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Minters flags economic and fiscal highlights
MinterEllison has responded to the government’s mid-year economic and fiscal outlook 2019-20, released earlier this week.
Emma Musgrave
The government’s outlook signalled that the budget is set to return to surplus in 2019-20, however, as Minters flagged, the project budget surplus in 2019-20 and over the next four years is set to reduce.
“While the MYEFO signals that the budget is scheduled to return to surplus in 2019-20, the headline announcement was the reduction in the projected budget surplus both in the 2019-20 year (from $7.1 billion to $5 billion), and over the next four years (from $45 billion to $23.5 billion). This was driven mainly by the reduction in revenue collected, stemming from previously announced income tax cuts, a slowing market economy and the ongoing effects of drought and bushfires.
“Despite this reduction, the underlying cash balance is expected to improve from a broad balance of -$0.7billion in 2018-19 to a surplus of $5 billion in 2019-20.
Although no new tax measures have been announced as part of the MYEFO, we take this opportunity to revisit some of the key policy decisions taken (and in some cases implemented) by the government since the 2019 Pre-Election Economic and Fiscal Outlook (PEFO).”
Economics
When it comes to economical considerations in the outlook, the team from Minters explained a $5 billion underlying cash balance is expected in 2019-20, with surpluses continuing over the remaining years of the forward estimates to cumulate to $23.5 billion.
“As foreshadowed, the government has announced additional funding in response to the severe drought and bushfires, and the MYEFO highlighted the impact of these domestic conditions on slower than expected growth,” the team said.
“Other key priority areas include an additional $4.2 billion spent on infrastructure over the forward estimates, and further support for essential services such as aged care, in light of the ongoing royal commission.”
Furthermore, expected tax receipts have been revised down by about $2.2 billion in 2019-20 and $30.7 billion over the four years to 2022-23.
“This downward revision in the immediate term is driven largely by a reduction in collections from superannuation fund taxes and GST, reflecting foreign exchange losses and reduced consumer spending,” the Minters’ team said.
“In the medium term, downgrades to the forecasts for individual taxes, company tax and GST all contribute to a reduction in revenue collected, which is underpinned by average forecast wage growth and lower corporate profits.”
Corporate tax
In terms of corporate taxation, the government is set to remove the tax on refunds of large-scale generation certificate shortfall charges.
“The government will amend the Renewable Energy (Electricity) Act 2000 (Cth) (Renewable Energy Act) to ensure no tax is payable on the refund of large-scale generation certificate (LGC) shortfall charges. The proposed measure will apply to refunds relating to all LGC shortfall charges including those charges already paid,” the team at Minters’ said.
“Currently, under the Renewable Energy Act, liable entities (usually energy retailers) must surrender LGCs to meet their legal obligations or pay a non-deductible shortfall charge.
“The amendments allow for entities, liable to pay the shortfall charge, to apply to have the charge refunded if they surrender the outstanding certificates within the allowable refund period.
“This measure is estimated to have a cost to revenue of $70 million over the forward estimates period.”
Emma Musgrave
Emma Musgrave (née Ryan) is the managing editor, professional services at Momentum Media.
Emma has worked for Momentum Media since 2015, including five years spent as the editor of the company's legal brand - Lawyers Weekly. Throughout her time at Momentum, she has been responsible for breaking some of the biggest stories in corporate Australia. In addition, she has produced exclusive multimedia and event content related to the company's respective brands and audiences.
Prior to joining Momentum Media, Emma worked in breakfast radio, delivering news to the Central West region of NSW, before taking on a radio journalist role at Southern Cross Austereo, based in Townsville, North Queensland.
She holds a Bachelor of Communications (Journalism) degree from Charles Sturt University.
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