The CPA Australia pre-budget submission to Federal Treasury focuses on reducing regulatory burdens and encouraging investment innovation.
Easing the regulatory burden on practitioners and improving Australia’s investment and savings regimes: these are the two main themes of CPA Australia’s submission
to the Australian Government ahead of the Federal Budget to be delivered on April 2.
CPA Australia’s 19 recommendations cross core subject areas, spanning regulation, tax, investment, education and the environment.
Paul Drum FCPA, CPA Australia head of external affairs, says that while CPA Australia is a strong supporter of appropriate regulation, under current funding models, practitioners are being asked to bear a disproportionate share of the burden.
“Public practitioners are struggling not just with compliance but also with costs, because now they are paying inflated fees under the ASIC funding model,” says Drum.
“This goes to issues of market concentration and affordable advice, because the reality is that if you foist these costs onto service providers it will sound the death knell for small accountancy and financial advice practices in the market.”
Cutting regulatory costs
Under the principle of “rightsizing” the costs of regulation, the CPA Australia submission recommends the government moves from a full cost recovery for the Australian Securities and Investments Commission (ASIC) to a partial cost recovery model, and also reinstates funding which was previously cut.
The submission argues that the full cost recovery model does not recognise that the entire Australian community benefits from a smoothly functioning, efficient and accessible capital market.
Some fees, the submission says, can motivate behaviours which are not in the public interest. For example, charging self-managed superannuation fund (SMSF) auditors A$899 to cancel their registration is not only unfair, but it adds costs to ASIC’s administration, which can mean that many auditors remain registered, although they are inactive.
No fees on ASIC searches
ASIC searches should also be free of charge because this would improve transparency and reduce the risk of exposure to businesses with unethical or even illegal histories, such as phoenix activity.
The CPA Australia submission also argues against the introduction of the full cost recovery model for the Tax Practitioners Board (TPB), which is expanding its tax agent visitation program.
Given that a well-functioning and regulated profession is critical to the tax system and therefore to the broader community, CPA Australia argues that any increase in the TPB funding should come from public sources.
In terms of savings and investment, the key recommendation is the introduction of a 40 per cent savings income discount for non-business related income.
Drum says the taxation system is currently heavily skewed for people to invest in their superannuation, and while this has created a robust retirement savings regime it does not encourage people to save for capital items outside of super.
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“The current treatment of investment and savings is of no help to young people buying a first home, a car or a large capital asset,” he says.
“There is no reward for people taking any risk and investing outside of their super, and we think that instead of the current superannuation tax preferred approach to investing we need to give people other incentives outside of the super framework.”
Capital gains tax and negative gearing
Other recommendations are around Capital Gains Tax (CGT) on investments and also negative gearing
Specifically, the government is urged to remove the retrospective removal of the CGT main residence exemption for non-residents, a move which CPA Australia believes is “draconian and inconsistent with fair and reasonable policy design”.
On negative gearing, the submission says it is important that investor confidence is not further eroded by future policy changes, and recommends no change to the current arrangements.
“The markets are fickle at the moment and many people are in a holding pattern with their investments,” says Drum.
“Global economic conditions are very volatile with trade wars and growth slowing down, so we really don’t believe it is wise at the moment to ‘scare the horses’ and change the rules around CGT and negative gearing.”
Improving financial literacy
Other recommendations in the submission go to issues of financial education and literacy in the aftermath of the Royal Commission into Misconduct in the Banking, Insurance and Financial Services Industry.
The Government is urged to review the effectiveness of its current programs, with a view to improving access to affordable financial advice for people with low levels of financial literacy.
For small business, CPA Australia is recommending that the government’s A$25,000 instant asset write off announcement should become permanent, arguing that the current annual extension of the scheme creates uncertainty, particularly when the amendment is passed after the commencement date.
CPA Australia also recommends the maintenance and extension of funding for environmental programs, with the reinstatement of at least A$200 million in funding to the Global Climate Fund and $A10 billion for the Clean Energy Finance Corporation over the next five years.
More funding is also required, the submission says, for the Australian Charities and Not-for-profits Commission, an organisation which is being asked to regulate a sector equivalent to 8 per cent of national GDP.
Read the full CPA Australia pre-budget submission.