By John Storey, Tax Counsel, The Tax Institute
The tax rules affecting small businesses can make owners feel like they are driving a car where they can’t see out the windscreen, only the side windows and the rearview mirror: you know where you are, you know where you have been, but nobody seems to be able to tell you the direction ahead.
That uncertainty has a name in the tax world: ABUMs – announced but unenacted measures. And ahead of this federal budget, there are at least fourteen of them sitting in limbo, many affecting the small businesses that make up the backbone of the Australian economy.
Tax reform keeps failing in Australia; not always because the ideas are bad, but because they often don’t make it from announcement to legislation. Before we can have a serious conversation about the shape of future reform, we need to deal with the mess that’s already been made.
The broken promise economy
In the lead-up to the next federal budget, there have been various media leaks and partial announcements about tax changes that the government intends to implement. Some of these, like changing the 50% CGT discount, potentially limiting negative gearing, and new taxes on discretionary trusts, are controversial because it is alleged that such changes represent a breach of government election commitments.
But alongside that issue of trust sits a longer-standing one: why would Australian taxpayers believe that what is announced on May 12th will be what is enacted, or enacted at all?
If you run a small business, you probably already know Division 7A: the rules that often govern how profits are distributed, used and reinvested within private family groups. It’s one of the most complex and confusing areas of tax law, and it touches almost every private business in Australia.
You might have gotten excited when it was announced in the 2016-17 Federal Budget that reforms were coming to try and fix. A consultation paper followed in 2018. That’s eight years ago, and yet the fixes are still not legislated. In the meantime, business owners and their advisers have been navigating an area of law that everyone agrees is broken, without the promised repair.
That’s not an isolated case. Individual tax residency rules, affecting Australians who work overseas or internationally mobile professionals coming here, were flagged for reform in the 2021-22 Budget. A consultation paper arrived in 2023, but there’s been nothing since. The proposed deduction for education and training expenses was announced during the 2020-21 federal budget. It has not moved an inch beyond the press release.
These are not abstract policy debates. For small business owners and the advisers who serve them, stalled reforms mean ongoing compliance costs, ongoing uncertainty, and an ongoing inability to plan. Every year at budget time, more announcements are made, often just adding to the list and to the complexity of our tax system.
Trust is built in the details
There is a genuine appetite across the business and policy community for meaningful, long-term tax reform, reform that requires a longer time horizon, genuine community engagement, and a willingness to accept difficult trade-offs. But here’s the thing: you cannot build public trust in a long-term reform agenda if our governments can’t follow through on what has already been announced.
When businesses and individuals see measures promised and then forgotten, their reasonable conclusion is that announcements are political, not practical. That reform talk is designed to manage headlines, not deliver outcomes. And that cynicism, earned through repeated disappointment, is one of the biggest obstacles to the kind of durable, bipartisan reform Australia actually needs.
Rebuilding that trust starts with the basics. This Budget needs to do something deceptively simple: tell people what’s actually happening with the measures that have been on the table for years.
What we’re asking for
The Tax Institute has a clear call for the Treasurer. Before we talk about major new reform ambitions, address the backlog.
For each of the fourteen measures we’ve identified, the government should state clearly: this will proceed, with a timeline and legislation, or this is being abandoned, so taxpayers and their advisers can plan accordingly. Both outcomes are acceptable; it’s silence that isn’t.
Some of these measures genuinely matter for small businesses. The Division 7A reforms would simplify compliance significantly. The relaxation of residency requirements for self-managed super funds, which were announced in 2021-22, would help business owners who need to spend time overseas without unwinding their retirement savings. The monthly or quarterly lodgement of Taxable Payments Reporting System data could reduce the administrative burden on businesses using subcontractors.
Ultimately, we’re not asking for radical measures. These are practical improvements that have survived consultation and carry genuine support from the business community. And now, they just need to be legislated.
A credible reform environment starts here
For small business owners, these issues are not abstract; it’s felt in every compliance bill, every conversation with an accountant about rules that might change, every investment decision deferred because the tax treatment is unclear. Complexity has a cost, and that cost falls hardest on businesses without dedicated legal and tax teams to absorb it.
What would a trust-building Budget look like? One that matches ambition with accountability. One that doesn’t just announce new measures, but demonstrates it can actually deliver the ones it’s already committed to. One that treats the long list of unenacted measures not as political liabilities to be quietly buried, but as obligations that deserve resolution.
There is a pattern of inaction, of promising taxpayers change and not following through. Until the government resolves the long list of outstanding measures and establishes a process for ongoing system maintenance, we will not see real progress on the productivity agenda.
The appetite for reform is real. What’s missing is follow-through, and this Budget is the right moment to provide it.
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views, policies, or positions of Dynamic Business, its editors, or publisher. This article is intended for general informational purposes only and does not constitute legal, tax, or financial advice. Readers should seek independent professional advice before making any business or taxation decisions.
John Storey is an experienced tax lawyer, business leader, public policy influencer, and author. John is Tax Counsel at The Tax Institute, the leading forum for the tax community in Australia, representing more than 9,000 tax professionals and 40,000 business leaders.
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