CGT backflip, migration falls, Swiss watch slump

CGT backflip, migration falls, Swiss watch slump

News in brief

Immigration last year fell to its lowest level since 2022 with just over 300,000 people entering the country. The ABS figures show that Australia’s population grew by 1.5 per cent last year, to 27.8 million.

 

The management of the $12 billion Snowy 2.0 hydroelectricity project failed to take necessary action to limit cost overruns and construction delays and deliver value for money for taxpayers, according to the Australian National Audit Office.

 

Portsea, on the Mornington Peninsula in Victoria, has become Australia’s richest location, knocking off Sydney’s eastern suburbs, with Tax Office figures showing that the average taxable income for the 787 residents is $322,000.

 

The first Federal Reserve interest rate meeting under new chairman Kevin Warsh left the benchmark rate unchanged, but half of the board members indicated they expected a rise later in the year.

 

One product category struggling as a result of the Middle East war is Swiss watches, with exports down five per cent in the first five months of the year.

Fear-o-meter

CPA Australia on changes to the proposed CGT regime:

 

The changes are a constructive step forward, but critical design questions remain unresolved, with potential implications for small businesses and advisers.

 

Tax Lead Jenny Wong said the announcements by the Prime Minister and Treasurer broadly respond to industry concerns and are “heading in the right direction”, particularly at a time when small businesses are facing sustained cost pressures and economic uncertainty.

Ms Wong stressed that significant design and implementation issues remain unresolved, particularly in the draft legislation.

 

CPA Australia has identified other key concerns, including:

• the absence of critical legislative detail defining who is taxed, at what rate, and on which assets
• gaps in how the new CGT rules interact with existing frameworks, including deceased estates, CGT rollovers and private company transactions
• substantial compliance burdens for taxpayers and their advisers.

“These are not minor technical issues – they go to how the system will operate in practice,” Ms Wong said.

Fear & Greed Q+A today

On the government's backflip on CGT changes, and what it means for SMEs in Australia:

 

“The concern about the capital gains tax changes was that they changed the risk-reward balance.

 

If you're a small business owner trying to grow into a medium business owner, you're often not paying yourself that much, you're often not paying yourself super, you're investing everything you can into growing the business as your priority, with the intention that that will become your retirement fund and support your future.

 

That, in a sense, is your reward for all of the risk that you're taking now. These proposed tax changes change the risk-reward balance, which has been the underlying concern here.

Obviously the concessions and the changes to the thresholds alleviate that somewhat for small businesses with a turnover under ten million.”

The federal government has announced a partial backdown on its proposed capital gains tax changes, announcing that 2.7 million small businesses turning over up to $10 million would be eligible for a 50 per cent concession on CGT when their owners sold active assets.

 

The government also changed rules governing testamentary trusts used to bequeath assets to beneficiaries. They are to be typically exempted from the minimum 30 per cent tax on discretionary trust distributions. There are around 10,500 discretionary testamentary trusts in Australia.

 

Labor will also allow start-ups that meet an “innovative business” definition to retain the 50 per cent CGT discount for owners and employees with shares in the businesses, and to opt out of the inflation indexation CGT model.

Greed-o-meter

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Australian households are stretched to their limits. According to AMP, average household debt in Australia is more than double household income - well above other countries. This shows just how much households have extended themselves to buy a home, making them vulnerable to interest rate hikes or an economic downturn.

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