What’s in it for you?
First of all, there is not much good news. In fact, note, most of us in the small to medium income earners’ range will pay an extra $1, 500 tax. The Morrison government introduced the $1500 off-set for small and medium taxpayers such as you and me. The current Federal Government has cancelled this off-set and it, in effect, raises the tax by $1,500. When you file your income tax return instead of expecting, say $2,000 refund, it will be $1,500 less.
Personally, my concern is that taxpayers are overtaxed, and the Federal Government has attacked the gas at oil industry significantly to produce what the government hopes, is a surplus. I’ll believe it when I see it! I am concerned that the Federal Government’s spending, even though they claim it will not lead to inflation.
Here is a little rule for you. 72 divided by the rate of inflation equals
the number of years when your purchasing power of the dollar is halved.
Let us say the inflation is 8%. 72÷8 = 9 years so in 9 years your dollar is effectively worth only 50% of what is now. By hiding money under the mattress where it does not produce income or is not invested, as per the example above. In 9 years, the dollars only worth effectively 50 cents. That is why governments of the world and of course consumers are concerned about high inflation. Inflation above 3% is about the highest that you want, and this is a current problem throughout the world. The Reserve Bank of Australia’s (RBA) job is to curb inflation by upping interest rates to extract money out of the spending system.
So what benefits are you likely to pick up from this Federal budget? If you are in business, there is an extended instant asset write-off extension until 30 June 2024. After that, depreciation rates apply. Instead, write-off newly acquired assets after 30 June 2024, normal depreciation is applied. Instant write-offs are not necessarily a good thing I might add, and I review clients’ requests for instant write-offs against normal depreciation whereby taxable income is expected to rise in the following years. Quite often it produces cash flow positive for that year, however, it can be very detrimental in the following years. It depends entirely upon the business situation. Note that the instant write-off of an asset is limited to $20,000 (net of GST). There is no limit on the number of assets though.
As acknowledged by the Federal Government, we have a consumer recession. This is caused by people and business not spending money. In my opinion, the Federal Government is concerned about the future and that will be very concerned about what income will have coming in during the next few years.
The ATO is hiring a lot more staff to do tax audits so when filing your tax return, you really need to be conscious of keeping receipts and other documentary evidence (such as a logbook for travel). Here at Sierra, great care is taken to claim what is lawful and keep you from getting into trouble with the ATO.
