Budget blues over tax reform

Budget blues over tax reform

The IT&T industry will have to wait until the Business Tax summit in June before realising the fruits of its lobbying efforts after the Federal Government's Budget failed to address critical tax issues.

The Budget, handed down last week, makes few specific concessions to the IT industry but promises a general surplus of $5.4 billion.

The focus on biotechnology, medical research, health, and education, left key tax issues out in the cold such as capital gains tax, research and development rebates, and GST compliance compensation.

What the IT&T industry wanted

According to Paul Drum, a senior consultant of the Australian Society of Practising Accountants (CPA), the tax reforms the IT industry have been craving will remain unresolved in this Budget. "Tax will not play a big role in this budget mainly because there is an ongoing Business Tax Review due in June. If any initiatives were taken now, it would scuttle this work. In the end, the review will probably recommend tax concessions be cut back, not increased. Instead, business tax will come down."

The CPA's recommendations to the Government that tax concessions should be granted for costs incurred by businesses making the transition to the GST have so far been ignored. "For the GST, the Government should not only make software expenditure immediately deductible for all businesses but should also make other concessions available for small businesses to help them prepare for the GST," Drum said.

However, this does not discount the GST as a major concern for many in the industry now, with several resellers perceiving this budget as the foundation for the new tax system. "The Government is setting the country up for the GST," claims Simon Duncan, general manager of operations and finance at reseller Volante. "The specifics of this budget will have a minimal effect - it is the GST ramifications that will change things," Duncan claimed.

Nick Cuthbertson, managing director of reseller Protech, is optimistic about the GST's general impact on the IT industry. "Not only will this be a good tax model for us to operate under, it will also provide the IT industry with a lot of opportunities to prepare the economy for the GST."

The Budget also failed to include amendments to the capital gains tax in Australia, an issue the Australian Information Industry Association (AIIA) has been pushing vehemently, though with little hope of substantial changes until after the GST has been finalised.

Further tax woes are imminent, according to Prins Ralston, president of the Australian Computer Society, who was not surprised at the absence of research and development tax reforms. Ralston also contends that the current R&D tax system will be a detriment to the IT industry's ability to compete with regional centres such as Malaysia and Singapore.

This is in direct conflict with the Government's Budget decree to see Australia become the financial centre of the Asian region, claim several IT industry groups.

Colin Mckenna, managing director of Intergrand, believes "Australia still imports too much, we seem to be doing quite well in services but we need to encourage local businesses to build hardware and software".

Budget breakdown

$10.5 million for the Australian Broadcasting Authority to transform to digital television, which includes $7 million over four years to provide a regulatory framework for online content$1 million for Online Australia Year$1.65 million for Cooma Call Centre, which includes a business centre, high-tech telephony, Internet and computing services, and video and voice conferencing equipment for small and medium businesses and farm-based enterprises$82 million for CSIRO over the next three years$5.8 million to universities to encourage corporate involvement in research and trainingA pooled development fund program for small and medium businesses over the next four yearsAn increase in outsourcing funding$22.5 million over four years for a technology park in Melbourne$28 million for a software engineering and testing centre$704 million for the research and development program started last year$108 million for a technology diffusion program

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