For an unforeseen second year of further outbreaks, the COVID-19 pandemic has challenged and disrupted us. As the working year draws to a close, this article reflects on what has been achieved from a tax policy and administrative perspective and what remains outstanding as we head into an election year.
Commonly, though incorrectly, credited with the words “Life is what happens to you when you’re busy making other plans”, the great John Lennon made the words famous in his 1980 song Beautiful Boy.
We thought there was light at the end of the 2020 tunnel; it turned out to be the light of an oncoming train in the form of the highly contagious and serious Delta variant of the COVID-19 virus. The health directives in response to the spread of Delta particularly in NSW and Victoria led to extended lockdowns, the economic impact of which will be felt for years to come. While the Commonwealth and state governments continue to provide financial assistance, affected businesses nationally are assessing and mopping up the damage done from extended closures as they reopen and turn their attention to 2022.
Now that more than 90 per cent of the Australian population aged 16 and over have now been fully vaccinated, and over 93 per cent have had their first dose, let us collectively hope that the beam we now see as 2021 closes is indeed the light at the end of this long and tiring tunnel.
The global spread of COVID-19 has, according to the World Health Organization at the time of writing, infected nearly 272 million people. This time last year, I reported in this column that nearly 66 million people globally had been infected. In this same period, Australia has jumped from fewer than 30,000 cases to nearly 239,000 cases since the start of the pandemic.
Economic response to the pandemic and how the professional bodies helped you and your clients
The total Commonwealth pandemic support to date is $337 billion (16.3 per cent of GDP), with direct economic and health support of $25 billion committed during the Delta outbreak. This includes more than $7.3 billion in business support payments and $12.6 billion in payments to individuals through the Commonwealth COVID‑19 Disaster Payment.
This financial support is, of course, distinct from that provided by the state and territory governments, the most significant of which was the NSW government’s commitment to the JobSaver program. The design, implementation and tapering of the program benefitted from weekly engagement meetings between the NSW government and the professional bodies working group, represented by The Tax Institute, Chartered Accountants Australia and New Zealand, CPA Australia and the Institute of Public Accountants. Having been extensively involved throughout 2020 with the Commonwealth’s JobKeeper program, the bodies were well-placed to advise and assist the NSW government for the duration of the lockdowns. Issues of concerns were able to be escalated and resolved; this led to more effective guidance for those businesses drawing on the financial support.
What does MYEFO tell us about the state of the budget?
The effectiveness of the Commonwealth’s economic response has most recently been measurable with the release of the Mid‑Year Economic and Fiscal Outlook 2021–22 (MYEFO) on 16 December 2021. The MYEFO provides a mid-year assessment of how the Federal Budget 2021–22 is tracking since it was released on 11 May 2021. The Treasurer, the Honourable Josh Frydenberg MP, announced that Australia has performed more strongly than any major advanced economy throughout the pandemic, and the federal government is committed to securing Australia’s strong recovery from the greatest economic shock since the Great Depression.
The underlying cash balance for 2021–22 is expected to be a deficit of $99.2 billion (4.5 per cent of GDP), a $7.4 billion improvement since the Federal Budget 2021–22. The improvement in the forecast budget balance for 2021–22 has flowed through to an improved debt outlook, which is projected to be lower in every year of the forward estimates than what was expected in May. The gross debt for 2021–22 is forecast to be $919 billion instead of $963 billion and $1.017 trillion instead of $1.058 trillion for 2022–23.
What happened this year in tax?
Notable tax policy and administrative developments this year include, but are not limited to:
What’s in the pipeline?
The following key measures are progressing as bills before Parliament but are not yet law:
The following key measures have been announced but are yet to be introduced as bills into Parliament:
What’s around the corner?
Let’s take a glimpse at what 2022 holds for the profession. The key issues that will feature on the landscape in the early part of 2022 include the following:
Inspector-General of Taxation and Taxation Ombudsman (IGTO) reviews
The IGTO is currently investigating:
Tax reform, the 2022–23 budget and the election
In July 2021, The Tax Institute released its ambitious endeavour, a 287-page paper to prompt discussion for the future of Australia’s tax and transfer system, The Case for Change.
The Tax Institute continues to prosecute The Case for Change and undertake further stakeholder engagement. This paper has positioned The Tax Institute as the thought leader when it comes to tax, and that ongoing thought leadership activity will continue throughout 2022.
The media often frames changes and reforms in terms of “winners and losers”. We need to desist from doing this and start approaching tax reform sensibly and constructively. We need to ready the community for change and encourage governments to have the political courage to bring about change. Our government should be approaching tax reform holistically in an apolitical manner, rather than continuing to make bandaids fixes and kneejerk reactions that are politically motivated.
It would be refreshing yet surprising if the Commonwealth government commits to tax reform leading up to the 2022 federal election. However, both major parties have a golden opportunity to create and sell their vision to the electorate as part of their 2022 campaigning.
The federal budget 2022–23, scheduled for Tuesday, 29 March 2022, will presumably contain a few electoral sweeteners but little that resembles structural reform of the tax system.
Final comment
The year 2022 will no doubt be another busy year in tax but, hopefully, one that allows more time and space to breathe than the past two years.
In this column last year, I acknowledged the Herculean effort of the profession as it rallied and rose to the occasion throughout 2020 to support clients and the Australian community in unprecedented ways. What surpasses “Herculean” in describing the profession’s efforts in 2021? The profession is weary, fatigued and, frankly, exhausted.
So lower your laptop lids, change your Zoom and Teams status to “offline”, and venture out to enjoy some warm summer days with your family and friends again. Recharge, relax and reward your hard efforts this year with some time out.
I wish all our members, the profession and the readers of this column a safe and relaxing festive season. This column will return in the new year.
Robyn Jacobson is the senior advocate at The Tax Institute.
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