The Qld budget should address cost of living pressures but beware of tax changes

BDO tax partner Leisa Rafter says while the state budget’s focus will be on cost of living and housing support, the `unintended consequences’ from new funding measures should be considered.

As Queensland awaits next week’s state budget, there are several key areas that require attention and a balanced approach.

While the focus will almost certainly be on cost of living and housing support, it’s essential to consider the funding sources, the effectiveness of any proposed measures, and the potential impact of tax changes on businesses and taxpayers.

A state budget addressing the acute cost of living pressures is undoubtedly necessary. However, the crucial question remains: how will the government fund any initiatives designed to combat these pressures?

With the talk of windfall royalty revenue, assessment as to whether this windfall will be sufficient to fund cost of living measures without resorting to significant tax changes should be closely contemplated.

The federal budget introduced multiple measures to stimulate an increase in Australia’s housing supply by targeting new built-to-rent (BTR) projects and increasing access to affordable housing schemes.

The upcoming Queensland Budget will be an opportunity for the Queensland Treasurer to provide state tax relief to Queensland BTR projects.

While the Treasurer previously announced tax concessions to drive investment into affordable housing, concerns linger over the effectiveness of these measures. Tax exemptions must be meaningful enough to incentivise participation. Clear and simple criteria also encourage participation.

This upcoming Queensland Budget is not the first state budget for 2023. Reading the tea leaves and looking at past trends, Queensland has followed the lead of southern states when introducing new state taxation measures, for instance, the introduction of a land tax surcharge and transfer duty surcharge following NSW and Victoria.

This year has seen NSW remove its annual land tax model for first home buyers, Victoria announced a transition to an annual property tax on commercial and industrial property and an additional Covid-19 levy for bigger businesses with an Australia wide payroll of over $10m or more.

If Queensland intends to follow suit, clearly defined changes are crucial to prevent unintended consequences that could stifle businesses and burden taxpayers.

Payroll tax reform has been a topic of discussion for some time, and next week’s budget presents an opportunity for Treasurer Cameron Dick to instigate an intention for Queensland to support payroll tax reform.

This should include simplifying compliance burdens and harmonising laws across states. While payroll tax reform is not expected to be a focal point in the upcoming budget, it must be considered to support business, efficiency and employment growth.

Leisa Rafter is a tax partner at BDO and is based in the firm’s Brisbane office