Treasurer Scott Morrison’s income tax reforms have been received well by the retail sector on the expectation that will they will provide a much-needed shot in the arm to consumer spending.
Harvey Norman chairman Gerry Harvey reckons the budget was good for business and is expecting a bump in sales after Australians get a boost in their tax returns from next July.
“It’s a good budget for business,” he told Inside Retail. “I’d be silly to say that tax cuts wouldn’t help.”
On Tuesday night the Turnbull government unveiled $13.4 billion in taxation reforms in its 2018 Federal budget, part of which is an income tax cut that could deliver up to four million low and middle-income earners up to $530 in savings.
The cut will be implemented as a lump sum via the tax offset program, which is thought to be particularly beneficial to higher ticket retailers such as Harvey Norman and JB Hi-Fi Group.
Former Myer chief executive Bernie Brookes said the Government should be applauded for fiscal policy that will assist all tiers of the retail sector.
“The budget is positive for retail as it puts more money in consumers pockets,” he told Inside Retail. “It will assist disposable spend and help all tiers in retail.”
“This combined with infrastructure investment which assists employment and consumer confidence plus tax reduction on equipment and expenditures for small business will all enhance the retail environment,” Brookes said.
Consumers will also benefit by $12.8 billion over four years from a decision not to raise the Medicare Levy by .5 per cent to 2.5 per cent.
The budget also confirmed the Government’s plans to close the GST loophole on imported goods valued at under $1000 which Harvey said was better late than never.
“My biggest beef with the Government has been that for 10 years they haven’t changed the GST [on low value imports] its taken them 10 years to do something they should have done a decade ago,” he said.
Australian Retailers Association executive director Russell Zimmerman said the closure of the GST loophole would deliver a much-needed competitive boost to local retailers from 1 July.
There is a view that the tax cuts could have gone further given the size of the windfall the Government had to work with, but Deloitte tax partner Kamlee Coorey said the changes had to be affordable.
“It was a balancing act,” she said. “We’ve got modest tax cuts phased in over time to ensure that we can afford it.”
Harvey also said bracket creep measures in the budget were positive but said the tax system still needed a “complete overhaul”.
“The way the tax system works is antiquated and needs a complete overhaul,” he said. “If you look after the middle class and job creators you are looking after the less fortunate.”