The first week of parliamentary sittings of the ‘new paradigm’ that is the 43rd Australian parliament is complete.
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.
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 Nick Sherry, who was previously the Assistant Treasurer, has been replaced by Bill Shorten, who steps into a combined portfolio of Assistant Treasurer and Minister for Superannuation and Financial Services.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.
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.
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.
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.
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?
Thursday, October 7, 2010
Thursday, September 16, 2010
Predictions - post election
Canberra’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: Post Election: The Economy, Markets and the Health of Small Business.
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.
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.
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.
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.
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.
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?
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.
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.
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.
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.
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.
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?
Friday, July 2, 2010
As easy as MRRT
Let 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!
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.
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.
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%.
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.
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.
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.
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.
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.
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.
If the goal is long term tax reform, then we must heed the lessons from experiences like this. Wouldn’t you agree?
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.
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.
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%.
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.
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.
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.
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.
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.
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.
If the goal is long term tax reform, then we must heed the lessons from experiences like this. Wouldn’t you agree?
Friday, May 14, 2010
Federal Budget awakens real tax reform
If 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.
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.
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.
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.
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.
There were, of course, other measures announced in the Budget too. Have a look at the Institute’s response and the report we put together with Thomson Reuters on the Chartered Accountants website.
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.
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.
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.
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.
There were, of course, other measures announced in the Budget too. Have a look at the Institute’s response and the report we put together with Thomson Reuters on the Chartered Accountants website.
Wednesday, May 5, 2010
Is this tax reform?
Well there has been no shortage of commentary on the Henry tax review, which was released on Sunday, 2 May.
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 the government’s initial response to the review constitutes the beginning of ‘real’ tax reform.
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 the Institute’s initial reaction, 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.
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.
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.
I am interested in your thoughts.
Henry tax review member survey
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.
I am hoping to get as much member participation as possible. To help the process along, we have created an online survey 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.
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.
Post-Henry conference 21-23 June
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.
The conference is being organised by UNSW and Monash University, and will run from 21-23 June, 2010. Registrations are now open.
It is an event not to be missed!
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 the government’s initial response to the review constitutes the beginning of ‘real’ tax reform.
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 the Institute’s initial reaction, 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.
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.
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.
I am interested in your thoughts.
Henry tax review member survey
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.
I am hoping to get as much member participation as possible. To help the process along, we have created an online survey 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.
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.
Post-Henry conference 21-23 June
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.
The conference is being organised by UNSW and Monash University, and will run from 21-23 June, 2010. Registrations are now open.
It is an event not to be missed!
Monday, April 26, 2010
Henry 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.
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.
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.
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.
So what are we likely to see?
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.
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.
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.
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.
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.
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.
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.
One thing is for certain: all eyes will be on Canberra next Sunday, 2 May.
If you would like to follow the Institute’s response to the release of the Henry tax review, follow us on Twitter and be the first to read our press release. Comprehensive commentary and analysis will then be posted on the Henry Review page of the Chartered Accountants website.
I look forward to sharing information with you, and to engaging in discussion around Australia’s Future Tax System.
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.
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.
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.
So what are we likely to see?
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.
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.
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.
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.
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.
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.
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.
One thing is for certain: all eyes will be on Canberra next Sunday, 2 May.
If you would like to follow the Institute’s response to the release of the Henry tax review, follow us on Twitter and be the first to read our press release. Comprehensive commentary and analysis will then be posted on the Henry Review page of the Chartered Accountants website.
I look forward to sharing information with you, and to engaging in discussion around Australia’s Future Tax System.
Friday, April 23, 2010
Fasten your seatbelts; we’re cleared for take-off!
The odds are now stacked heavily in favour of the government releasing the Henry tax review and their response to it sometime next week, perhaps Wednesday or Thursday. If the report is not released then, it will certainly be released the week after, which would make it the week before the Federal Budget on 11 May.
As you know, this week the government managed to achieve a breakthrough agreement (of sorts) with the Council of Australian Governments agreeing to the Commonwealth’s proposed changes to the administration and funding of health care. All states and territories agreed to the deal, except for Western Australia, which is holding out for a better deal. But putting that to one side, the point is, now that the health reform issue has been (mostly) put to bed, the government can shift its focus to tax reform. Finally, I hear some of you say.
Last night (Thursday 22 April), Finance Minister Lindsay Tanner was interviewed on ABC’s Lateline program where he said that the government’s response would not only deal with the recommendations made by Dr Ken Henry, but would in fact go beyond the specific recommendations in some areas.
I interpret what Minister Tanner said as suggesting that in some areas of the tax system the government may not in fact adopt Dr Henry’s recommendations, but rather may choose to implement different initiatives that address the underlying issues identified by the review.
Even though we’re still waiting on the 'verdict,' it is becoming clear from sources on the ground in Canberra that the government’s response to the Henry tax review is comprehensive, and that the campaign around its release is about to be unleashed on us all. This is a big deal, and this is a big event. My advice: sit down and fasten your seat belts… tax reform is about to take off!
As you know, this week the government managed to achieve a breakthrough agreement (of sorts) with the Council of Australian Governments agreeing to the Commonwealth’s proposed changes to the administration and funding of health care. All states and territories agreed to the deal, except for Western Australia, which is holding out for a better deal. But putting that to one side, the point is, now that the health reform issue has been (mostly) put to bed, the government can shift its focus to tax reform. Finally, I hear some of you say.
Last night (Thursday 22 April), Finance Minister Lindsay Tanner was interviewed on ABC’s Lateline program where he said that the government’s response would not only deal with the recommendations made by Dr Ken Henry, but would in fact go beyond the specific recommendations in some areas.
I interpret what Minister Tanner said as suggesting that in some areas of the tax system the government may not in fact adopt Dr Henry’s recommendations, but rather may choose to implement different initiatives that address the underlying issues identified by the review.
Even though we’re still waiting on the 'verdict,' it is becoming clear from sources on the ground in Canberra that the government’s response to the Henry tax review is comprehensive, and that the campaign around its release is about to be unleashed on us all. This is a big deal, and this is a big event. My advice: sit down and fasten your seat belts… tax reform is about to take off!
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