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Welcome to the September edition of BDO Kendalls' Tax News. This month we highlight a number of recent decisions and take a look at the new Australia/Japan tax treaty, the 2008-09 Compliance Program, and an upcoming review of the Australian taxation system.
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Review of taxation system commences
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In the 2008-09 Budget, the Government announced a comprehensive review of the Australian Taxation System. The review was to encompass Commonwealth and State taxes but would not consider the rate and base of the GST.
The review was also to consider the transfer system which effectively encompasses Government payments such as family assistance and pensions (there are around 40 cash transfers paid to Australians worth around $70 billion). The Review Panel is being chaired by the Secretary to the Treasury, Dr Ken Henry.
The Review Panel has now released a detailed discussion paper entitled ‘Architecture of Australia’s Tax and Transfer System’. The paper outlines the current state of play in Australia’s tax and transfer systems (including international comparisons) without making any recommendations in relation to required reforms. The aim of the paper is to generate discussion in relation to issues for reform.
The Government has stated the goals of its review are to:
- make the tax system more internationally competitive;
- reward hard work by removing disincentives resulting from the interaction between the tax and welfare systems; and
- simplify existing systems.
Some of the interesting facts contained in the paper include:
- There are 125 different taxes in Australia – 99 of these at the Commonwealth level;
- 10 of the taxes account for around 90% of all revenue collections in Australia; and
- Many taxes are levied on similar transactions by different Australian Governments with relatively little harmonisation across jurisdictions.
The Review Panel has called for submissions from the public as part of its overall strategy of consulting with the community. The submissions are due by 17 October 2008.
Once submissions have been received, the Review Panel will prepare a consultation paper which will be released at the end of 2008. This paper will provide a basis for further review by the Review Panel in 2009 which will include a further opportunity to provide submissions.
In making submissions, the Review Panel has recommended considering the following questions:
- What major challenges facing Australia need to be addressed through the tax-transfer system?
- What features should the system have in order to respond to those challenges?
- What are the problems with the current systems?
- What reforms do we need to address these problems?
The Review Panel is scheduled to provide its final report to the Treasurer by the end of 2009.
BDO comment
The Review Panel has an opportunity to recommend a fundamental redesign of the tax system in Australia. The last similar review conducted on behalf of the Government which led to structural changes to the tax system was the Ralph Review in the late 1990s. The Henry Review will be at least as important as the Ralph Review in guiding the future of the tax and transfer systems.
Other interesting points made in the Review’s discussion paper were that while Australia is the eighth lowest taxing country in the OECD, our company tax rate is above the average and there is a higher tax burden on capital income. These facts may give rise to subsequent changes in these areas. State tax reforms and the interaction with Commonwealth taxes are also areas which may receive attention in a bid to remove inefficient taxes such as payroll tax and stamp duty, and to harmonise State regimes should these taxes remain.
Another fundamental issue requiring attention is a way to overcome the complexity in the tax system and the associated compliance costs attached to complex tax laws. BDO will be submitting its views to the Review Panel about where improvements can be made to the tax system. Any readers who would like to provide input into this submission should contact their local BDO adviser.
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New Australia/Japan tax treaty
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The International Tax Agreements Amendment Bill (No. 1) 2008 was recently introduced into Parliament and contains a modernised tax treaty between Australia and Japan. Read more |
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Guidance on dividend exemptions
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The ATO has issued two Tax Determinations dealing with the exemption from tax of certain dividends paid by a non resident to a resident company Read more |
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Company reinstated for Part IVA
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The Federal Court has ordered that a company should have its registration reinstated so that the Commissioner could make a Part IVA determination against the company Read more |
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2008-09 Compliance Program
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The Commissioner of Taxation recently released the ATO’s 2008-09 Compliance Program. The publication of the Compliance Program is part of the ATO’s policy of a more open and transparent Read more | | | |
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Tax Design Review Panel
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In February this year, the Government established a Tax Design Review Panel to examine ways to reduce delays in the enactment of tax legislation Read more |
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Issuing shares for assets/services
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The Commissioner has released Taxation Ruling TR 2008/5, which deals with the tax consequences for companies of issuing shares in return for the acquisition of assets Read more |
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'Climate Ready Grants' program
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The ‘Climate Ready’ program is a competitive based grants program delivered by AusIndustry. It aims to encourage growth and successful innovation Read more |
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