[00:00:00] Host – Grace Jennings-Edquist: On Tuesday the 12th of May, Federal Treasurer Jim Chalmers handed down what may become one of the most debated budgets in years, delivered against a backdrop of global instability, persistent deficits, rising geopolitical tension and growing concern about the strength of the Australian economy. So what does it all mean for small businesses and the wider economy? In today’s Business Essentials, economist Professor Robert Brooks from Monash University unpacks the balancing act between inflation, growth, interest rates, housing affordability and recession risk. He also explores what it means for small and medium businesses. Then tax adviser Michael Jones, a partner at Forvis Mazars, explains the proposed changes to capital gains tax, negative gearing and family trusts. He also outlines the potential impact on investors, start ups and business owners. Together, they explore whether the budget builds long term resilience or simply shifts today’s pressures into the future. From SoundCartel, I’m Grace Jennings-Edquist, and this is Business Essentials.
Budget 2026 – Breaking down the economic impact
Our first guest is Robert Brooks, a professor of econometrics and business statistics from Monash University. The new budget contains measures aimed at supporting business investment and easing pressure on households. But there are also loud calls about inflation, productivity, recession and whether the government is doing enough to prepare the economy for what may come next. And for small businesses already feeling the squeeze. The question is whether the reforms make an economy already under pressure more difficult to navigate. Professor Robert Brooks, from the Monash Business School joins Nicole Goodman to discuss. She begins by asking what Australia’s biggest economic challenges are that this budget needed to address, and is it likely to succeed?
[00:01:57] Professor Robert Brooks: So I think there’s probably three main dimensions to it. It is really clear from compared to where we were at at the start of 2026, that the conflict in Iran has given us a whole series of economic challenges that the government wasn’t planning to have to address. Now, some of that’s clearly beyond our control, but some of the initiatives in the budget are in a response to that. So the budget did clearly have to address that. The second issue that the budget had to address is this long term structural deficit issue of, you know, how do you manage both taxation and spending? And then the third issue that the budget had to address is this question of the tax burden falling on households and labor income and labor income in both a wage and salary sense, and in a small business sense.
[00:02:48] Nicole Goodman: The government is still spending more than it earns, and that’s not expected to change for another decade. Does this budget do anything meaningful to address the structural problem, or does it effectively kick the can down the road?
[00:03:01] Professor Robert Brooks: So I think the budget responds really in two ways. On the taxation side, it’s a view that the tax burden that falls on labor income is currently too high, which I think is a reasonable enough view. And there’s a reframing of some additional taxation predominantly on on what you’d broadly describe as capital income. And on the spending side of the budget, it’s really clear that the big initiative areas are with respect to the future of the NDIS. Now, I think everyone agrees that the NDIS and spending has to move to a more sustainable footing as part of the social licence of that really important initiative. The issue on there is going to be in implementation. Can you do this in a way that works to bring spending to a more sustainable level, but continues to provide important supports to people who need it.
[00:03:56] Nicole Goodman: Rob, ahead of the budget, there was a lot of speculation about changes to capital gains tax and negative gearing. Now that we know what was announced, what do the changes mean for property prices and housing affordability in the real world?
[00:04:11] Professor Robert Brooks: Sure. So the government has made, you know, an initiative around both the capital gains tax and the negative gearing, and they’ve clearly pitched that as a housing affordability measure. Now, what most of the analysis tells us is that the effect of these changes are going to be to moderate the extent of property price rises by a small amount, but they are going to be an amount that does that. And the critical side of the housing affordability piece is also the material that relates to supply. So in and of itself, housing affordability is clearly not purely a demand problem. It is also a really important supply issue. So we’ve seen the tax mix changes. Think about demand and they will work to provide, you know, some moderation to demand. But supply remains critical. So the initiatives announced around infrastructure and the initiatives announced around, you know, some simplification and deregulation as it relates to construction are actually extremely important. The key matters that remain around housing affordability is about supply. Supply must be pivotally addressed as part of that. And so the tax changes have had a lot of rightly have had a lot of important highlighting, particularly given the pre-election commitments of the government. But it’s extremely important to address the supply side as well.
[00:05:36] Nicole Goodman: Is this a budget that the reserve Bank would welcome or worry about? And where do you think inflation and interest rates are headed over the next 12 months?
[00:05:44] Professor Robert Brooks: I think the bank has been really clear in what it has said in its announcements this year that it is concerned about demand pressure in the system. And it’s also concerned about government policy settings creating too much demand pressure and making the inflation settings more challenging for the bank and requiring more of a policy response from the bank. So what I think the bank would have been looking for is you didn’t want to see a situation where you had cost of living relief going that would create more discretionary spending. So on that ground, the budget has done that because, you know, the the tax offsets that are planned are delayed. So I think that’s a desirable thing. And the bank would have not wanted additional spending coming in. So by and large, if the spending that’s announced can be implemented well they are a positive situation in there. But I think on balance the Bank would think that we haven’t added to inflationary pressure. The challenge that the reserve Bank and the government faces, however, is that the big inflation risk Pressure in the system is not something that we can control, as is pretty clear in the budget scenarios. You know, we’ve got a base case scenario where oil prices are not going up significantly from where they currently are. Perhaps they moderate a bit, but they clearly don’t moderate back to where we were at the beginning of 2026 before the conflict.
[00:07:13] Professor Robert Brooks: But we have also got in the analysis, you know, a worst case scenario where oil prices are significantly higher. And in that scenario, inflation risk is much, much higher. And there is also more risk for economic growth and for unemployment in that scenario. That getting into a stagflation scenario is clearly the worst case scenario for the bank, because it makes it much harder to to fight inflation with monetary policy tools without having a bigger impact on economic growth and unemployment. So our challenge on that is, of course, that’s all outside of our control. So, you know, what would the reserve Bank want out of a budget? It would want a budget that doesn’t create additional inflationary pressure, because let’s hope we don’t end up in the worst case scenario. And the market pricing to date, you know, around oil and energy markets are not pricing being up in that worst case scenario either at the present point in time, but you need an insurance option that if things got into a more difficult situation, you don’t end up in that much more awkward stagflation situation to have to manage. I think on balance, there would be a comfort perhaps around, you know, the tax mix change and trying to think about labor income and more broadly defined and around some spending restraint.
[00:08:37] Nicole Goodman: Well, let’s talk a bit more about unemployment because it has remained surprisingly low despite high interest rates. Do you expect that to continue, or are we likely to see a softer labor market and rising unemployment over the next year.
[00:08:51] Professor Robert Brooks: The reserve Bank has really been very clear in saying we see a major risk on higher inflation, translating into higher inflationary expectations. And higher inflationary expectations are then really undesirable because they then come through into both prices and they also come into wages. Now, what I think is interesting about the higher inflation environment that we’ve had so far, and also in terms of the the reserve Bank changes, is we haven’t really seen a cycle of wage inflation and unemployment changes happening. So that, I think, is the risk that people are trying to manage really carefully. You don’t want higher inflation to become embedded in higher inflationary expectations, because those higher inflationary expectations become then embedded in higher wage inflation, and that higher wage inflation becomes a real challenge in the labor market In that particular setting. So I think that is really extremely important around the inflationary expectation setting. What has remained really interesting in the whole monetary policy setting. You know, we’ve probably been in now for the last 18 months is that that wage pressure hasn’t come in to the system perhaps as much as people had been concerned with. And I think that has been related to inflationary expectations perhaps not being as embedded into the system. There is some concern that those inflationary expectation issues are a genuine risk. And the longer we have international conflict and geopolitical tension, and the longer we have higher oil prices, the more we have that risk. So I think our risk around that remains for a period of time. But the base case scenario forecast is that we’re not ending up in a dramatically different wage inflation or unemployment situation.
[00:10:51] Nicole Goodman: What does that mean then, for wage pressure and hiring for small businesses.
[00:10:56] Professor Robert Brooks: At the minute? A lot of the policy settings are about managing that inflationary expectations setting. The other dimension to this around small business hiring and small business situation is that while a lot of the tax mix changes are clearly focused on particular horizontal equity issues, in particular housing affordability issues, we do know that small businesses are corporate structure makes use of of the trust arrangements as well, and they make use of the trust arrangements for, for really good business reasons. So there is a risk on the hiring situation that as people work through the implementation piece of that, that that has impacts. Now there’s, there’s been some post-budget, you know, analysis of that. And there’s clearly been some consideration of transitional arrangements around that. And I think that’s why the trust changes are on a different timeline to the negative gearing and the capital gains tax changes, because there is a recognition that people in certain small business and family business settings are going to have to think about their corporate structure and how that’s worked on.
[00:12:12] Nicole Goodman: Does this budget give us the tools, do you think, to avoid a recession or has it made the risk worse?
[00:12:18] Professor Robert Brooks: Our risk of recession is largely still going to be driven by international factors. So I don’t think the budget in and of itself alters that. What the budget needs to have done is made sure that we’re not in a situation where if international factors become worse, we’ve got less tools to be able to manage that situation. So I think in that sense, you know, our recession risk will largely be driven by external factors that we can’t control, what the budget and what our economic policy settings must do is give us better capacity to be able to manage that if it occurs. So I think, you know, not adding inflationary pressure, having some attempt to address spending issues, thinking about tax reform genuinely, which is actually, you know, been the interesting thing out of both the budget and the post budget reply, we’ve actually now got a tax reform discussion happening in a much more meaningful way than we had previously. That’s actually a really desirable thing that that is actually a good thing to have have happened. Recession risk remains for us something that has to be managed, but it’s an externally driven factor.
[00:13:30] Nicole Goodman: Is there a case, do you think that a mild recession would be good medicine? In other words, do we actually need a recession?
[00:13:37] Professor Robert Brooks: Well, you know, I’m of the age where I can remember recessions that we had to have to use a famous treasurer term from a very long time ago. So, you know, the view on those recessions that we had to have. If you think back to that time, you know, the view at that time was that Australia, like a lot of other economies, had inflation, hangover and inflationary expectations that were too high out of the 1970s shocks and hadn’t had to be managed out of the system. And so what happened, you know, in the US a bit earlier, but in in Australia a bit later were a lot higher interest rates to drive down inflation and to drive down people’s inflationary expectations. And painful though those policies were, they were successful in driving down inflationary expectations. And it got, you know, Australia and the US and Europe and lots of other parts of the world into a much better inflation management situation for a longer period of time. That’s why I think the reserve Bank and the focus of a lot of others is on this managing inflationary expectations situation. You only need to get into those scenarios when you’ve got an inflation problem that’s fed into higher inflationary expectations. We’re not in that setting at the present point in time, but we also don’t want to be in that setting either, because you cannot get out of that situation without it being a lot of economic pain for consumers and for business and for the country. That’s not a situation that we want to be in. So all our policy setting should be around managing inflation so it doesn’t become embedded in inflationary expectations.
[00:15:25] Nicole Goodman: For a while now, it’s felt like small businesses are really being squeezed from every direction. What are the likely flow on effects from this budget for small and medium businesses?
[00:15:35] Professor Robert Brooks: So I think it certainly is correct to say that, you know, small and medium businesses have faced a lot of cost pressures in recent times. So, you know, why have they faced those cost pressures? So part of that cost pressure more recently has been, you know, clearly higher distribution and freight costs associated in part with oil price shocks and also associated in part with efficient functioning of freight and distribution markets. So in terms of that, we’ve seen a budget initiative and we’ve pretty much seen a bipartisan position to say that we’ve got to have greater fuel security in terms of fuel supply. So I think that’s a desirable thing. So that clearly helps with that side of it. You know, all that said, ultimately, fuel costs are driven by global markets that are beyond our control. And the better long term outlook on that is reduced geopolitical tension and an absence of conflict. But we can’t control that bit of it. But we can control is how our markets function. So that’s in a better space than it was immediately after the conflict. So that’s a desirable thing. The second issue we’ve seen, which has been really important for for small and medium businesses, has been energy costs for a period of time. So we know energy costs are really important.
[00:16:51] Professor Robert Brooks: After the Russia, Ukraine conflict, we got into a really difficult situation in terms of a significant gas price spike, and that fed through into much higher energy costs for everyone. What we have seen is a policy now about getting a better policy around the functioning of the domestic gas market, and also around behavior around more domestic supply. So I think that is a desirable thing. The other thing we’ve seen out of the budget is a view that, you know, we need to reduce some of the regulation burden on small business, and we need to reduce some of the red tape. Reducing regulatory burden and compliance costs is clearly a desirable thing. The other budget piece that we’ve ended up with, I think that’s really been interesting. And that’s now actually become bipartisan. Is this instant asset write off arrangement that help facilitate business investment. So we’ve pretty much now got a situation out of, you know, policy up to the budget, out of the budget policy and out of the opposition budget reply, where we’ve now got a bipartisan view, that instant asset write off is desirable. The fact that we’ve now got a consensus that having this is a desirable matter, and it does facilitate business investment.
[00:18:07] Nicole Goodman: It’s also true to say that small businesses live and die by consumer confidence. And most economists agree that Australia’s had a productivity problem for years. Where do you see real GDP growth heading over the next 12 to 24 months, and what will determine whether businesses feel genuine improvement?
[00:18:26] Professor Robert Brooks: So it is certainly the case that consumer confidence is lower than it was. And consumer confidence being lower than it was, is not desirable for for GDP growth. And it’s not desirable for business activity more generally. So part of the hit on consumer confidence is clearly in terms of the fuel price shock. And it’s clearly in terms of some of the fuel distribution issues that we had, you know, in the period immediately after the commencement of the current conflict. So in terms of the fuel price shock issue, fuel prices are going to be driven by global factors. Those global factors are beyond our control. We would hope that the geopolitical situation and the conflict situation ends up better than it currently is in the second half of 2026, but we can’t control that. That said, the market pricing of that is still consistent with being some distance from a from a worst case scenario around that. No, it’s not back to the beginning of 2026 by any means. Sure. The other question where we’ve got into a challenge with the consumer confidence piece has been around people trying to work out where the reserve Bank is at with interest rate settings.
[00:19:36] Professor Robert Brooks: So it is pretty clear that if people think that interest rates are likely to continue, have to move up, and that that then does have an impact on people’s discretionary spending and confidence, that is a potential risk factor. That’s why this whole focus on the inflationary expectations material has been extremely important and a really critical thing to have been done. So that’s a desirable thing. The productivity issue has been a challenge for a significant period of time. And there’s been a lot of work done on on that. And, you know, how do you how do you unlock greater productivity? Now, all the comments in the budget have also been framed around, you know, let’s get productivity moving. Let’s try and cut burdens into the economy and let’s move to greater flexibility where we can have it to get in a better setting. They are extremely desirable policy outcomes to have, but they’ve got to be delivered at the point of detail around that productivity material.
[00:20:42] Host – Grace Jennings-Edquist: That was Professor Robert Brooks from Monash University.
Budget 2026 – Tax reforms, reshaping wealth, property and business
Now to the tax implications of the budget. Many are calling it one of the most significant tax reform budgets in decades, with sweeping changes to capital gains tax trust structures, negative gearing and the taxation of investment income. Supporters say the reforms are about fairness and housing affordability. Critics argue they fundamentally change the way Australians invest, build wealth and structure businesses. So what was actually announced and what does it all mean for investors and importantly, business owners? Joining Nick Schildberger to unpack the tax implications of the federal budget is Michael Jones, partner at Forvis Mazars. Nick starts by asking Michael about the government’s announcement to replace the use the 50% capital gains tax discount with cost base indexation.
[00:21:36] Michael Jones: It’s from 1st July 2027, so there’s a bit of a way before it starts. And at that point, the 50% CGT discount will be replaced with a system that adjusts the assets costs for inflation, which we used to have back in 1999. And that’s just called an indexation. But another really important change is that there’s a minimum 30% tax on capital gains tax after 1st July 2027. So instead of halving the gain, which has been the case for, you know, decades, the purchase price will be adjusted before inflation, before calculating the gain and then subjecting it to tax.
[00:22:18] Nick Schildberger: Is it going to be more complicated to calculate than a simple 50%?
[00:22:22] Michael Jones: Perhaps it’s just that it’s going to be paying more tax. This is a really significant thing. You know you watch debate and the language is about clamping down on the capital gains tax rate. And that’s it’s very biased language because the idea that you tax income and capital the same is really nonsensical. One with capital people make investments. There’s risk. There’s a long term before you get a return. If you do. And besides that, you’ve already paid tax on the money and then you invest it, right. And then to tax it as income is, I think, misguided. So the calculation is not the issue. It’s just taxing capital gains without understanding the consequences. I think it will make a difference to investment and it will make a difference to innovation in this country.
[00:23:12] Nick Schildberger: Now, you mentioned in passing there that the capital gains are also going to be subject to a minimum 30% tax. Is that going to be significant in practice?
[00:23:20] Michael Jones: Yes. And it will also include pre CGT assets. Right. So that if you acquired an asset before the introduction of capital gains tax in 20th September 1985 that assets been not subject to capital gains tax. That’s now changing. Well, 1st July 2027, it’ll change. So it’s 30% minimum, but it’ll be up to 47. So I’ll give you just an example that’s not too fanciful. And it’s about the biggest one is for startups and innovation, you know, so if someone starts a company, they’ve got a nominal $2 cost base. It’s all about their effort and their brains and their creativity.
[00:24:00] Nick Schildberger: Start with nothing.
[00:24:01] Michael Jones: Start with nothing, build it, build it, build it. And these are our clients. We have people that do this and it takes decades. And then if everything works, they sell for a lot of money, like a lot of money, but it might have taken them 20 years or more anyway, self, a lot of money. The indexation gets adjusted and they’re taxed at 47%. You know, that is, um, I think a real issue in this time of innovation that we’re living in, in this time where we want more productivity and creativity. And there’s an appetite for people to be doing things and being more hands on. That’s one side. Will it help housing? I don’t know. It maybe it will, you know, and maybe that’s a good thing, but at what price? At what price to the Australian community. So yeah, it’s quite a shocking change.
[00:24:50] Nick Schildberger: Yeah. The focus of the budget’s been about investing mainly in property and in shares. But it’s that investing in business that we don’t want to discourage as a country.
[00:24:59] Michael Jones: We really need it. And the language is about rewarding workers against others. And I find that unhelpful way to frame tax reform. So winners and losers, we’ll all be paying more capital gains tax winners, I guess you could say. If you already had an asset that you’ve owned for a number of years, that’ll be taxed at using the discount up to 1st July 2027, you may not feel like a winner, but Relatively. You’re a winner. The other winner, though, just quickly, is probably superannuation, which has not had any changes in this budget. So if you’ve got a self-managed super fund in particular where you can manage the assets, you know, you’ve got a tax rate of 10% on capital gains and that sort of tax rate for an investor, really over the long term enables compounding and is an encouragement for investment. And of course, you know, if you hold it till your retirement, it’s zero tax rate if your balance is less than 2 million. So there’s I think self-managed super funds are winners and losers is probably everyone else. And hopefully though there is some improvement in availability of housing.
[00:26:10] Nick Schildberger: Well that’s the hope. We will see. Another major reform is the restriction of negative gearing on residential property to new builds only. What impact is that going to have on investors and housing supply and also property prices.
[00:26:25] Michael Jones: Let’s just talk about how it works. So again, it’s from 1st July 2027. The negative gearing will be limited to new residences, as you said, but also there’s a carve out. So if you did own your property before the 12th of May, the budget night, then you can continue with the negative gearing. But going back to that future point, it’ll only be available for new builds. So if you buy a property after the 12th of May, you won’t be able to offset any loss against your salary. You can offset it against future rent and future gains, but not against your salary. And the pre made 12 properties are grandfathered. This is only for residential properties and the commercial properties and other classes such as shares. You can still do negative gearing.
[00:27:16] Nick Schildberger: So taking all these changes into account can I run a quick example by you. Yes. What if someone has purchased an investment Apartment a few weeks ago before the budget, but it hasn’t settled yet, so they’re kind of stuck in a bit of limbo between the two. What’s going to happen there?
[00:27:32] Michael Jones: Well, they’ll end up in the winner’s bucket because yeah, if you’ve entered the contract then it’s considered owning it for these purposes for tax purposes.
[00:27:40] Nick Schildberger: Okay. So they’re in the winner’s bucket. Excellent. Moving on to family and discretionary trusts. They’re now going to face a minimum 30% tax rate on distributions. And trusts have been central to many investment and business structures for decades. I think you said before back to the 1970s.
[00:27:57] Michael Jones: They started popular in the 70s. Yep.
[00:27:59] Nick Schildberger: So this is going to be a big change. Does it mean the end of trusts?
[00:28:03] Michael Jones: This is an enormous change. Like it’s certainly the end of an era. It may not be the end of trusts but an end of an era. And this is how we imagine it’s going to work. Like if you look at today, when a trust distributes income to beneficiaries, the beneficiaries are taxed at their marginal tax rates. If the trust accumulates income, it will pay 47% tax on that income. And that’s why generally trust income is distributed. Now what’s extremely common practice is you have something it’s called a corporate beneficiary or a bucket company. If the trust distributes to their corporate beneficiary, it’ll pay either 25% or 30%, depending on the activity of that corporate beneficiary and the franking credits that that trust might have will also flow to the company. Now, from 1st July 2028. So this is now a further year out. The trustee will pay a 30% minimum tax on the taxable income, including capital gains, right. The beneficiaries that receive that income individuals, not a corporate corporate rate will come back to that. Personal beneficiaries get a non-refundable credit for the tax that’s been paid. And the franking credits received from the trust can be applied against the trustee tax. So it means you can never distribute income to anyone. And it’s taxed at less than 30%. Excluded from that 30% tax are unit trusts, widely held trusts, super funds, deceased estates, charitable trusts and primary production income.
[00:29:46] Nick Schildberger: Now you mentioned corporate entities. There’s going to be a double taxation on distributions to those. So that’s a real double whammy isn’t it.
[00:29:54] Michael Jones: So in that example we talked about you can distribute to individuals or corporate beneficiaries. This change means you will not be distributing to corporate beneficiaries anymore. So from 1st July 2028 you’ll effectively be doubling the tax you pay when you distribute to a corporate beneficiary. So the trust earns the income, pays a 30% withholding tax, distributes to the corporate beneficiary. But the corporate beneficiary gets no credit for the trust tax. And then the corporate beneficiary might frank that income out to a shareholder eventually the end result it’s a double of the tax up to 60%. Maybe more on that trust income. Now I’m pretty sure they knew what they were doing and they meant to do it, but it’s a shocking move.
[00:30:43] Nick Schildberger: And that just means that you’ll have to find another way for your clients to be distributing their money.
[00:30:48] Michael Jones: This is day three of the New World. Uh, Nick, what the government wants is for people to move out of trusts and transfer into companies. We don’t know a lot of the detail, but there’ll be rollover relief to transfer assets to a company. But my consistent experience with government rollover relief is it’s often quite narrow. It doesn’t work well. I mean, this move is based on the idea that, oh, those people with trusts, they’re the bad people. And we’re going to close them down and do this. It’s not a sympathetic environment that takes into account that people have been doing this for 50 years. It’s this sort of broad labeling, and that’s a real problem.
[00:31:29] Nick Schildberger: And Michael, could you expand just a little bit on that rollover relief?
[00:31:32] Michael Jones: The idea is you’ve got a three year window to restructure, and it starts in 1st July 2027, and it’s to support taxpayers moving out of trust into companies or a fixed trust structure. So it’s only for three years. So we need to start thinking about that now. And there’s a whole lot of variety of things to weigh up. I guess the main point at this point in time is to understand these rollover relief. And you’ve got three year window to do it. And it starts 1st July 2027.
[00:32:02] Nick Schildberger: So taking all this into account, do these measures represent a broader philosophical shift in how the government wants to tax wealth and investment in Australia?
[00:32:10] Michael Jones: Yes. And the government needs to raise money. And it is taxing wealth more than it has ever before. The number of examples over the last couple of years at a state level and at a federal level, by doing it with capital gains, I think there’s significant bad consequences because it discourages people taking risk and making investments. It discourages people starting up things from scratch, being creative. That’s a real disappointment.
[00:32:43] Nick Schildberger: So for business owners and investors listening today, should they already be reviewing structures and investment strategies or is it too early before the legislation is finalized?
[00:32:53] Michael Jones: No, I think they should start be thinking about it now. And we will need more detail, of course. But incentive structures definitely. We’re already talking to clients about it. It’s an important thing to consider.
[00:33:06] Nick Schildberger: All right. There was a lot in the budget and we haven’t got time to cover it all. But I do want to just sort of quick fire round here for other business related tax measures from the budget. I just want a quick one line answer if you can. The first one refunds for tax losses for eligible start ups.
[00:33:23] Michael Jones: Okay, so that starts 1st July 2028. And first two years of a company’s life with a turnover of less than $10 million can get some money for their losses. Okay. Interestingly, the refund is capped at the FBT and Payg withholding paid on Australian wages, which means what they want to do is encourage employment rather than the usual sort of founder or contracting basis.
[00:33:51] Nick Schildberger: But that’s a good one because we did talk earlier about disincentivizing start-ups.
[00:33:55] Michael Jones: Yeah.
[00:33:56] Michael Jones: It’s a good one. How big? I don’t know. And I hope we’ll see more start up incentives. But look, incentives are always complicated and have strings. Why not just open it up, Nick?
[00:34:08] Nick Schildberger: Yes, yes, it would be nice. Uh, the second one, the return of company loss. Carry back rules.
[00:34:14] Michael Jones: Okay. This is available from 1st July 2026. Okay.
[00:34:18] Nick Schildberger: 2026?
[00:34:19] Michael Jones: Yes. And it’s a permanent measure. It’s for companies with less than 1 billion turnover. They’ll get a refund on tax paid in the prior two years by using current year losses. So they’ve paid tax on income for the last two years. They’ve got a loss. So it helps cyclical businesses you know like construction farmers, things like that. Winemakers. Yeah. It’s revenue losses only. And it’s capped by the franking account balance.
[00:34:48] Nick Schildberger: The third one the permanent $20,000 instant asset write off.
[00:34:53] Michael Jones: Okay great. I mean remember it’s been on for so many years. Look, of course it’s good. And our clients really like this, but, you know, $20,000, it’s starting to be a bit too small, you know, for capital expenditure. I think we want it to see more than that. And it’s welcome.
[00:35:11] Nick Schildberger: Start lobbying for $40,000 next year.
[00:35:12] Michael Jones: Yeah. More meaningful amount I agree. Let’s start talking about it.
[00:35:16] Nick Schildberger: And the last one in the phasing down of the electric vehicle FBT exemption.
[00:35:22] Michael Jones: Yeah. I’m glad you said phasing down because often these announcements you think, oh that’s great. This one. It’s great that there’s something there. But it is a phasing down. So currently you have a electric vehicle FBT exemption for the right sort of amount of cars. This is a transition. So it goes from 100% exemption to a permanent 25% fringe benefit tax discount from 1st July 2029. So the way it works is that the current rules remain until 31st March 2027, where vehicles less than or equal to $75,000, provided it’s before 1st April 2029, get to keep that 100% discount for the life of the arrangement going forward. From that, vehicles between $75,000 and the fuel efficient LCT threshold will get a 25% discount if they’re provided between one April 27th and 1st April 2029. Now, as a planning point, this rate is locked in at the start of the arrangement, so bringing forward Novated leases before April 2029 preserves the sort of full exemption for the full length of time of the lease.
[00:36:38] Nick Schildberger: So finally, Michael, looking at the federal budget as a whole, do you think it creates confidence for the small business sector or more uncertainty, and what should business owners be focusing on now as a result?
[00:36:51] Michael Jones: Well, I think that it doesn’t create confidence. I think it’s I think it’s a good one for small business. The changes that they’ve provided are quite small against a significant, very, very significant changes to do with trust and capital gains tax. And these are such important measures for our small businesses. So To uncertainty. I think it’s certainly bad for small business. So people, they’ve got to sharpen the pencil. They’ve got to start thinking it’s not the end of the world, it’s just another budget. But it has serious consequences. And you need to understand what it means for you and your business.
[00:37:29] Host – Grace Jennings-Edquist: That was Michael Jones, partner at Forvis Mazars. Thanks for joining us for this week’s episode. Follow Business Essentials Podcast across social media and head to www.BusinessEssentialsPodcast.au for more. Business Essentials is a SoundCartel podcast. Producers are Nick Schildberger, Nicole Goodman and myself. Technical production is by Pete Letts. I’m Grace Jennings-Edquist thanks for listening. We’ll bring you more business essentials next week.
