With the looming Federal Election, this year’s Budget is out of sync with the usual timing, and is being touted as one that Labor was not eager to deliver. But with the election clock ticking, and an inconveniently timed cyclone, the Government had little choice but to press ahead with handing down the Budget on 25 March.

The Pre-Election Playbook

We expect that the Government will want to tread carefully in the lead-up to the election. If you were hoping for wholesale tax reform or meaningful tax cuts, don’t hold your breath. Government spending is at an all-time high and direct taxes – personal and company tax – dominate our tax mix.

Australia’s direct taxes are currently sitting at 74% of total tax revenue – up 10% during the last quarter century to their highest level, and trending upwards.

Without substantial tax reform, the Budget is unlikely to contain any groundbreaking tax-related announcements. Instead, we anticipate the Government will tinker around the edges, possibly leaning on strategic incentives such as investments in training and education and AI. We may also see small adjustments to the instant asset write off for businesses.

We also expect further cost-of-living relief to be handed down, possibly in the form of energy bill subsidies and Medicare bulk billing support.

What we’d like to see

Australia’s tax system remains heavily reliant on direct taxation, a model that puts increasing pressure on income tax collections. A meaningful shift would involve reducing this reliance and instead broadening indirect taxes. However, with an election slated for this year, significant tax reform is unlikely to be on the Budget agenda.

What’s next?

With fiscal constraints tightening and an election approaching, this Budget is unlikely to be a blockbuster. Instead, we expect a cautious approach with targeted measures to drum up electoral support. Whether that will be enough to satisfy the electorate remains to be seen.

Contact Pilot

If you would like to discuss any of this in more detail, please contact Murray Howlett, Tom Howard or your Pilot advisor on (07) 3023 1300.

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