Federal Budget Brief 2016
An investment in smaller businesses, funded mostly by larger businesses, is the centrepiece of the Government’s attempt to stimulate an economy on the brink of deflation — without an increase in spending.
A modest package focused around defence and related industries comprises the budget night innovation announcements.
At the same time, structural tax reform has been put on the back burner until after the election.
Instead, a package of tax concessions for small and medium enterprises funded by tougher tax measures for multinationals will drive the core of the stimulus effort. The Government will encourage growth in small businesses by lowering the corporate tax rate immediately and extending other concessions, such as the immediate deductibility of certain expenditure.
Although large businesses have the promise of a future 25% corporate tax rate in the 2026-27 year, they will face significantly greater penalties and tighter anti-avoidance rules before they get there.
In addition, higher-earning taxpayers will be called upon to fund the reducing deficit through changes to superannuation tax concessions. Smokers will also play their part.
Overall, this budget seeks to navigate the difficult task of stimulating an economy in transition by implementing spending restraint and starting a Ten Year Enterprise Tax Plan, with a nod to innovation.
However, it is not clear whether the announced stimulus measures will be enough to transition Australia to the “stronger, more diversified, new economy” the Treasurer envisages.
Business will also have to wait until after a double dissolution election to see how much of this is realised.