The plan is aimed not just at generating economic growth, and getting more Australians working, but more importantly reducing costly compliance headaches for Australian businesses.
It includes achievable amendments to Australia’s tax law settings that can be introduced quickly in recognition of the impacts COVID-19 continues to have on Australian businesses and households.
“We continue to hold the view that Australia needs major tax reform, which is critical for the economy to scale new heights and ensure we remain globally competitive, however, with the shocks of the pandemic still being felt across the nation, we know that now is not the time for such profound change,” said PwC Australia tax business leader Chris Morris.
“For now, our recommendations focus on achievable but important changes to our tax laws that can be made now, without delay, in order to give our economy a boost, encourage greater workforce participation and labour productivity, and drive down compliance costs on businesses.”
Included in the plan are changes to the fringe benefits tax (FBT) to facilitate better access to mental health and wellbeing support for Australian workers, and allow families greater access to affordable childcare.
It also contains recommendations on how to attract talent from overseas by expanding the application of the “temporary residents” tax rules to incentivise professional expatriates to return home.
Thirdly, the plan has ways in which the government, by working through the tax system, can help Australia realise its net zero-emissions commitments, through further changes to FBT and the income tax treatment of electric vehicles.
Business investment is also a major concern in the PwC plan and it contains recommendations that will give businesses the confidence they need to invest, first, by extending the temporary full expensing mechanism set to expire next year, and, secondly, by making the loss carry back regime permanent.
Finally, PwC said it has also put in the plan sensible measures to modernise and simplify the tax system in order to reduce the costs of compliance.
One of the most equitable changes to the tax system that could be easily implemented, said Mr Morris, was by allowing the Fringe Benefits Tax rules to pave the way for more affordable childcare, helping more parents back to work.
Currently, businesses can cover the costs of childcare for employees as part of a salary sacrificing arrangement, but will only be exempt from the associated FBT if the participating childcare facility is located on business premises of the employer, thereby making many smaller employers ineligible. If the exemption does not apply, the cash cost to the employer (which is likely passed on to the employee) is effectively doubled.
“Only large-scale, major employers such as big corporates, government departments and universities can feasibly house a childcare facility on their premises, in addition to childcare operators themselves. The vast majority of employers, including small employers, or those operating in small rural and regional communities have little if any practical ability to provide such benefits,” said Mr Morris.
“By allowing more employers and employees to enter into a salary sacrificing arrangement that sees childcare costs paid for by business but without associated FBT costs, more parents will be able to access affordable childcare, and subsequently boost their workforce participation.”
According to PwC Australia’s pre-budget tax submission, other potential changes to FBT laws include:
- Concessions for employee benefits that promote health, fitness and wellbeing such as private health insurance, and better mental health support
- Concessions to encourage the take-up of electric vehicles, including for example, exempting the provision of charging and charging infrastructure
- Temporary exemptions to entertainment benefits in order to alleviate excessive compliance burdens and stimulate the hard-hit hospitality industry
- A new regulation-making power for the Treasurer to help support an FBT regime that is quickly adaptable to the rapidly changing business environment
