Spoiler Alert: it depends…
We’ve taken a good hard look at Scott Morrison’s budget delivered one week ago. And, we’ve read what the pundits are saying. As a result…. we’ve cherry-picked those elements we think could impact you, our reader: whether you’re an employer OR a contractor. And we present them to you here (please take note, those elements that have no impact on you in your ROLE, we’ve left alone).
Small Business Regulatory Reform
The National Partnership on Regulatory Reform (NPRR) with the States and Territories to remove regulatory restrictions on small businesses and competition.
What could this mean?
Well, under the NPRR, the Federal Government will pay the State and Territory Governments for implemented reforms that drive Australia’s economic performance and living standards. The focus here is squarely on small business regulatory reform.
As such, a high-level impact on the overall economic performance of all States & Territories is a positive. And a good sign that the Government is commitment to considering all levels of business.
DIRECT IMPACT: Nil
SECONDARY IMPACT: A positive hit to the economy? Sure!
Okay, we get it. Income taxes relate to employees.
We’ve included this component in our analysis as we believe as employers, you need to know. Look. Below are income tax rates and thresholds. And with zero changes to either, the prospect of bracket creep is real. Hence, this could sway your view of contingent workers. Maybe it means you’ll engage more to offset fewer employees?
|Tax Rates: 2017/2018|
|Taxable Income||Tax on this income||Rates|
|$18,201-$37,000||19c for each $1 over $18,200||19%|
|$37,001-$87,000||$3,752 plus 32.5c for each $ over $37,000||32.5%|
|$87,001-$180,000||$19,822 plus 37c for each $1 over $87,000||37%|
|Over $180,000||$54,232 plus 45c for each $1 over $180,000||45%|
|Compulsory Superannuation rate: 9.5%|
The issue is also this: middle income Australians will wear this most. There’s been an outcry that a decline in workforce participation rates is very likely, due to workers taking home less pay as result of bracket creep (bracket creep happens when wage inflation pushes workers into higher tax brackets).
And no surprise, this hasn’t been welcomed. From PwC managing partner, financial advisory, Tom Seymour:
“It’s a slow boiling frog and it just becomes more and more inequitable over time. It impacts the disposable income of mums and dads and that’s not good when we’re trying to grow the economy.”
And this: “Bracket creep is also a disincentive to work when we are trying to encourage greater workforce participation.”
The example provided was this:
The average wage earner will move from the 32.5¢ bracket to the 37¢ bracket. This is equivalent to a 7% tax increase due to bracket creep alone.
Looking at the hard numbers, this is a tough call, that could also potentially directly impact employee views – as in, they may well start to view the prospect of being a contractor, as far more attractive.
The other problem here is, the new tax regime proposed by the government, will likely hit everyone. From the new Medicare levy, the bank tax (which is being mooted to hit most people, through the passing on of interest rates & fees), to increases in tax rates for FBT and high-income earners. As a result, although not hit directly, this area of the budget may well affect employers’ views of their staffing numbers AND their contingent worker numbers.
DIRECT IMPACT: Possibly
SECONDARY IMPACT: Most likely
There’ll be a hike in the Medicare Levy, by half a percentage point from 2.0 to 2.5 percent of taxable income from 1 July 2019 to make sure the National Disability Insurance Scheme (NDIS) is fully funded. Now this is being criticised as (again) too heavy a leaning on income tax to raise revenue.
All Australians will pay higher taxes from July 1, 2019 when the Medicare levy increases.
DIRECT IMPACT: Nil
SECONDARY IMPACT: Only on the tax burden of individual employees, the resultant likelihood of bracket creep. See ‘Tax Impact’ above.
There’ll be additional funding for the Tax Office taskforce charged with clawing back $15b from black economy, including a crackdown on contractors in the courier and cleaning industries.
The ‘Google Tax’ is expected to raise around $4b from big business & multi-nationals. In March of this year, the Turnbull government passed into law, new powers for the ATO to recoup tax from multi-nationals who structure businesses by paying taxes in minimal tax legislations. This will include some of Australia’s biggest companies such as Apple, BHP Billiton, Crown, and Google itself (although Google has recently restructured its tax affairs in anticipation of this law).
The five largest banks (the Big Four and Macquarie), will pay a six basis point levy which is expected to raise $6.2b over the budget and forward estimates (but as we said earlier, the taxpayer is likely to be hit the most).
$130m annual licence fee for broadcasters will be scrapped in favour of a $40m ‘spectrum’ fee. Will this mean a better shot at work for contractors in the media? Remains to be seen.
DIRECT IMPACT: On blue collar contractors and their employers, yes. Otherwise, nil.
SECONDARY IMPACT: Unlikely. Hard to say if the Google tax will impact talent strategies of these big employers
Both big and small business will be hit with new levies under the changes to engaging foreign workers. Here’s how:
Turnover of more than $10m:
- $5k up front for each foreign employee on a permanent work visa
- $1.8k for each employee on a temporary skill shortage visa (which will replace the 457 visa)
Turnover of less than $10m:
- $3k up front for each foreign employee on a permanent work visa
- $1.2k for each employee on a temporary skill shortage visa (which will replace the 457 visa)
The levy on businesses using foreign workers will fund up to 300,000 apprenticeships and traineeships over four years.
DIRECT IMPACT: Unlikely
SECONDARY IMPACT: Potentially fewer contractors available in certain skill sets. Contract skills shortage? Future scope for contractors in hard-to-fill fields, will be pricier.
The Government claims it will invest $75b into a 10-year infrastructure program. This includes a $10b National Rail Program to improve connections between cities & regions.
Other projects include:
- Government in talks to buy back share of Snowy Hydro from Victorian and NSW governments
- $37m for new energy infrastructure and gas pipeline in South Australia
- $844m to upgrade Bruce Highway
- Second airport for Sydney at Badgerys Creek $5.3b over 10 years
- Melbourne-Brisbane inland rail link gets $8.4b with construction to begin this financial year
- $550m Victorian regional rail fund, $30m for airport link business case
DIRECT IMPACT: Potentially more opportunities for contractors
SECONDARY IMPACT: Unlikely
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