tag:blogger.com,1999:blog-67895123491928183292024-02-21T08:16:06.732+11:00Taxing IssuesYasser El-Ansary, Tax Counsel, Institute of Chartered Accountants in Australia, comments on the latest taxation issues in Australia and beyond.Yasser El Ansaryhttp://www.blogger.com/profile/07101514089471039780noreply@blogger.comBlogger30125tag:blogger.com,1999:blog-6789512349192818329.post-47159663068661167512011-06-02T11:37:00.000+10:002011-06-02T11:37:59.254+10:00My blog site is movingAs of 2 June 2011, all my new blogs will be posted in the Institute’s new <a href="https://www.charteredaccountants.com.au/secure/myCommunity/blogs/yelansary">myCommunity</a> section.<br />
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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.<br />
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I look forward to hearing your views on future blog posts in myCommunity. <br />
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Regards, Yasser El-Ansary.Yasser El Ansaryhttp://www.blogger.com/profile/07101514089471039780noreply@blogger.com0tag:blogger.com,1999:blog-6789512349192818329.post-44240858389893399262011-05-30T11:34:00.001+10:002011-05-30T13:37:18.963+10:00Reducing emissions = carbon price + other tax changesThe 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.<br />
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But the implementation of a price on carbon - whether fixed or fluctuating - will not achieve the desired outcomes on its own. <br />
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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. <br />
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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.<br />
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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. <br />
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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.<br />
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<a href="http://www.charteredaccountants.com.au/Industry-Topics/Sustainability">Further information</a> about the Institute’s position on carbon pricing will be available over the coming days.Yasser El Ansaryhttp://www.blogger.com/profile/07101514089471039780noreply@blogger.com0tag:blogger.com,1999:blog-6789512349192818329.post-2656290677720492332011-05-23T12:39:00.000+10:002011-05-23T12:39:17.906+10:00Back to the trusts debate – againThe debate about whether or not family trusts should be taxed as companies is making headlines again. <br />
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Hot on the heels of the speech that <a href="http://www.joehockey.com/mediahub/speechDetail.aspx?prID=1184">Shadow Treasurer Joe Hockey delivered at the Institute’s National Tax Conference</a> 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 <a href="http://www.charteredaccountants.com.au/News-Media/Media-centre/2011/Tax-trusts-as-companies-Hockey.aspx">speech to the Institute a few weeks back</a>. 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.<br />
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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.<br />
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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 <a href="http://www.treasurer.gov.au/DisplayDocs.aspx?doc=pressreleases/2011/020.htm&pageID=003&min=wms&Year=&DocType=0">October Tax Forum</a>.<br />
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What do you think?Yasser El Ansaryhttp://www.blogger.com/profile/07101514089471039780noreply@blogger.com0tag:blogger.com,1999:blog-6789512349192818329.post-64222128369596561872011-05-11T16:40:00.000+10:002011-05-11T16:40:17.238+10:00Government charts its course towards a return to Budget surplusCanberra was buzzing yesterday as the Gillard Government handed down the 2011-12 Federal Budget to an audience of stakeholder groups, influencers and media commentators.<br />
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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. <br />
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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.<br />
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Overall, the budget contained very few surprises or measures that the public were not aware of ahead of Budget night. <br />
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Some of the most interesting announcements related to:<br />
<ul><li>Changes to the tax laws to provide incentives for private sector investment in infrastructure</li>
<li>Reforms to the way in which fringe benefits tax is applied to salary-sacrificed motor vehicles</li>
<li>The abolition of the low income tax offset for non-earned income distributed to minors.</li>
</ul>All of these measures have policy merit in different ways and should therefore be supported.<br />
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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.<br />
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<div> </div>Yasser El Ansaryhttp://www.blogger.com/profile/07101514089471039780noreply@blogger.com0tag:blogger.com,1999:blog-6789512349192818329.post-31963392054721654852011-05-02T11:49:00.002+10:002011-05-04T12:42:39.074+10:00It’s that time again; the federal budget is nearly hereThere’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.<br />
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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.<br />
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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.<br />
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In the Institute’s <a href="http://www.charteredaccountants.com.au/Industry-Topics/Tax/Exposure-drafts-and-submissions/Submissions/Government/Submission-type/~/media/Files/Industry%20topics/Tax/Exposures%20draft%20and%20submission/Treasury/03%2002%2011%20BudgetSubmission_2011-12.ashx">budget submission</a> 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. <br />
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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.<br />
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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: <br />
<ul><li>A crackdown on the tax rules that apply to trust distributions to minors</li>
<li>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.</li>
</ul>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.<br />
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<em>The Institute will keep you informed of all the latest information relating to the federal budget. Check our website for up-to-date information.</em><br />
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<div></div>Yasser El Ansaryhttp://www.blogger.com/profile/07101514089471039780noreply@blogger.com1tag:blogger.com,1999:blog-6789512349192818329.post-21673950898295893742011-04-18T11:33:00.001+10:002011-04-18T11:48:07.971+10:00Time to give consumers more protectionLast Friday the Assistant Treasurer, Bill Shorten, released the <a href="http://www.treasury.gov.au/contentitem.asp?NavId=037&ContentID=2005">Discussion Paper</a> 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. <br />
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For those of you following this policy debate, you’ll remember that in 2008 the Australian Law Reform Commission handed down a report called <a href="http://www.alrc.gov.au/report-107"><em>Client Legal Privilege in Federal Investigations</em></a>, 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.<br />
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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. <br />
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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.<br />
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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. <br />
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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.Yasser El Ansaryhttp://www.blogger.com/profile/07101514089471039780noreply@blogger.com0tag:blogger.com,1999:blog-6789512349192818329.post-43079530330896427002011-04-11T12:06:00.002+10:002011-04-11T12:08:24.189+10:00Talking tax: professional privilege, trusts and ATO collaborationYou 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!<br />
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<div></div>Highlights from the two days included:<br />
<ul><li>A speech by Assistant Treasurer Bill Shorten, where he announced that the federal government is to release a discussion paper on <a href="http://www.charteredaccountants.com.au/News-Media/Media-centre/2011/Professional-privilege-for-accountants-now-on-the-national-agenda.aspx">professional privilege</a> 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</li>
<li>Shadow Treasuer Joe Hockey’s lunchtime address, where he generated a lot of controversy amongst delegates and in the media by bringing up the <a href="http://www.charteredaccountants.com.au/News-Media/Media-centre/2011/Tax-trusts-as-companies-Hockey"> taxation of trusts. </a> He also discussed how he would simplify the tax system</li>
<li>Commissioner of Taxation Michael D’Ascenzo’s presentation, where he <a href="http://www.charteredaccountants.com.au/News-Media/Media-centre/2011/Accountants-welcome-fairer-approach-to-tax-office-audits.aspx">launched the ATO publication, <em>Good Governance and Promoter Penalty Laws Guide</em></a>, 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.</li>
</ul>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 <a href="http://www.charteredaccountants.com.au/">Institute website</a>. <br />
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I’d love to hear your feedback or thoughts on some of the issues that came up! <br />
<div></div>Yasser El Ansaryhttp://www.blogger.com/profile/07101514089471039780noreply@blogger.com0tag:blogger.com,1999:blog-6789512349192818329.post-86109725535385415472011-04-04T09:02:00.002+10:002011-04-04T09:35:46.423+10:00Another big week lies ahead in the tax worldTax reform has been a big issue on the public agenda over the last month, following government announcements on the carbon tax, mining tax, national tax forum and the review of GST funding. <br />
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With that in mind, the Institute's inaugural annual tax conference, appropriately titled, ‘the Big 1’, couldn’t have come at a better time. It starts this coming Wednesday, 6 April in Melbourne. <br />
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The conference runs for two days and features speakers ranging from Assistant Treasurer Bill Shorten, Shadow Treasurer Joe Hockey, through to Tax Commissioner Michael D'Ascenzo and former High Court judge Michael Kirby.<br />
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With so many different initiatives underway right now in the tax arena, the conference presents a unique opportunity to debate and discover the tax reform priorities of conference speakers and delegates. Some of the areas that will be discussed include:<br />
<ul><li>The development of a tax reform blueprint for Australia, which is back on the agenda following the recent announcement by the Federal Treasurer of details on the national tax forum to be held in early October this year</li>
<li>The next steps in the introduction of the proposed new resource tax arrangements. The formation of a new Implementation Group (which I am fortunate to be a part of), and the commitment by the government to adopt all 94 recommendations from the Policy Transition Group, means the momentum is certainly about to gather pace again in this area. </li>
</ul>These recent developments, as well as a raft of others, will be comprehensively debated at the tax conference by a wide cross section of experts. It's going to be fantastic to watch and participate in.<br />
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If you haven't registered to attend the National Tax Conference yet, visit <a href="http://www.charteredaccountants.com.au/NTC">www.charteredaccountants.com.au/NTC</a> to find out more. In the meantime, you can follow the latest updates at <a href="http://twitter.com/Chartered_Accts">twitter.com/Chartered_Accts</a> by referencing <a href="http://twitter.com/#search?q=%23taxconf">#taxconf</a>.Yasser El Ansaryhttp://www.blogger.com/profile/07101514089471039780noreply@blogger.com0tag:blogger.com,1999:blog-6789512349192818329.post-19381112810808642092011-03-21T12:56:00.000+11:002011-03-21T12:56:50.291+11:00New thinking: link carbon pricing to tax reformLate last week, Professor Ross Garnaut released <a href="http://www.garnautreview.org.au/update-2011/update-papers/up6-key-points.html">Paper Number 6</a> as part of his 2011 update review into climate change.<br />
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In this paper, Professor Garnaut discusses a number of issues that link climate change policy to the need for major tax reform in Australia. There are a few points made in his report that resonated with me. <br />
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Firstly, he points to the fact that the implementation of a carbon price in Australia will, inevitably, have short-term negative effects on economic growth and real wages. He says that ‘judicious’ use of the revenues generated from the carbon price could help to offset many of those short-term negative effects on the economy. Specifically, he suggests that half of the anticipated $11.5bn in revenue generated in 2012-13 should be used to fund cuts to personal income tax rates and provide incentives for people to return to the workforce. I believe that these ideas are appropriate, and entirely consistent with those set out by Dr Ken Henry is his landmark Future Tax System Review. <br />
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Secondly, Professor Garnaut criticises the current concessional fringe benefits tax rates that apply to motor vehicles. These rules essentially provide a direct incentive to reduce tax liabilities by travelling greater distances in a 12 month period. This runs counter-productive to the broader policy efforts by the government to encourage environmentally responsible behaviours. This is a point that we, at the Institute, have been making for a number of years.<br />
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We are yet to see a specific response from the federal government to Professor Garnaut’s recommendations around the need for tax reform. However, his arguments provide further evidence of the need to urgently commence a broad-based discussion about the make-up of Australia’s future tax system. The government’s national tax forum, now to be held in October this year, will be the opportune time for this conversation to take place.Yasser El Ansaryhttp://www.blogger.com/profile/07101514089471039780noreply@blogger.com0tag:blogger.com,1999:blog-6789512349192818329.post-28117003792604176002011-03-14T09:33:00.002+11:002011-03-14T09:57:23.152+11:00Tax time: deal or no deal?Since the federal government announced the first major step towards simplification of Australia’s complex personal income tax return system last week, there has been a lot of talk about how the changes will impact the Australian public. <br />
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The initiative follows last year’s announcement by the Treasurer that from 1 July 2012, individual taxpayers will be entitled to claim an automatic deduction of $500 (rising to $1000 in the following financial year) for work-related expenses and costs of managing tax affairs. <br />
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In other words, the government is making a ‘deal or no deal’ offer to taxpayers: claim $500 without needing to keep any receipts, or claim a different amount if you want to maintain documentation to support your claim. From a policy perspective, it’s one of those rare ‘win-win’ scenarios for individual taxpayers and is a good first step towards the simplification of tax compliance. <br />
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For some tax agents, this sort of simplification would be considered a win as well. Freeing up resources from focussing on straightforward tax returns enables more time to work with clients who have more complex business affairs and therefore require high value-add advice. <br />
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In order for this simplification idea to be effective, however, there needs to be a significant take-up of the offer. The question is whether or not $500 (or even $1000) will be enough to entice people to take the deal. Data suggests that individuals claim an average of around $2,000 every year for work-related expenses. When budget conditions allow, I think the government will need to make the offer much more attractive in order to ensure a significant take-up across the population. <br />
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While the standard deduction is a good first step, I predict that in the next few years the Australian Tax Office (ATO) will be capable of taking a giant leap forward around simplifying compliance further. For taxpayers with straightforward affairs, I would like to see a one-page tax return from the ATO, pre-populated with information already received from third parties, (such as employers, banks and companies). Taxpayers would simply sign the form, send it back, and wait for their refund. <br />
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Don’t think that this sort of idea is a distant dream – simpler tax returns are just around the corner.<br />
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Find out more about this issue from Assistant Treasurer Bill Shorten at the Institute's <a href="http://www.charteredaccountants.com.au/Training/Tax/Courses/National-Tax-Conference-2011">National Tax Conference</a> in April.Yasser El Ansaryhttp://www.blogger.com/profile/07101514089471039780noreply@blogger.com0tag:blogger.com,1999:blog-6789512349192818329.post-16091226038072453342011-02-25T14:37:00.002+11:002011-02-25T14:38:31.191+11:00Let’s not get bogged down in an old debateDebate has raged for some weeks now about the 'opportunity cost' of the federal government striking a deal last year with the big mining companies over the design of the proposed new minerals resource rent tax (MRRT). Recent reports have suggested that the amount of revenue ‘lost’ could be as high as $100bn over 10 years.<br />
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While this sort of analysis makes quite an emphatic statement about the revenue that would have been collected had the original policy design been implemented, the fact of the matter is that it’s a waste of time to keep discussing hypothetical projections about the original policy design – that debate has already run its course.<br />
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An almost unanimous chorus of opinion last year concluded that the government's policy design for the original resource super profits tax (RSPT) was flawed, and that significant policy changes would need to be made if the new tax arrangements were to be fair and justifiable on policy grounds.<br />
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During the height of the mining tax debate last year, the Institute was one of the lone voices that said the original RSPT would deliver significantly higher revenues than what the government was forecasting at the time.<br />
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How did we know that? <br />
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Policy history in Australia suggests that the Treasury Department typically underestimates the potential revenue to be collected from new tax imposts: capital gains tax, fringe benefits tax and GST are recent examples. The RSPT was always likely to follow suit; and the MRRT may yet prove to be the same as well.<br />
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Recent figures released about the foregone revenue in fact reaffirm the veracity of the concerns raised last year - that the original RSPT was simply too big an impost on the Australian resources sector. <br />
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In my mind, I think it's reasonable to secure a better return to the community from the country's natural mineral wealth, but I don’t think it’s reasonable to extract mountains of cash from normal commercial businesses that take calculated risks in return for premium profits.<br />
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That said, this debate about revenues is for the history books.<br />
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Focusing on the future, I hope the government takes steps soon to release a White Paper explaining the detailed policy principles for the new tax, so that businesses and their advisers can begin to understand the inner workings of how the new laws will operate.<br />
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An announcement by the government is anticipated in the very near future. Stay tuned!Yasser El Ansaryhttp://www.blogger.com/profile/07101514089471039780noreply@blogger.com0tag:blogger.com,1999:blog-6789512349192818329.post-39069190340038495392011-02-11T11:56:00.001+11:002011-02-11T12:17:30.461+11:00A watershed moment for policymakingIt is no government secret that all too often, big policy decisions are made behind closed doors and rolled out to an unsuspecting sector of the economy when the political timing is right.<br />
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But in a welcome change of gears, the financial advisory services industry will not have to run after the ‘bus’ of legislative reform. This week, representatives of the accounting profession and financial planning industry came together with policymakers in federal government to broker an agreement on how financial planners who provide taxation advice will be regulated going forward.<br />
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In a watershed moment for policymaking in financial advisory services, the Assistant Treasurer and Minister for Financial Services and Superannuation, the Hon Bill Shorten MP, facilitated the agreement of a set of principles governing the regulation of financial planners who provide tax advice as part of financial planning services.<br />
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The new principles place consumer protection as the centrepiece of the design of the new regime.<br />
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The agreed principles spell out that ASIC would be the key agency for interacting with financial planners and consumers in relation to tax advice provided as part of financial planning services. This would minimise duplication and red tape. However, ASIC would be supported by a strong and collaborative arrangement with the Tax Practitioners Board to utilise expertise (tax and finance), and ensure that consistent approaches to regulation can be implemented as far as possible.<br />
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This is a welcome milestone on a policy issue that has been lingering for well over 12 months, when financial planners were excluded from new rules introduced to regulate all tax advisory services and deliver consistent consumer protection measures to Australians who rely on that advice.<br />
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The details of this model are still being developed so changes are not yet applicable, but what is clear now is that the government will ultimately require planners to comply with specific competency standards in relation to the provision of tax advice; something that to this point, has not been a key feature of the existing Australian Financial Services licencing regime.<br />
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The Institute will continue to talk to the government throughout this ongoing process in the lead-up to the release of Exposure Draft legislation for public consultation in the next few months.<br />
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Overall, this is a very good outcome that prioritises the interests of consumers above other interests - precisely what you should do when you look to make important public policies changes such as this.<br />
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More information can be found on the <a href="http://www.charteredaccountants.com.au/Industry-Topics/Tax/Current-issues/Tax-agent-services-regime/News-and-updates/11-02-11-Agreement-to-regulate-financial-planners-who-provide-tax-advice.aspx">Institute's website</a>.Yasser El Ansaryhttp://www.blogger.com/profile/07101514089471039780noreply@blogger.com2tag:blogger.com,1999:blog-6789512349192818329.post-342803164920103352011-02-04T17:14:00.000+11:002011-02-04T17:14:33.126+11:00Easing the burden of natural disastersAustralia has seen its fair share of natural disasters this summer. Following the devastation caused by the flooding across Australia and Cyclone Yasi in northern Queensland, it is important for affected communities to rebuild and recover as soon as possible. The government’s responsibility is to assist individuals and businesses in this process.<br />
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A good way to speed up the recovery of communities is the introduction of an investment allowance for businesses impacted by the floods or the cyclone. This kind of incentive would encourage people to rebuild their businesses quickly and subsequently, rebuild the economy. The success of previous temporary investment allowances, such as the one used in 2009 during the global financial downturn, suggests this type of financial incentive is effective in kick-starting business activity when the economy needs it most.<br />
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For the long term, in light of this year’s natural disasters, and those in previous years (such as bushfires and storms), it is important that the government puts a plan in place to manage the unfortunate and unexpected (though not unpredictable) costs that natural disasters bring.<br />
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If the government sets aside funding (through cutting costs or delaying projects), Australia can be better prepared to rebuild and recover quickly, whatever nature may bring.<br />
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See our <a href="http://www.charteredaccountants.com.au/Industry-Topics/Tax/Exposure-drafts-and-submissions/Submissions/Treasury/Submission-type/03-02-11-Budget-Submission-2011-12.aspx">2011-12 Federal Budget submission</a> for more.Yasser El Ansaryhttp://www.blogger.com/profile/07101514089471039780noreply@blogger.com0tag:blogger.com,1999:blog-6789512349192818329.post-76513581631425969102011-01-27T16:28:00.001+11:002011-01-27T16:29:32.459+11:00Increasing taxes: still not the answer...As I unfortunately predicted in my <a href="http://yasserelansary.blogspot.com/2011/01/forget-about-tax-increases-send-in.html">blog last week</a>, the federal government has proposed the introduction of a flood levy on taxpayers to cover the costs of rebuilding ravaged infrastructure in flood affected communities, in an effort to keep its promise to return the budget to surplus by 2012-13.<br />
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As I alluded to last week, the most effective way to meet Australia’s increased spending requirements is to defer the date of returning the budget to surplus – it is important to have a real-time sense of perspective about budget deficits and public debt. When successive governments have been trying to reduce the tax burden on Australians over the last decade, the last thing we need is a new levy.<br />
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Australia’s financial and risk management strategy should involve controlling expenditure and having the capacity to fund unexpected events or emergencies. While the flood crisis was an unexpected natural disaster on a massive scale, it was not unpredictable.<br />
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The question Australians need to ask themselves is: what can we do to ensure this country is able to deal with crises of this scale in the future? Will the flood levy set a precedent for future ‘one-off’ taxes?<br />
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The Institute has also published a <a href="http://www.charteredaccountants.com.au/News-Media/Media-centre/2011/Flood-levy-not-the-answer-to-infrastructure-spending">media release</a> on this issue.Yasser El Ansaryhttp://www.blogger.com/profile/07101514089471039780noreply@blogger.com0tag:blogger.com,1999:blog-6789512349192818329.post-2603738878386917672011-01-20T12:25:00.003+11:002011-01-27T16:31:08.453+11:00Forget about tax increases – send in the ‘razor gang’ insteadAs the full extent of the recent flood crisis across Australia begins to emerge, attention is turning to the extent and cost of the long-term devastation and ruin.<br />
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Estimates vary, but even conservative economists are suggesting that the floods could dampen Australia’s GDP growth by a full percentage point in the year ahead. If that’s correct, it would have a significant impact on tax revenue collections because the profits of many businesses will be negatively impacted in the short-term. On top of that, it is estimated that the floods could cost the government a minimum of $5 billion over the next three or four years. Some are even suggesting the final number could be as much as $20 billion.<br />
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In light of this new and unexpected financial burden, calls are increasing for the federal government to revisit its plan to return the budget to surplus in the 2012-13 fiscal year, and to push that timetable out so that the immediate focus remains on rebuilding communities and public infrastructure. Some knee-jerk responses that have already been put forward include increasing the current 1.5% Medicare levy. While that may be an easy option for the government, I don’t think that’s the right policy answer.<br />
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I suggest a more prudent approach would be to review all of the major federal government agencies’ spending programs with the objective of finding efficiency gains and expenditure cuts. When this kind of exercise is conducted properly, big dollar savings can always be found, and that will go a long way to plugging the financial hole.<br />
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Sending in the ‘razor gang’ to find cost savings is always very difficult to do, but in challenging times like these, it’s the right answer. Following the personal loss and devastation facing communities across the country, the last thing Australia needs is to increase the tax burden on taxpayers at a time when we are trying to move in the exact opposite direction.Yasser El Ansaryhttp://www.blogger.com/profile/07101514089471039780noreply@blogger.com0tag:blogger.com,1999:blog-6789512349192818329.post-51404700761639754822010-12-20T17:16:00.000+11:002010-12-20T17:16:28.150+11:00Let the GST exemption go through to the keeperMuch has been said over the past few weeks by Australian retailers about their dire position as a result of our Goods and Service Tax (GST) laws, which exempt certain overseas purchases via the internet. If you take on board some of the commentary going around, you might believe that the $1,000 GST exemption for imported goods is the sole reason behind declining consumer spending across the country.<br />
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But, as with any debate like this, you have to take what you hear and read with a grain of salt.<br />
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The fact is, the GST exemption was put in place to provide relief from the significant compliance problems that would exist if every single importation into Australia – regardless of its value – had to be subject to GST.<br />
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Imagine if you had a friend overseas who sent you a birthday present (worth $100) via mail. Before you received the parcel, you would get a message from the Customs Service saying that before you could receive your present, you would have to send them $10! It may sound harsh, but that’s precisely what would happen if the GST exemption didn’t exist.<br />
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It would probably not be a very happy birthday!<br />
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The $1,000 exemption is there to ensure that these kinds of scenarios don’t arise. You can argue whether or not $1,000 is too generous. Ultimately, no matter where the line is drawn, someone is bound to disagree with it.<br />
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A little over a year ago, the Board of Taxation, an independent expert tax policy adviser to government, looked into the importation exemption. They concluded, based on the investigation and analyses they carried out, that due to the compliance problem that would arise if the threshold were reduced or removed, no changes were needed.<br />
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Australian consumers who choose to buy goods online from an overseas location do so because of a range of factors, such as currency exchange, the quality and availability of a comparable product in the Australian marketplace, and perhaps the GST. So, while the tax exemption would feature in the decision-making process, it is not the sole motivating factor. The argument progressed by Australian retailers fails to acknowledge the other factors influencing consumer spending.<br />
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At the end of the day, the $1,000 GST exemption exists for very good reasons. To move forward, the government should clearly explain its policy position to the retailers, and then move on to important policy initiatives. I believe the government should let this issue go through to the keeper.Yasser El Ansaryhttp://www.blogger.com/profile/07101514089471039780noreply@blogger.com1tag:blogger.com,1999:blog-6789512349192818329.post-25483852956209276312010-11-29T13:41:00.000+11:002010-11-29T13:41:43.746+11:00GST needs to do more ‘heavy lifting’Last week saw the tax reform debate take a new turn when the state governments of Victoria and Western Australia openly canvassed the need for Australia to have a good look at the base and rate of our existing GST system.<br />
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As our members will know, the Institute has been a long-time advocate of the case for a broader based GST with a potentially higher rate than 10%. Dr Ken Henry was not given the opportunity by the federal government to review the scope of the GST as part of his landmark review of our future tax system. The exclusion of the GST was viewed by many in the business community, including the Institute, as a missed opportunity to tackle the big issues confronting our future tax system.<br />
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But things appear to be moving on. The fact that two influential state governments have now begun to openly speak about the need for a GST system that generates more revenues than is currently the case, is promising. <br />
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Why?<br />
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The answer lies in the fact that any serious overhaul of inefficient and market-distorting state taxes (like stamp duties or payroll taxes) brings with it a need to replace the lost revenue with a new source. Given that GST revenues are already passed through to state governments under the deal struck back in 1998, and the fact that the GST is an inherently more efficient tax, it would make a lot of sense for us to look closely at the option of expanding the existing base of goods and services currently subject to the tax. <br />
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The two options essentially boil down to looking at whether or not more goods and services should be brought within scope, and if it is appropriate to increase the actual rate of the tax beyond 10%.<br />
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The expansion of the GST in this sort of way would undoubtedly have a big impact on low to middle income earners; as consumers, rather than businesses, generally suffer the final impacts of consumption taxes like the GST. Because of this, any change to the base and rate of the GST would need to be coupled with an appropriate reduction of personal income tax rates in order to offset the increased costs that would be borne by those least able to afford it in our community. This, incidentally, is precisely what our neighbours in New Zealand have recently decided to do.<br />
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Tell me what you think: is moving to a broader based GST, with a higher rate, a good idea if it means a dramatic reduction in some of the cumbersome state taxes?Yasser El Ansaryhttp://www.blogger.com/profile/07101514089471039780noreply@blogger.com2tag:blogger.com,1999:blog-6789512349192818329.post-87689943018066148022010-11-16T15:22:00.000+11:002010-11-16T15:22:33.419+11:00Tax lessons from the OECDEarlier this week, the Organisation for Economic Cooperation and Development (OECD) released its most recent economic survey of Australia. Many of its observations and recommendations closely reflected the Institute’s position in a number of areas.<br />
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The report said that ‘the proposed changes in resource taxation are welcome but should go further’. The OECD confirmed the economic merits of moving to a rent tax approach to non-renewable resources to replace the existing state-based royalties system.<br />
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Similar to the Institute’s position, the OECD recommended that ‘the resource rent tax [should] be extended to all commodities and all companies irrespective of their size’. Members will recall that our <a href="http://www.charteredaccountants.com.au/files/documents/InstituteSubmission-PolicyTransitionGroupIssuesPaper_28102010.pdf ">submission to the Policy Transition Group </a>about the Minerals Resource Rent Tax (MRRT) included recommendations that the policy design of the new MRRT should be easily adapted to other commodities in the future as Australia’s reliance on coal and iron ore exports diminishes over time. While this recommendation has not been received well by some parts of the mining sector, I believe it represents a sensible approach to policy-making.<br />
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In other parts of the report, the OECD made observations about the need for Australia to drive down its corporate income tax rate. The report noted that at 30%, Australia’s tax rate is ‘well above the average’ of all small to medium-sized OECD countries. This message is consistent with the policy arguments we made during the Henry tax review. (Dr Henry ultimately recommended that Australia should move to a 25% corporate tax rate.) <br />
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The OECD also delivered a strong message to the government about the need to ‘increase the weight of the GST in total tax revenues’. This means Australia should broaden the base of its GST system and increase its rate. This reflects the Institute’s own policy thinking over recent years – increasing revenue collected from the GST would allow Australia to abolish a raft of inefficient and distortionary state-based taxes such as stamp duty and other levies.<br />
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It seems to me that international economic thinking and analysis all point to the same conclusions. All we need now is for the government to start thinking the same way!Yasser El Ansaryhttp://www.blogger.com/profile/07101514089471039780noreply@blogger.com0tag:blogger.com,1999:blog-6789512349192818329.post-33083295304667818782010-11-10T10:40:00.000+11:002010-11-10T10:40:56.155+11:00All may not be what it seems…As many of you are aware, the mining tax policy consultation group swept through Sydney late last week. Led by Australian business sector veteran Don Argus and Resources Minister Martin Ferguson, the Policy Transition Group (PTG) held several meetings with stakeholders during the two days they were in town.<br />
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The Institute participated in one of the stakeholder meetings alongside representatives of the Big 4 accounting firms and other professional associations. However, the meeting was not quite what I had been expecting.<br />
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Since I attended the meeting, a number of people have asked me what I thought about the process – the way in which the government and the PTG are going about putting the design of the new mining tax together. Unfortunately, my response to that question has typically been one of concern. <br />
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The major question to come out of this process for me is whether or not the PTG will be able to influence the government and its agencies in the final design of how the new Minerals Resource Rent Tax (MRRT) will operate, given it is mainly made up of external executives from the resources sector. <br />
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At the Sydney meeting, we were advised that the Treasury Department had already started drafting the legislation surrounding the new MRRT. In order to draft legislation, Treasury must have a pretty good idea of how the detailed policy design is going to work.<br />
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Does that mean that the government and Treasury have already pre-judged the outcomes from the PTG consultation process? If so, is that really the way we want to go about critically important reforms to our tax system in the future? You be the judge.Yasser El Ansaryhttp://www.blogger.com/profile/07101514089471039780noreply@blogger.com0tag:blogger.com,1999:blog-6789512349192818329.post-8710879514131439512010-10-07T11:05:00.000+11:002010-10-07T11:05:51.567+11:00R&D tax concessions – coming soonThe first week of parliamentary sittings of the ‘new paradigm’ that is the 43rd Australian parliament is complete. <br />
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I watched the first sitting day at Parliament House and there was a decidedly different mood in the air. After the initial excitement of the official opening and swearing-in ceremonies, Parliament got down to the ‘real’ business of running the country. Prime Minister Gillard took the helm and introduced her new team to the people of Australia. <br />
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Wayne Swan remains in his pre-election portfolio of Treasury and at the same time maintains his role of Deputy Prime Minister. Nick Sherry, who was previously the Assistant Treasurer, has been replaced by Bill Shorten, who steps into a combined portfolio of Assistant Treasurer and Minister for Superannuation and Financial Services. He will have direct responsibility for the day-to-day functioning of our tax system.<br />
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One of the highlights of the first week was the Minister for Innovation and Industry, Senator Kim Carr, re-introducing the legislation that deals with the implementation of the proposed new research and development (R&D) tax credit regime. You may remember that the previous government had been embarking on a reform project around replacing the existing R&D tax concession with a new credit system that delivers ‘below-the-line’ tax savings to eligible businesses.<br />
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The government’s objectives for the new R&D tax regime are to shift the benefit of the tax credit from large businesses to small to medium enterprises. Whether the changes will deliver the outcome the government are looking for is yet to be determined.<br />
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My concerns are in regards to the start date of the proposed law, which is currently retrospective at 1 July 2010. In my opinion, the proposed start date must be pushed back to 1 July 2011. In the tax policy world, it’s highly unusual to pass retrospective tax laws unless there is some major integrity risk for the tax system; that’s clearly not the case here so there is no reason to pass the laws with a 2010 start date.<br />
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What are your thoughts on the new R&D regime? Do you think it will deliver any tangible benefits to the business community, and do you agree that the start date should be deferred by one year?Yasser El Ansaryhttp://www.blogger.com/profile/07101514089471039780noreply@blogger.com0tag:blogger.com,1999:blog-6789512349192818329.post-56146232745434175202010-09-16T15:34:00.001+10:002010-09-16T15:36:50.142+10:00Predictions - post electionCanberra’s been a hive of activity lately and last night I was fortunate enough to be part of a panel there at an Institute function. Naturally, the impact of the election result has been at the forefront of everyone’s mind, so the topic was particularly relevant: <i>Post Election: The Economy, Markets and the Health of Small Business</i>.<br />
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Dr Shane Oliver, Chief Economist for AMP Capital gave us the good news that the global economy is unlikely to move back into recession and that Australia is in a very strong economic position relative to the rest of the world.<br />
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I spoke about what the new era of federal government will mean for the business sector. My predictions sadly aren’t as optimistic as Shane’s but for what it’s worth, this is what I think will be happening over the next few years.<br />
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Firstly, complex policy-making will be difficult to work through parliament. There is clearly a mood in Canberra that is quite different to that which existed prior to the election; there’s a mood of caution about policy and major decisions.<br />
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Secondly, government announcements will be viewed with some trepidation until we know the position of the minor parties on any given issue (especially tax and corporations laws). The Greens and the Independents will become increasingly relevant players in terms of policy development, and all major stakeholders (such as the Institute) will need to work closely with them.<br />
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Finally, the government will work towards putting a price on carbon across the economy sometime in the next two years – it seems to me the community’s concerns in this area have been made quite clear in the way the election results played out.<br />
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A minority government is new for us all and only time will tell if my predictions are accurate, but I’d love to hear back from readers – will these changes be good or bad for the country? What do you think the next few years will look like?Yasser El Ansaryhttp://www.blogger.com/profile/07101514089471039780noreply@blogger.com1tag:blogger.com,1999:blog-6789512349192818329.post-42597429744666583532010-07-02T16:25:00.003+10:002010-07-02T16:32:43.155+10:00As easy as MRRTLet me start by saying I’m feeling a bit sheepish looking at my last entry date on this blog. All I can say in my defence is it’s been hectic in the tax world! <br />
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Over the last few weeks the whole world, it seems, became besmirched in the resource super profits tax wrangle that emerged following the government’s package of tax reforms announced on 2 May. <br />
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Today, though, our new Prime Minister, Julia Gillard, revealed a re-design of the tax, putting an end to the speculation and uncertainty for many Australian businesses.<br />
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Fresh with a new name – the Minerals Resource Rent Tax – the new tax boasts several concessions which were deal-breakers up until now, including a reduction in the headline rate from 40% to 30%, an applicability to only iron ore and coal, and an uplift factor of the government bond rate plus 7%. In addition, oil and coal seam gas will be rolled into the existing Petroleum Resources Rent Tax and taxed at 40%.<br />
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While the changes mean the government loses $1.5bn of expected revenue, today’s announcement is a major win for investment certainty for Australian businesses and their shareholders.<br />
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From day one, it was clear the initial announcement of the proposed resource tax did not strike the right balance between delivering a better return to the community and protecting investment in the mining sector. But it looks as though today, we have finally achieved a much better balance of those objectives.<br />
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My feeling is that real progress can now be made in moving to the next stages of consultation around the detailed design features of the new tax. Key to this will be working through the details of how existing projects will be transitioned to the new regime.<br />
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Importantly, the government also said today it will retain other aspects of the tax package unveiled as part of its response to the Henry tax review; specifically, the corporate tax rate cut and the superannuation guarantee increases. This means taxpayers can now make fully informed, long term decisions about the impact of those changes. <br />
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The decision to wind-back the original 2% corporate tax rate cut to 1% is a shame, but in reality it is appropriate given the importance of getting the design of the new resource tax right. We’ll keep putting the case to the government to reduce the tax rate further once the budget bottom line improves a little.<br />
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Tax reform is never easy, but what the last two months have shown us is that early engagement around policy proposals in a more open and consultative manner is always better than a 'surprise launch' of tax reform announcements. <br />
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If the goal is long term tax reform, then we must heed the lessons from experiences like this. Wouldn’t you agree?Yasser El Ansaryhttp://www.blogger.com/profile/07101514089471039780noreply@blogger.com0tag:blogger.com,1999:blog-6789512349192818329.post-70906510719616606392010-05-14T16:19:00.002+10:002010-05-14T16:19:36.681+10:00Federal Budget awakens real tax reformIf you joined me in thinking the Federal Government had shied away from any commitment to serious tax reform a week ago, you probably shared my enthusiasm on Tuesday night when it did an about-face in its Budget announcement. <br />
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The 2010-2011 Federal Budget, which the government labelled a ‘no-frills’ affair, was indeed no fiscal revolution. It did, however, mark the first ‘real’ step towards the kind of tax reform the country – or at least us tax professionals – were waiting for following the release of the Henry tax review.<br />
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I’m talking about the announcement of a standard $500 tax deduction and a simplified personal tax return process that will benefit around five million Australians.<br />
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Simplified individual tax returns are a good thing. Why? Not only will a simpler system relieve many Australians of the chore of wading through more than 200 pages of the annual tax pack, but it will also provide an opportunity for accountants and tax agents to focus more of their efforts on helping clients with truly complex tax affairs. <br />
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At the end of the day, accountants provide strategic tax and business advice, and the more the tax system allows time for them to do that, the better.<br />
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There were, of course, other measures announced in the Budget too. Have a look at <a href="http://www.charteredaccountants.com.au/A124076202">the Institute’s response and the report we put together with Thomson Reuters</a> on the Chartered Accountants website.Yasser El Ansaryhttp://www.blogger.com/profile/07101514089471039780noreply@blogger.com0tag:blogger.com,1999:blog-6789512349192818329.post-20958435720747778462010-05-05T11:31:00.001+10:002010-05-05T11:36:03.731+10:00Is this tax reform?Well there has been no shortage of commentary on <a href="http://taxreview.treasury.gov.au/Content/Content.aspx?doc=html/home.htm">the Henry tax review, which was released on Sunday, 2 May</a>. <br />
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Over the last couple of days, we have heard from economists, academics, advisers, policy experts and pundits from all sectors of industry as to whether <a href="http://www.futuretax.gov.au/">the government’s initial response </a>to the review constitutes the beginning of ‘real’ tax reform. <br />
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Most of the reaction has centred on the government’s response to the review, rather than the review itself. For those of you who followed <a href="http://www.charteredaccountants.com.au/news_releases_2010/may_2010/A124036701">the Institute’s initial reaction,</a> you will know that I think the government on Sunday fell short of an important commitment to change Australia’s tax system for the better.<br />
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As I discussed in my last post, there was always a chance the government would shy away from making too many decisions too quickly. Particularly the difficult ones. But while I understand the political climate does not favour wholesale reform on the scale of which was expected under the terms of reference for the review, there is an important opportunity here that Australia cannot afford to squander if it is to remain a competitive, thriving economic hub.<br />
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When you look at Dr Henry’s package of recommendations there are so many feasible options that the reasons for change quickly outweigh the reasons for inaction. This is a comprehensive, well thought-out review that provides a clear roadmap for the future. What we need now is commitment from the decision-makers.<br />
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I am interested in your thoughts.<br />
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<b>Henry tax review member survey</b><br />
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There is a lot happening at the Institute now that the review has been announced. First, I have already started to prepare for the Institute’s comprehensive response to the Henry tax review, which we will publish over the coming weeks. <br />
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I am hoping to get as much member participation as possible. To help the process along, we have created an <a href="http://www.charteredaccountants.com.au/henryreview">online survey </a>which sets out all of the recommendations made in the Henry report, and asks whether you agree, disagree or are undecided on each issue. We will also be conducting state-based member feedback sessions in the coming weeks to explore the key themes further.<br />
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Please note the survey is only open to Chartered Accountants – as we will use this information to feed into the Institute's ‘official’ response – but if you are not a member and have comments, I invite you to share them.<br />
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<b>Post-Henry conference 21-23 June</b><br />
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The fun doesn’t stop there. In June, we will be hosting a conference at our Sydney offices that will bring together leading international tax and economic policy experts to dissect the plan for Australia’s Future Tax System. Dr Ken Henry himself will be there to listen to the academic community’s ‘verdict’ on his report. <br />
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The conference is being organised by UNSW and Monash University, and will run from 21-23 June, 2010. <a href="http://www.charteredaccountants.com.au/A124026994">Registrations are now open. </a> <br />
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It is an event not to be missed!Yasser El Ansaryhttp://www.blogger.com/profile/07101514089471039780noreply@blogger.com0tag:blogger.com,1999:blog-6789512349192818329.post-86204522050690565762010-04-26T19:23:00.000+10:002010-04-26T19:26:26.926+10:00Henry Review release date announced!After almost two years in the making, the Henry tax review will finally be released to the public next Sunday, 2 May. <br />
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Treasurer Wayne Swan made the announcement on Friday, 23 April. The government chose to release the report – and its response to it – on a Sunday, so as not to impact the financial markets with any potentially sensitive information.<br />
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I will be in Canberra to analyse the review papers and the government’s response to it in a stakeholder ‘lock-up,’ much the same as I do for the Federal Budget. Following the report’s release at 2.30pm, I will be working hard with my team to get as much information to our members and the public as quickly as possible.<br />
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While a lot of people think this is the end of the long debate on tax reform, the reality is that this is just the beginning. The government is expected to map out its plan for the country’s tax reform priorities over the next 10-20 years, and there is much work to be done before ideas can be turned into reality. <br />
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So what are we likely to see?<br />
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Big picture, I’ll be watching for measures that move Australia towards a much simpler, more equitable and broader based tax system. Some of the issues on my ‘To Watch For’ list include equalising the tax treatment for all categories of investment across property, shares and savings, which will help to provide an incentive for people to save for the future.<br />
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I’m also looking for the introduction of optional tax returns as a means to make our tax system simpler. I understand there is concern among some tax agents about this, but I’m also encouraged by the majority of Chartered Accountants who tell me that filing simple tax returns is not very profitable and instead they could use that time to work with other clients who need their professional advice. <br />
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Other hot issues we’ll see next week include decisions on changing the corporate tax rate, whether the government imposes a resource rent tax for the mining companies, consideration of the ‘adequacy’ of the nine per cent superannuation guarantee, and whether Australia’s ageing population requires a type of insurance designed to encourage people to make their super last longer.<br />
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While Dr Ken Henry’s report is expected to make these kinds of recommendations and more, I would still like to caution readers that the government might choose not to adopt them all straight away.<br />
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As I mentioned in my last post, Finance Minister Lindsay Tanner last week hinted that the government may choose to implement different initiatives that address underlying issues identified by the review.<br />
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If you look back on the life of the Henry Review, you’ll see the goal posts shifted mid-way through, when the financial downturn hit. The challenge for the government is to demonstrate it is serious about tax reform as it considers the impact of major changes that might jeopardise revenue collections aimed at funding the deficit for the next five years. <br />
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The danger is that uncertainty about the future can stifle business and investment decision-making at a time when the Australian economy needs it most. <br />
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One thing is for certain: all eyes will be on Canberra next Sunday, 2 May. <br />
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If you would like to follow the Institute’s response to the release of the Henry tax review, follow us on <a href="http://twitter.com/chartered_accts ">Twitter </a>and be the first to read our press release. Comprehensive commentary and analysis will then be posted on the <a href="http://www.charteredaccountants.com.au/henryreview">Henry Review page </a>of the Chartered Accountants website. <br />
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I look forward to sharing information with you, and to engaging in discussion around Australia’s Future Tax System.Yasser El Ansaryhttp://www.blogger.com/profile/07101514089471039780noreply@blogger.com1