Company tax rate reduction & more on the self-education expenses cap

Self-education expenses cap

Last Friday, the Federal Government's Economic Statement contained the decision to defer the start date of the self-education expenses cap to 1 July 2015 to allow for further consultation.

The Government has demonstrated that it is starting to listen to community concern by announcing this delay. It is a welcome first small step in the right direction in the Government's handling of this policy measure.

At the same time, the Government has acknowledged the need to minimise the potential impact of this measure on genuine continuing professional development and other education needs.

The Tax Institute has been deeply concerned for some time now by the intention of the Government to use such a blunt policy instrument to target certain perceived excessive claims since the measure was first announced in April this year.

It has been especially concerning as there are potentially much more suitable alternatives, such as tightening the Tax Office's administration of the existing law, that could be used to target the so-called excessive claims causing concern to the Government.

A blunt instrument like the proposed cap unfairly penalises Australians who are endeavouring to improve their qualifications for work or business who are not incurring unnecessarily excessive costs.

Building an educated workforce should be one of the key objectives of Government.

Opposition's pledge to reduce the company tax rate

The Federal Opposition's announced reduction in the company tax rate is a welcome development for small and medium business across the country. The pledge to reduce the rate of company tax by 1.5% is an overwhelmingly positive move that will deliver economy-wide benefits.

The Tax Institute has long-supported reducing the company tax rate in the medium term from its current 30% to the 25% recommended by the Henry Tax Review. The proposed modest cut to a 28.5% rate is a step in the right direction and Australians across the board will stand to share in the benefits of increasing Australia's attractiveness as a destination for foreign investment.

When this announcement is coupled with the Opposition's policy to increase the company tax rate on companies with a taxable income of more than $5 million to fund a paid parental leave scheme, the company tax rate cut will be neutral to those businesses and a real reduction for companies earning less than $5 million.

Reducing the burden of company tax for small and medium business will encourage innovation and entrepreneurship and allow companies to pass on the savings to their workers in the form of increased wages or additional recruitment, increasing both productivity and employment.

Election campaign (officially) begins

With the Prime Minister having set 7 September 2013 as the Federal Election date, the government has officially assumed a 'caretaker role'. This convention acknowledges that because the Parliament has been dissolved for the period of the election campaign, the Executive arm of government cannot be held accountable for its decisions in the same way. This caretaker period continues until the election result is clear, or if there is a change of government, until the new government is appointed.

During this time the ordinary business of government continues, but the government must not act to bind an incoming government. This means that the government avoids: making major policy decisions that are likely to commit an incoming government; making significant appointments; and entering major contracts. If the government does do any of the above, it must consult the Opposition beforehand.

However, the convention applies only to the making of decisions rather than their announcement, so decisions made by the government before the dissolution of Parliament can be announced during the caretaker period without breach.

The effect of this on The Tax Institute's advocacy on behalf of members is that whilst interaction with the various arms of government can and will continue, the active decision making of government will not recommence before the election.

Robert Jeremenko

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.


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