2012 / 2013 Budget Response
While the 2012-13 Federal Budget contained some benefits for tourism these were tempered by a combination of tax increases and omissions that represent a missed opportunity for the industry as a whole.
The Deputy Chair, Wayne Kayler-Thomson and Chief Executive Dianne Smith were in Canberra yesterday and provide the following views on the key areas of the budget relevant to tourism and events and implications for our industry.
• Allowing companies to carry back tax losses so they get a refund against tax paid in the previous year in 2012 13, increasing to two years from 2013 14, providing a tax benefit of up to $300,000 per year.
• From 1 July 2012, all small business (whether they are run by sole traders, partnerships, trusts or through companies) will be able to immediately write off each eligible business asset they buy costing less than $6,500 per asset.
VTIC welcomes these tax relief initiatives for business but notes the scope is limited as there is a delay inherent to the loss carry-back initiative, and the loss carry-back only applies to those businesses structured as a corporation, meaning that many SMEs will be ineligible.
More importantly, the scrapped one per cent reduction in company tax was a major disappointment for the business sector as a whole. In its budget response statement VECCI Chief Economist, Steven Wojtkiw notes, “The likely benefit to industry associated with the loss carry back initiative (approx. $700m over 4 years) is substantially lower than benefits that would have resulted (approx. $4.8B) if the originally-proposed company tax cut had proceeded.”
In addition, VTIC is concerned that the increase in taxes on foreign investment is likely to make attracting investment in tourism product less attractive by the doubling of withholding tax, to 15%, applicable to ¬foreign investment in managed investment trusts.
SMALL BUSINESS SUPPORT
• The Government is extending its Small Business Advisory Service program with $27.5 million over four years for small business advice and assistance.
• The Government is also establishing a Small Business Commissioner who will be a point of contact for small business services and information.
These are good support initiatives for small business but how these will be implemented remains to be seen as access to federal programs can sometimes be problematic, especially for small businesses. It is hoped that the Small Business Commissioner will be able to affect positive change in term so of red-tape reduction and other productivity improvements.
• $61 million earmarked over four years to establish an Asia Marketing Fund to support the promotion of Australia to growing markets in Asia and intended to encourage investment by the private sector and state and territory governments. The Asia Marketing Fund will be administered by Tourism Australia.
This is recognises the importance of emerging Asian markets such as China and India and the need to establish and promote Australia as a priority destination among these markets. The first year of the fund, (2012-13), will deliver A$8.5m followed by A$14m, A$17.5m, and A$21m over the following three years out to the 2017 financial year.
However the costs of this fund will be met by the $8 increase in the Passenger Movement Charge, from $47 to $55. Given that Government estimates the PMC will raise $610 million over the forward estimates period, the allocation for the Asia Marketing Fund represents a mere 10 per cent of projected PMC revenue. VTIC will advocate for a greater proportion of the PMC tax revenue to be directed at tourism-related projects, as the Budget is silent on where the additional PMC revenue will be allocated.
VTIC questions the rationale of this increased charge and is concerned about it reducing Australia's competitiveness.
• For all occupations not on the National Skills Needs List, existing employees who are converted to apprenticeships/traineeships will not attract the $1500 commencement incentive – but $500 will be added to the completion payment.
• Commencement payments will be deferred from 3 months to 6 months.
• $19.4 million for training newly graduated apprentices in business and finance skills.
The additional funding for up-skilling of new graduates is welcomed; however, as many service sector occupations are not on National Skills Needs List the abolishment of the commencement incentive may result in reduced investment by employers in training, which in turn could have a negative impact on the quality of service delivery in the hospitality, tourism and retail sectors.
• $2.9 million over two years to improve support for the Australian wine industry including $2.1 million to the Wine Australia Corporation for marketing and $0.8 million in improvements in data and research.
Another welcome investment in a key sector related to tourism but a relatively small contribution in the context of the wine industry nationally.
The investment of $10 million for a new community sports centre in the Olympic Park Precinct and $20 million to Museum Victoria for preservation and promotion of the Royal Exhibition Building in Melbourne is positive news to both the tourism and events industries in Victoria. VTIC is pleased the government has recognised the importance of our sporting and cultural facilities as valuable tourist attraction and events facilities.
However Victoria missed out on new infrastructure funding for vital Victorian major projects such as the Melbourne and Avalon Airport Rail Links, East-West link and the Metro Rail project, but did receive $12.5 million for the installation of freeway management technology for the West Gate Freeway. It is hoped that this will improve traffic flows along the Freeway, which should be of particular interest to tourism operators who frequent the Great Ocean Road and other destinations in the State’s west.
Overall, from a business and tourism perspective the budget does little to stimulate tourism competitiveness and growth. Some small wins were overshadowed by increases in other areas and in some cases, key areas such as infrastructure and wide-spread tax reform were overlooked. In the context of the impending carbon tax and increased superannuation contributions, the budget has not helped to lower costs to the industry. The tourism and events sectors will need to continue to be innovative and creative in order to ensure longevity and sustainability in the face of economic and political uncertainty both at home and abroad.