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 18, 2011
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:
I’d love to hear your feedback or thoughts on some of the issues that came up!
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.
I’d love to hear your feedback or thoughts on some of the issues that came up!
Monday, April 4, 2011
Another big week lies ahead in the tax world
Tax 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.
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.
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.
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:
If you haven't registered to attend the National Tax Conference yet, visit www.charteredaccountants.com.au/NTC to find out more. In the meantime, you can follow the latest updates at twitter.com/Chartered_Accts by referencing #taxconf.
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.
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.
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:
- 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
- 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.
If you haven't registered to attend the National Tax Conference yet, visit www.charteredaccountants.com.au/NTC to find out more. In the meantime, you can follow the latest updates at twitter.com/Chartered_Accts by referencing #taxconf.
Monday, March 21, 2011
New thinking: link carbon pricing to tax reform
Late last week, Professor Ross Garnaut released Paper Number 6 as part of his 2011 update review into climate change.
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.
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.
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.
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.
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.
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.
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.
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.
Monday, March 14, 2011
Tax 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.
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.
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.
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.
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.
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.
Don’t think that this sort of idea is a distant dream – simpler tax returns are just around the corner.
Find out more about this issue from Assistant Treasurer Bill Shorten at the Institute's National Tax Conference in April.
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.
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.
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.
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.
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.
Don’t think that this sort of idea is a distant dream – simpler tax returns are just around the corner.
Find out more about this issue from Assistant Treasurer Bill Shorten at the Institute's National Tax Conference in April.
Friday, February 25, 2011
Let’s not get bogged down in an old debate
Debate 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.
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.
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.
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.
How did we know that?
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.
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.
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.
That said, this debate about revenues is for the history books.
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.
An announcement by the government is anticipated in the very near future. Stay tuned!
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.
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.
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.
How did we know that?
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.
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.
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.
That said, this debate about revenues is for the history books.
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.
An announcement by the government is anticipated in the very near future. Stay tuned!
Friday, February 11, 2011
A watershed moment for policymaking
It 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.
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.
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.
The new principles place consumer protection as the centrepiece of the design of the new regime.
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.
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.
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.
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.
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.
More information can be found on the Institute's website.
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.
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.
The new principles place consumer protection as the centrepiece of the design of the new regime.
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.
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.
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.
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.
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.
More information can be found on the Institute's website.
Subscribe to:
Posts (Atom)
