The implications (both real and political) of the Federal Government’s 2013-14 Budget have been analysed and commented upon ad nauseum this week. But what does it mean for tax reform?
Unfortunately, the Budget is yet another wasted opportunity to embark on a long-term tax reform plan that is vital to ensure that the country is well positioned for the challenges of the decades ahead.
Instead, the Government has chosen the easy path of tax grabs from business to fund its excessive spending commitments. Efforts to protect the integrity of our tax system by closing loopholes are worthwhile, but the Budget measures ignore the long-term vision laid out in the Henry Tax Review.
In addition, the Budget adds significantly to the stock of announced but un-enacted tax measures. An outstanding agenda of more than 100 tax measures in an election year will heighten uncertainty for business in an already volatile environment.
Through The Tax Institute’s technical sub-committees we will be working through the details of the discussion papers and participating in the consultative fora over the coming weeks and will keep members informed as the changes take shape.
Late yesterday the Opposition leader delivered his Budget reply speech. The promised tax white paper that builds on the work of the Henry Review is a positive step towards a vital national conversation on tax reform.
In other news last week, The Tax Institute and the Business Law Section of the Law Council of Australia wrote to the Treasurer and Shadow Treasurer to express our deep concern regarding the recently announced measure to reform the self-education expense deduction by capping the deductible amount at $2,000 per annum from 1 July 2014.
The imposition of a cap on the deduction is a very blunt instrument to achieve the object of preventing extravagant claims. The proposed measure would capture and limit all claims for self-education expenses, regardless of their nature. An educated workforce should be one of the key objectives of Government. Providing a financial penalty to those seeking to self-fund their education is a significant disincentive. The objective of building a smarter Australia will be compromised through the introduction of the proposed cap.
The imposition of a cap might well prevent large deductions from being claimed, but in doing so, it would also penalise Australians who are endeavouring to improve their qualifications for work or business who are not incurring unnecessarily excessive costs. Accordingly, many legitimate claimants would suffer higher out-of pocket expenses as a result of this measure.
Robert Jeremenko CTA is Senior Tax Counsel of The Tax Institute.
The Tax Institute is Australia’s leading professional association in tax. Its 13,000 members include tax agents, accountants and lawyers as well as tax practitioners in corporations, government and academia.