TAX REFORM UPDATE

Dealers will be aware the Government is currently conducting a review of Australia’s tax system through the Tax White Paper (TWP) process. As a result of strong public response to retirement incomes including key interactions between the age pension, superannuation, taxation and employment, the Government extended the date for submissions to 24 July 2015.

The Government will reflect the community’s views in its options (green) paper, which will set out draft reform proposals in the second half of 2015. After consideration of community views on the options paper, the Government will outline its plan for a better tax system prior to the next election.

AADA can only assume that it will be business as usual with the swearing in of our 29th Prime Minister, the Hon Malcolm Turnbull MP and subsequent cabinet reshuffle.

In the meantime, a number of the major accounting firms have expressed their views on the need for reform in certain areas. KPMG is sponsoring the AFR Tax Reform Summit in Sydney in late September and speakers include current Treasurer, the Hon Joe Hockey MP and Shadow Treasurer, the Hon Chris Bowen MP.

Deloitte Australia is launching two reports on Mythbusting tax reform. The first report discusses fiscal drag (bracket creep), GST and company tax, and; and considers some myths and facts that surround these contentious topics.

The Deloitte report makes the point that “The GST is widely considered the ‘third rail’ of Australian politics – touch it, and you get electrocuted.

Myth 3: GST hits the poor, and a wider GST base would be a double blow for the poor, as they spend a bigger share of their outlays on ‘essentials’.

Mythbuster: It “ignores the bleeding obvious: that we can raise pensions and benefits and tweak the personal tax system to keep the less well-off at least no worse off than now.”

With regard to company tax rate, both AADA and Deloitte agree that many OECD countries and a number of our Asia Pacific trading partners have lower rates of company tax, and this may lead to a perception that Australia is not an attractive place for investment.

The Tax and Transfer Policy Institute, Crawford School of Public Policy, ANU College of Asia and the Pacific in its research paper titled “A stocktake of the tax system and directions for reform: five years after the Henry Review” in February 2015 concluded at page 84:

“Tax reform has the potential to enhance Australian economic prosperity and support income-enhancing investment, innovation and productivity growth in Australia. It can also contribute to improving fairness and resilience of the system for the future.”

AADA awaits the release of the Government’s Green Paper on tax reform.

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