate all payments made to employees.

All will be revealed on Tuesday night!

Mark Molesworth is a tax partner at BDO in Australia’s Brisbane office