Budget 2013: 10 things to expect from the federal budget

The past few federal budgets haven’t been kind to small business. Tonight’s won’t be any different.

Although the government has ditched its promise to deliver a surplus, spending cuts are the order of the day. In order to restrict the deficit to just $15 billion – the most recent reported estimate – Treasurer Wayne Swan has put everything back on the table.

Paul Stacey, the general manager of the Institute of Chartered Accountants, tells SmartCompany small businesses can expect not only spending cuts, but cuts to concessions.

That means some beloved breaks or assistance could be affected.

“Given the language out of Canberra, the pain or the contribution towards the budget is to be shared across all society,” he says.

“That means the tax increases, in whatever form they may be, won’t be limited to just the business tax system.”

SmartCompany will be at the federal budget in Canberra this evening to deliver our special annual budget edition. But for now, here are our 10 predictions for what we’ll see in this evening’s budget:

1. Deficit

No ifs or buts about it, tonight’s budget will deliver a deficit. And based on the most recent reports, it’s going to be a big one.

The budget surplus promise was dumped late last year, and none too soon. Business groups and economists alike praised the government for sticking to its promise for a surplus, which many felt was motivated by politics rather than economics.

Deloitte economist Chris Richardson even said it would have been “dumb” to go after a surplus and potentially “damage the economy”.

In December, Swan finally said it would be “unlikely” there would be a surplus.

The most recent reports from The Australian Financial Review indicate there’ll be a deficit of about $15-16 billion, based on a budget shortfall of $12 billion.

The government has said it’s coming. Expect a deficit this year, and for that matter, in the next few years to come as well.

2. Changes to thin capitalisation rules

There have been several reports indicating the government will crack down on thin capitalisation rules, so expect some movement here.

Companies which are thinly capitalised are those which are funded by a proportionately high amount of debt, which gives them access to tax deductions. This results in a low amount of tax paid.

Swan is expected to amend the current thin capitalisation rules, which are often utilised by multinational companies – a particular target of interest for the government. The current ratio allows debt to equity of 3:1, which is expected to be changed to 1.5:1.

Tax experts tell SmartCompany it would be logical to expect the government to bring something else to the table regarding multinational companies as well tonight.

3. Superannuation changes

Last month, the government announced some changes to the superannuation system, and as far the industry was concerned, it was a mixed bag.

While a change to the excess contributions penalty was welcomed, capping the earnings tax exemption for super streams above $100,000 was met with some disdain.

But experts say you should expect some more pain when it comes to superannuation tonight, and possibly in the self-managed sector as well.

“I think we should be prepared for the possibility,” says Dan Butler of DBA Lawyers.

4. Export market changes

The export market was furious over a planned cut in the Export Market Development Grant last year. Expect those changes to be reflected in the budget tonight.

Last year, the government realigned the Export Market Development Grant to focus on the Asia-Pacific region, at the expense of some North American operations. This also meant a reduction of $25 million in the total funding of the scheme.

Ian Murray, the executive director of the Australian Institute of Export, tells SmartCompany no one should expect any new support.

“We’re disappointed, but we’re not expecting anything…apart from what has already been announced,” he says.

The Export Market Development Grant is already drastically underfunded. Any cuts tonight could impact a lot of small businesses trying to expand overseas.

5. A change to parenting payments

We’ve already seen the government abandon a former pledge to boost Family Tax Benefit payments. Now, Paul Stacey says it would be wise to expect a change with regard to family payments.

“Apart from the more eye-catching increases such as the Medicare levy rise, we can expect similar but less eye-catching changes.”

“For example, there may be a reduction in the childcare rebate down from 50% to a lower percentage rate. Or, that rebate could be means tested.”

“The whole individual tax area is one which is full of thresholds which can be applied to means-testing or other tests.”

According to recent reports, a cut to the Baby Bonus isn’t outside the realm of possibility, either.

Both Wayne Swan and Julia Gillard have made plenty of comments about how the country needs to make “tough decisions” with regard to the budget. Changing up childcare and family payments could be part of that strategy.

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