The Federal Budget leaves Australia waiting for a long-term tax reform plan that is vital to ensure that the country is well positioned for the challenges of the decades ahead.
The Government has attempted to tackle half of our Budget problem: expenditure, without committing to a timeline in which to address the other crucial half of the equation: revenue.
The 2% income tax ‘levy’ is the wrong direction to be taking Australia’s tax system. It would place an even greater reliance on income tax revenue, when the Government should be relying less on income tax revenue and instead moving more towards relying on revenue from consumption taxes like the GST.
This highlights the need for structural reform of our tax system, because it shows that the current system is not raising sufficient revenue to meet the spending decisions of Government.
The promised Tax Reform White Paper process is the appropriate way to address the tax system's shortcomings rather than relying on the quick 'sugar hit' of an income tax levy. The Government has missed an opportunity to set a timeline for this process in the Budget.
The Tax Reform White Paper and closely-related Commonwealth-State Relations Paper on the Federation are crucial levers in generating a community-wide public debate.
The Tax Institute has been a strong advocate for reforming the excess superannuation contribution laws so that inadvertent breaches of the caps are not unfairly penalised.
The Government is to be congratulated for taking further action to permit correction of inadvertent breaches of the non-concessional contributions cap.
The Government’s commitment to reduce the company tax rate is a positive step in relying less on company tax revenues.
Cutting the company tax rate will reduce taxes on investment, driving an increase in savings and capital as well as innovation and entrepreneurship. It will also reduce the incentive for profit shifting out of Australia, allowing us to retain a greater share of the profits generated here in Australia.
The Government’s decision to index fuel excise was recommended by the Henry Tax Review, and will ensure its value is not eroded by inflation.
The Government’s decision to move the tax complaints function from the Office of the Ombudsman to the Inspector-General of Taxation is a sensible move that should assist in addressing tax administration issues.
The Inspector-General of Taxation plays an extremely important role in holding the Tax Office to account in improving the administration of the tax laws for the benefit of all taxpayers.
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.