Good to be with you for another month. I hope your business has made a positive start to 2024. Here’s what’s making news in terms of tax, the economy and the vehicles market:
Inflation falls to 4.1%
Household spending slows
ATO gives tax reminder
Motorists favouring SUVs
Read more below.
The Reserve Bank is nowhere near declaring victory in the war on inflation, but the data suggests we're closer to the end than the beginning.
Inflation fell to 4.1% in the December 2023 quarter, compared to 7.8% the previous year, according to the Australian Bureau of Statistics.
The Reserve Bank has forecast inflation will fall to 3.2% by the end of this year and 2.8% by the end of next year. However, in the minutes from the Reserve Bank's most recent monetary policy meeting, board members “noted that it would take some time before they could have sufficient confidence” that inflation would return to the target range of 2-3% within a reasonable period of time.
“Uncertainty about the outlook for the economy was high. Members also observed that the costs of inflation not returning to target within the envisaged timeframe were potentially very high. Given this, members agreed that it was appropriate not to rule out a further increase in the cash rate target,” according to the minutes.
“They also agreed that it would be important to continue to pay close attention to developments in the global economy, trends in domestic demand, and the outlook for inflation and the labour market. Members reiterated their resolve to do what is necessary to return inflation to target.”
Households significantly cut back on their spending during the 2023 calendar year, Australian Bureau of Statistics data has confirmed.
Inflation increased 4.1% during 2023, but household spending increased only 2.3% during the same period, which means the average household made fewer purchases.
Household spending varied markedly from state to state, rising faster than inflation in Western Australia and the Northern Territory (both 4.5%), but slower in South Australia (2.8%), Victoria (2.4%), Tasmania (1.9%), New South Wales (1.8%), Queensland (1.6%) and the ACT (0.8%).
The concern for businesses is that real household disposable income was actually negative (-1.5%) at the end of 2023, due to elevated inflation and interest rates.
However, as the cost-of-living situation improves, real household disposable income is expected to return to positive territory soon, reaching 2.5% in December 2024 and 3.5% in December 2025, according to Reserve Bank forecasts. If and when that happens, household consumption should rebound.
The Australian Taxation Office has reminded small businesses they may be eligible for tax concessions.
Businesses with an aggregated turnover of less than $2 million can qualify for capital gains tax (CGT) concessions, including the small business 15-year exemption, small business 50% active asset reduction, small business retirement exemption and small business roll-over. These concessions are available when businesses dispose of an active asset. If you have more than one capital gain for the year, you can apply multiple CGT concessions until each capital gain is reduced to zero.
Businesses with an aggregated turnover of less than $5 million can access the small business income tax offset. To be eligible, you must be operating as a sole trader, or have a share of net income from a partnership or trust.
Businesses with an aggregated turnover of less than $10 million can access the small business restructure roll-over. This allows businesses to transfer active assets from one entity to another without incurring an income tax liability.
Please consult a tax professional to check how these concessions would apply to your business.
Australia's automotive industry has raised concerns about the federal government's vehicle emissions scheme as motorists continue to favour relatively fuel-inefficient SUVs.
Motorists purchased 89,782 new vehicles in January 2024, which was 1.4% more than the previous January record (88,551) set in 2018, according to the Federal Chamber of Automotive Industries (FCAI).
SUVs accounted for 55.5% of those purchases, leading FCAI chief executive Tony Weber to warn that the government faced a challenge as it introduced its New Vehicle Emissions Standard from 2025.
“Industry wants an emissions standard that is ambitious without limiting the choice and increasing the cost of the vehicles Australians need and want,” he said.
“For more than a year the industry has been sharing information with the government about what is happening in the suburbs and regions around the country and the preferences and challenges facing families and businesses."
“Good policy must reflect reality rather than a desktop exercise that makes assumptions about what the world can look like, and we strongly urge the government to share its modelling with us.”