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Tax professional questions vastly divergent policies

07 May 2018 2 minute readShare
Tax professional questions

“How can it be that we have such divergent views when it comes to tax?” the Institute of Public Accountants has asked, despite all the policies amounting to tinkering around the edges.

The institute’s CEO, Andrew Conway, said that “by their very nature, budgets and budget replies are inherently political”, but that the current divergence of tax policies is suggestive more of “political posturing” than leadership for the good of the nation.

“There is too much at stake for political posturing when we have very real and growing expenditure pressures on the budget brought about by our ageing population and increasing tax complexity,” said Mr Conway.

“We strongly encourage the parliament to put the national interest ahead of political interest and partisanship when it comes to tax.

“The ‘tax-talk’ from both sides of politics is so divergent that the layperson has even less of an idea of what the tax system will look like if the changes come into force.”

According to Mr Conway, the two very different tax plans announced so far (prior to the May 2018 budget) look something like this:

The Coalition government

  1. A reduced corporate tax rate for all companies eventually with a target rate of 25 per cent;
  2. A likely reduction in personal tax rates particularly for income levels up to $100,000;
  3. No change to current arrangements regarding negative gearing of investment property;
  4. No change to the capital gains tax (CGT) discount which currently sits at 50 per cent for individuals;
  5. No change to the current arrangements regarding trust distributions from discretionary trusts;
  6. No change to the current arrangements regarding imputation in particular, full refund of excess imputation credits; and
  7. No changes in relation to depreciation — the $20,000 immediate asset write-off available to 30 June 2018 is not currently being extended by the Coalition. This may change on 8 May.

Labor opposition

  1. A restoration of the company tax rate to the full 30 per cent coupled with a possible lower rate for smaller corporate entities with turnover less than $2 million;
  2. Higher personal tax rates at the top end of the income scale and lower personal tax rates at the lower end;
  3. An increase in the Medicare levy to 2.5 per cent coupled with a more generous Medicare levy arrangement for lower paid workers than currently available;
  4. A prohibition on negatively gearing investment properties other than newly built investment properties;
  5. A halving of the capital gains tax (CGT) discount to 25 per cent for individuals;
  6. A minimum tax of 30 per cent on all distributions from discretionary trusts;
  7. A denial of any refund in respect of excess imputation credits;
  8. A new deduction (the Australian Investment Guarantee) which will enable a 20 per cent deduction in respect of the purchase of any new eligible asset worth more than $20,000;
  9. Capping of deductions for managing tax affairs to a maximum of $3,000;
  10. Whistle-blower rewards for tax evasion; and
  11. Superannuation:
    · Oppose catch up contributions on concessional contributions and tax deductibility on personal superannuation contributions;
    · Lower annual non-concessional contribution cap to $75,000 and further lower high income super contribution threshold to $200,000; and
    · Increasing the Superannuation Guarantee to 12 per cent when fiscal circumstances allow.

Despite all these points, Mr Conway criticised both parties for “tinkering” with tax policy rather than enacting “substantive tax reform”.

“Either way, the Federal Parliament seems unwilling or unable to talk about holistic tax reform where the total tax mix is taken into consideration,” he said.

“As a community, we need to give politicians the license to be bold when it comes to tax reform. A tax system built on simplicity and equity should be our collective goal.”

Tax professional questions vastly divergent policies
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Adam Zuchetti is the former editor of MyBusiness and a senior freelance media professional, specialising in the fields of business, personal finance and property. In 2020, he also embarked on his own business journey – inspired in part by the entrepreneurs and founders he had met through his journalistic work – with the launch of customised pet gifting and subscription service Paws N’ All.

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