Thursday, June 2, 2011

My blog site is moving

As of 2 June 2011, all my new blogs will be posted in the Institute’s new myCommunity section.

To follow my blog at its new location, I invite you to login to this exciting new online resource for Institute members and finance professionals.

I look forward to hearing your views on future blog posts in myCommunity.

Regards, Yasser El-Ansary.

Monday, May 30, 2011

Reducing emissions = carbon price + other tax changes

The Prime Minister’s Multi-Party Climate Change Committee will soon begin to release further details about the carbon pricing mechanism that is planned to start from July 2012. We know that the initial three to five year period of the mechanism will be based on a fixed carbon price, and a market-based fluctuating pricing mechanism will be implemented thereafter, but beyond that, a lot more detail is required before we can fully understand the whole policy initiative.

But the implementation of a price on carbon - whether fixed or fluctuating - will not achieve the desired outcomes on its own.

To complement the pricing mechanism, the federal government will need to give consideration to the role that other tax policies should play in the future as part of the big picture policy.

One area to consider could be how to provide incentives for businesses and workers to move to regional areas where new large-scale renewable infrastructure might be built. One strategy might be to provide an investment allowance or research and development concession for those businesses. This could be in combination with new zone tax offsets for workers to encourage them to move out of the cities to these locations. Bringing new businesses and workers to regional communities is a good thing at both an economic and social policy level.

If we are going to approach the climate change challenge comprehensively, then the government must put in place a big picture solution that encompasses a number of policy strategies.

Stay tuned over the next few weeks as the pressure builds in Canberra. The policy debate around the price on carbon looks set to climax soon.

Further information about the Institute’s position on carbon pricing will be available over the coming days.

Monday, May 23, 2011

Back to the trusts debate – again

The debate about whether or not family trusts should be taxed as companies is making headlines again.

Hot on the heels of the speech that Shadow Treasurer Joe Hockey delivered at the Institute’s National Tax Conference back in early April, in which he revived the debate on the taxation of trusts, it appears as though the political heat has been turned up within the Opposition. Many of you will remember this policy proposal was first raised by the Coalition in the early 2000s by then-Treasurer, Peter Costello. More recently, the Shadow Treasurer gave life to the idea again during his speech to the Institute a few weeks back. On both occasions, the policy proposal has lasted the political equivalent of about five minutes. There’s simply too much to lose by seriously considering such a dramatic shift in tax policy, especially in the primary production and small business sectors, where family trusts are commonly found.

But despite that, we should still look closely at how trusts are currently used and whether there is an alternative type of flow-through structure that provides similar legal protections and estate planning opportunities as trusts do. Overseas, the concept of limited liability companies (LLC) is more commonly found than trusts. One of the main benefits of a LLC is that it allows a high degree of flexibility because profits are taxed in the hands of members – rather than at the corporate level. One of the other benefits is that the relevant tax laws would be less complex than those currently in place for family trusts.

While I don’t believe that we need to rush off and put in place LLC structures in Australia immediately, longer-term, we should seriously consider whether alternative structures such as LLCs might have a place in our future tax system. This seems like the perfect topic for dialogue at the upcoming October Tax Forum.

What do you think?

Wednesday, May 11, 2011

Government charts its course towards a return to Budget surplus

Canberra was buzzing yesterday as the Gillard Government handed down the 2011-12 Federal Budget to an audience of stakeholder groups, influencers and media commentators.

The 2011-12 Budget has unrealistically high expectations of the commodities boom to deliver major upward revisions to tax revenues over the four year period of the forward estimates.

One component of the projections that I am cautious about is our return to surplus in 2012-13, which has been built on quite optimistic assumptions about the strength of our non-mining sectors over the next two to three years. I think there is currently some 'softness' in the manufacturing, services and retail sectors that might continue for the next two years and beyond.

Overall, the budget contained very few surprises or measures that the public were not aware of ahead of Budget night.

Some of the most interesting announcements related to:
  • Changes to the tax laws to provide incentives for private sector investment in infrastructure
  • Reforms to the way in which fringe benefits tax is applied to salary-sacrificed motor vehicles
  • The abolition of the low income tax offset for non-earned income distributed to minors.
All of these measures have policy merit in different ways and should therefore be supported.

One measure absent from the Budget was the creation of a permanent natural disaster relief fund, which is what the Institute had recommended to the government in order to alleviate the need to implement one-off taxes like the recently legislated flood levy. The government still has an opportunity to consider this advice ahead of the October tax forum.


Monday, May 2, 2011

It’s that time again; the federal budget is nearly here

There’s little over a week to go until the federal government opens up the nation’s accounts for everyone to see for yet another year. The federal budget is due to be handed down by the Deputy Prime Minister and Treasurer, the Hon. Wayne Swan MP, at 7.30pm on Tuesday 10 May in Canberra.

Expert commentary has already begun to reveal the high points of the story that is likely to be told on 10 May. The recent natural disasters across Australia will have a twofold impact on the budget: firstly, tax revenue collections will be down on expectations because many businesses will not have made the sort of profits they would have expected. Secondly, the federal government will have to meet unbudgeted costs associated with the rebuilding of lost or damaged infrastructure across various states.

As you are aware, the Prime Minister announced in January that from 1 July this year, a temporary one-year flood levy would be applied to all taxable incomes above $50,000 for the year. The levy is intended to help offset some of the infrastructure costs that will be borne by the federal government.

In the Institute’s budget submission earlier this year, we put forward the argument that we should avoid resorting to one-off tax increases to meet unplanned – but not completely unexpected – costs associated with natural disasters such as floods and bushfires. We argued the case for the creation of a permanent natural disaster relief fund, so that one-off tax increases can be avoided in the future.

We also recommended the government consider the introduction of a special investment allowance for disaster-affected businesses to encourage them to reinvest in plant and equipment damaged or lost during the natural disasters. While this would cost money, if calibrated well it could effectively pay for itself by encouraging more business activity and profits, which would lead to more taxes being paid.

There has been other speculation emerging in the last few days about what may or may not be in the budget. Two things appear likely:
  • A crackdown on the tax rules that apply to trust distributions to minors
  • Another attempt to put in place a phased means-testing of the private health insurance rebate for those earning more than $75,000 per annum.
The speculation will no doubt continue up until budget eve. But in the end, the only thing that’s certain is this: The Treasurer’s announcement on 10 May will only start the process – of course, Parliament will be required to debate and approve the proposals when it comes together in a couple of weeks’ time. We can all enjoy the political fireworks.
The Institute will keep you informed of all the latest information relating to the federal budget. Check our website for up-to-date information.

Monday, April 18, 2011

Time to give consumers more protection

Last Friday the Assistant Treasurer, Bill Shorten, released the Discussion Paper he referred to at our National Tax Conference last week, exploring the merits of granting professional accountants access to a form of legal privilege over the tax advice they provide to their clients.

For those of you following this policy debate, you’ll remember that in 2008 the Australian Law Reform Commission handed down a report called Client Legal Privilege in Federal Investigations, which concluded that a new form of legal privilege, tax advice privilege, should be created under statute and granted to professional accountants. Successive government ministers since the time of that report have shied away from tackling the issue and taking it forward. But fortunately, the Assistant Treasurer has decided that it’s time to dust-off the report and test the merits of the proposal.

The Discussion Paper explores the genesis of the policy proposal, and acknowledges some of the arguments both for and against implementing a new tax advice privilege.

In essence, the substance of this issue really boils down to one central policy question: should consumers have access to the same legal protections and safeguards regardless of whether they seek tax advice from a lawyer or an accountant? If the answer is yes – and I believe it is – then we must direct energy towards identifying the best way to implement a model that delivers on that policy objective.

Over the coming weeks the Institute will be working closely with its members, as well as the legal profession, to discuss the proposal and a present sensible way forward to implement the changes. Please feel free to post a comment with your thoughts or suggestions on this issue.

This could mark the beginning of one of the most significant changes to the way in which Chartered Accountants provide tax advice - and in the end, it's taxpayers who stand to gain the most.

Monday, April 11, 2011

Talking tax: professional privilege, trusts and ATO collaboration

You have probably heard about our exciting couple of days at the National Tax Conference in Melbourne last week. High profile presenters and tax experts generated quite a bit of dynamic debate and discussion!

Highlights from the two days included:
  • A speech by Assistant Treasurer Bill Shorten, where he announced that the federal government is to release a discussion paper on professional privilege for accountants. This is an issue that we at the Institute have been advocating for some time, and it was great to see Minister Shorten acknowledging the role that professional accountants play in the community
  • Shadow Treasuer Joe Hockey’s lunchtime address, where he generated a lot of controversy amongst delegates and in the media by bringing up the  taxation of trusts.  He also discussed how he would simplify the tax system
  • Commissioner of Taxation Michael D’Ascenzo’s presentation, where he launched the ATO publication, Good Governance and Promoter Penalty Laws Guide, co-developed and designed with the ATO’s peak consultation forum, the National Tax Liaison Group, of which the Institute is an active member. The Commissioner talked about the importance of collaboration and how much he appreciated the Institute’s role in working with the ATO.
It was a great forum to hear from influential speakers about the big issues in the tax world, particularly in the lead-up to the federal government’s tax forum. More information about the sessions, including video recordings, will be available on the Institute website.

I’d love to hear your feedback or thoughts on some of the issues that came up!