PwC Federal Budget Analysis and proposed effects on future Asian investment

PwC has released in-depth analysis of the 2016-17 Federal Budget, showing efforts to transition to a more diversified new economy, including the opening of new markets in Asia.

Among other insights, PwC finds that the budget is poised to further monitor and encourage investment in foreign markets and trade links between Asia and Australia. A supplied summary of key insights across major measures announced in the 2016-17 Federal Budget is presented below:

  • The introduction of a new Diverted Profits Tax to tackle multinationals that seek to shift profits offshore. 
  • Increased funding for the ATO to establish a new taskforce to tackle tax avoidance.
  • A cut to company tax rate from 30% to 25% phased over 10 years, and companies with a turnover of less than $10 million will have a tax rate of 27.5% from 1 July 2016.  While not directly related to Indonesia, the reduction in tax rate may provide small businesses with additional capacity to explore opportunities to grow their business in Indonesia. 
  • Superannuation changes include an increase in tax on super for those earning over $250,000; a lifetime non-concessional super contributions cap of $500,000; and lowering the super concessional contributions cap to $25,000 per annum.
  • Address bracket creep by increasing the personal income tax threshold from $80,000 to $87,000 from 1 July 2016.
  • Investment in 2016-17 to promote Australia as an international financial technology (FinTech) destination.  Supporting the growth of Australian FinTech industry is expected to provide opportunities for financial services exports.
  • The Government expects Australia’s trade links to East Asia, where growth remains relatively strong, to provide continued economic growth.
  • The Government’s trade facilitation pilot programme, Australian Trusted Trader (ATT), has been fully funded to the tune of $69.9 million over four years. Named benefits to be implemented in forward years include periodic and streamlined reporting, duty deferral (e.g. monthly rather than on per consignment) and streamlined clearance in Australia and abroad. These benefits will reduce international supply chain compliance costs and provide greater certainty.  
  • Further, the Australian Foreign Investment Review Board (FIRB) has released revised tax conditions that will be applied to foreign residents seeking investment approval in Australia. These conditions include foreign investors being required to provide annual report to FIRB and agreeing to advise FIRB of a termination event.

The full PwC Federal Budget Analysis can be found here.

Senior Tax Manager, PwC