Pureplay and multichannel retailers are set to get a boost from last night’s Federal Budget announcement, as personal income tax cuts will give consumers more money in their pockets to funnel back through the retail sector.
The Turnbull Government has announced a throwback of around $13.4 billion in tax savings for low and middle-income earners. Consumers are tipped to save $530 per annum under the plan, which is due to be rolled out from July 1, 2018.
The National Retail Association (NRA) has welcomed this change, claiming it will help kick-start the Australian retail industry.
“The NRA welcomes the Government’s announcement to cut personal income tax for those earning below $87,000 per year,” Dominique Lamb, the CEO of NRA said following the Government’s announcement.
“The more money that ordinary Australians have in their back pocket the more money they have to spend on items ranging from groceries to personal accessories and clothing.”
Lamb believes this tax cut has come at a good time for retailers, after figures released by the ABS prior to the budget broadcast illustrated the challenging conditions businesses in the retail sector are currently navigating.
The income tax cut is set to be rolled out as a lump sum payment that low to middle-income earners will receive after they lodge their tax returns. The proposed tax reform is also expected to provide low-income earners with a taxable wage of $37,000 or less a benefit of $200, in addition to the existing low-income tax offset.
Small businesses have also received good news, as the treasurer plans to extend the instant tax write off that allows businesses with a turnover of up to $10 million per annum to claim a tax deduction for equipment costing up to $20,000.
“This deduction has made investing in new equipment easier for mum-and-dad small business owners and we are certain that it will continue to be beneficial to retailers,” Lamb said.
If supported, broader tax cuts to business as a whole is expected to have a positive run-through effect on the retail sector, as Lamb believes it will “help to increase employment opportunities across the industry”.
Russell Zimmerman, the executive director of The Australian Retailers Association (ARA) has a slightly less optimistic view of the Government’s latest budget announcements, believing the cuts should include all tax brackets, and be implemented sooner if consumer discretional spending is to increase.
“With this morning’s March retail trade figures showing a 3.15 percent trade growth year-on-year, retailers are still expecting the company tax rate to be lowered to sustain growth in the market and overall economy,” Zimmerman said.
However, the ARA has spoken positively about the Government’s $75 billion infrastructure investment to metro and regional areas, which is expected to improve consumer access as well as the efficiency of freight and logistics.
“Retailers are looking forward to major infrastructure projects such as the Melbourne airport rail link, Sydney’s rail freight corridor and Hobart’s new river crossing being implemented and completed as these long-awaited developments will increase consumer access and retail growth,” Zimmerman said.
As a whole, experts believe the budget will have positive ramifications on the retail industry, but as Zimmerman said, “the Government needs to develop a real plan to put Australia back on a track to zero debt and long-term lower taxes to ensure the longevity of Australian retail”.