Federal election result positive for financial certainty

The election result has also given a strong indication that people want more positive action on climate change. AAP Image.

The outcome of Australia’s federal election may have been a surprise to many, but the Liberal-National Coalition victory will result in fewer surprises in terms of tax and investment.

Australia’s surprise federal election result means Australian Labor Party policies on the negative gearing of investment property and franking credits on share portfolios will not proceed. 

“What we were calling the ‘fake budget’ after April is now the real budget,” says Paul Drum FCPA, CPA Australia head of external affairs.

“Of course, the Coalition needs to get them through the Parliament, and they may face some hostility in the Senate but there is a mandate for the budget, and that was expressed on May 18.”

Investment confidence

Drum says the election result delivers confidence and certainty to the investment environment for the next few years and should result in a “spike” in investment.

“Election policies that would have increased taxes and significantly reduced investment returns are now off the table,” he says.

“This is positive for business and for the economy overall, and also for members of the accounting profession who provide advisory services.”

Economic outlook

This was important in an economy that “barely has a pulse” and which just posted zero inflation for the first quarter of 2019, one of the first times in living memory this has occurred.

Drum says CPA Australia has supported the idea of backdating the personal tax cuts proposed by the Coalition.

“When property sales are down, along with retail sales, and the Reserve Bank of Australia has been keeping interest rates on hold, these measures are a fiscal stimulus for the economy,” he says. 

“I think it is fair to say that this government is not proposing to negatively influence business or investment or come in with big changes on how capital is taxed.”

Listen to the podcast: What the federal election results mean for CPA Australia members and their clients

Coalition measures such as cutting the corporate tax rate for small and medium sized businesses to 25 per cent by 2021, five years earlier than planned, would apply to nearly one million small businesses and would also stimulate the economy. 

The new government also proposes to extend this to 2.4 million unincorporated small businesses through an increase in the discount rate to 16 per cent.

Cost of managing tax affairs

CPA Australia is focussed on decreasing the cost of managing tax affairs and Drum welcomes the demise of Labor’s “iniquitous” proposal to cap at A$3000 the maximum deduction which could be claimed for tax management.

This proposal would have impacted individuals, trusts and partnerships.

There were issues, however, on which CPA Australia will continue to engage the government and these include uncertainty around private company loan rules, opposition to proposals for three-year audits for self-managed super funds, and pushing for double taxation arrangements with Hong Kong. 

“Our priorities are to reduce the cost of doing business, reduce the cost of compliance but also to advocate for regulations which are efficient and transparent,” Drum says. 

“We are also vigilant in advocating against increasing government-imposed cost pressures impacting smaller accounting practices, and this includes issues such as the current Australian Securities and Investments Commission (ASIC) funding model and we’ll be going back to the government to discuss this with a view to securing more public funds.”

Another issue for CPA Australia is climate change. Drum believes the election result has given a strong indication that people want more positive action.

“We are very keen to engage on this and help drive policies which help businesses and households transition to cleaner energy options over time,” he says.

“The Achilles heel in the Coalition’s policy offering was in the context of climate change, and I think the election result gave some very strong signals and we look forward to having those conversations.”

First home buyer subsidies

CPA Australia is “ambivalent” about Coalition plans, which were endorsed by the Australian Labor Party, to help subsidise first home buyers.

The government proposes to set aside A$500 million through the National Housing Finance and Investment Corporation to guarantee loans up to a value of 20 per cent of homes. 

The scheme will be available to first home buyers with an income of up to A$125,000 or couples with a combined income of A$200,000.

Drum says the scheme has significant downside risk, particularly if mortgage interest rates start to move higher.

“It is encouraging people who can’t afford to borrow to saddle themselves up with debt,” he says.

“At the end of the day these people still have to pay the money back, regardless of the guarantee, so we are very wary of this government policy.”

Read next: 

Announced and unenacted tax and super policies 

Summary of the tax and superannuation election policies of the major parties

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October 2021
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