Later today, Treasurer Wayne Swan will hand down his fifth Federal Budget.
Swan has already warned the budget will be of the slash-and-burn variety with various cuts already leaked and speculation rife as to what the Treasurer will scrap in order to bring the budget into surplus.
Gavan Ord, CPA Australia’s small business policy adviser, told SmartCompany that CPA expects the Federal Government will cut expenditure, move other expenditure to the future and engage in revenue raising in order to fulfil its “surplus fetish”.
“For small business what that means is don’t expect this budget to deliver anything really positive for you,” says Ord.
“The general economic impact of the budget will be contractionary for small business.”
SmartCompany will report direct from Canberra this evening in a special budget edition of our daily email, with all the news and analysis that matters most to small businesses.
Our 10 Big Predictions
In the meantime, here are our 10 big predictions for the 2012 Federal Budget.
1. A surplus
The Government has made it clear that the 2012 budget will be in surplus, whatever it takes.
Swan has said “just as it was right to step in and support demand when it was needed, it’s right now to be stepping back to provide space for the private sector to grow and to ensure the Reserve Bank has the flexibility to cut interest rates.
“This is a key reason why getting the budget back to surplus in 2012-13 … is the right strategy.”
The Reserve Bank has now cut interest rates, so it is up to the Treasurer to deliver.
However, consultancy group Macroeconomics has warned the Government is likely to choose “optimistic” parameters to ensure it gets the promised surplus.
2. Changes to living-away-from-home tax concessions
The Government is expected to make changes to LAFH tax concessions in the Budget.
Proposals already announced by way of a consultation paper would exclude visitors to Australia on temporary visas from any LAFH tax concessions except fly-in fly-out arrangements and would shift allowances into the income tax net, with employees being required to claim deductions for their accommodation and food costs.
Grant Thornton fringe benefit tax specialist Elizabeth Lucas warned that while the accountancy firm welcomed change to address scenarios seen as rorting, the Government’s proposals go much further, making them appear like a “tax grab”.
3. Loss carry back for business
The Government has already confirmed that loss carry-back will be included in the budget enabling businesses to claim losses of up to $1million against tax they have paid in the previous two years.
A business claiming the full amount would get a refund cheque of $300,000 — representing the company tax rate of 30c in the dollar.
The Government is expected to confirm in today’s budget exactly how loss carry-back will be paid for.
Robert Jeremenko, senior counsel at the Tax Institute, told SmartCompany the Government is also likely to take away some business tax breaks.
“The Government has made it clear they won’t do anything positive like that unless they can offset it with a saving,” says Jeremenko.
4. Scrapping the green building tax break
The budget is tipped to scrap existing tax breaks worth some $1 billion for property developers who improve the energy efficiency of older buildings, according to a report by The Australian Financial Review.
The tax breaks, first promised by Prime Minister Julia Gillard during the 2010 election campaign, are due to launch on July 1, but legislation has not yet been introduced to enable the Tax Breaks for Green Buildings Program.
This has prompted concern from the property industry that the scheme will be postponed or dropped.