|
 On
13 May 2008, Ken Henry was appointed to chair
'the most comprehensive review of Australia's
tax system' in twenty years and asked to find
a 'tax structure that positions us to deal with
the demographic, social, economic and environmental
challenges of the 21st century.'
After wading through 1,508 public submissions,
endless face-to-face meetings and analysis,
the Committee delivered its Final Report
to the Government just before Christmas
last year.
However 27 of the 138 recommendations have
already been ruled out - either partially
or in full - and many others look set to
disappear into the Government's vague '10-year
agenda' of reform.
Even the proposals that have been adopted
won't see the light of day until 1 July
2012 at the earliest.
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Summary of Key Government
Proposals
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Financial
Year
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Policy Change
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2009/10
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•
No change
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2010/11
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• No change
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2011/12
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• No change
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2012/13
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•
40% Resource Super Profit Tax introduced;
• Extension of the $50,000 concessional
contributions cap for people aged
over 50 with super account balances
of less than $500,000.
•
Super subsidy of up to $500 available
to those on incomes of less than $37,000
per annum to offset the 15% contributionstax.
•
New faster depreciation rules for
small business.
•
Company tax rate cut to 28% for 'eligible
small businesses.
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2013/14
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•
Superannuation Guarantee rate increases
to 9.25%.
•
SG contribution
age limit will increase from 70 to
75.
• Company
tax rate cut to 29%.
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2014/15
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• Superannuation
Guarantee rate increases to 9.5%.
• Company
tax rate cut to 28%.
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2015/16
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• Superannuation
Guarantee rate increases to 10%.
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2016/17
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• Superannuation
Guarantee rate increases to 10.5%.
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2017/18
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• Superannuation
Guarantee rate increases to 11%.
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2018/19
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• Superannuation
Guarantee rate increases to 11.5%.
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2019/20
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• Superannuation
Guarantee rate increases to 12%.
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Indeed, with a Federal
election due later this year, and Labor
now trailing in the polls, it's difficult
to know which ones (if any) will end up
as legislation.
So far, the biggest impact has been on mining
stocks where prices have dived nearly 5%
over the past two trading sessions. While
the proposed 40% Resource Super Profits
Tax (RSPT) could lead to a rethink on some
exploration activity, it is unlikely to
create as much havoc as mining companies
and business lobbyists claim. Similar taxes
are levied in Norway, Canada and the United
States, and economic modeling suggests that
investment, jobs and production will not
suffer as a result of the RSPT.
There are also some 'sleepers' in the Final
Report that have not garnered much press
attention so far.
The first is Recommendation 17b which argues
that the capital gains tax regime should
be simplified by removing the 'active asset'
50 per cent reduction and the '15-year'
exemption concessions which could have a
major impact on the retirement plans of
many business owners and self-employed professionals.
The second is Recommendation 19. This proposes
that the rate of tax on superannuation fund
earnings be halved to 7.5%, which is good
news, but it also recommends that the 7.5%
tax should apply to capital gains (without
a discount) and the earnings from assets
supporting superannuation income streams'
(i.e. pension accounts). The Government
has declared that it will not remove the
tax-free status of superannuation payments
for those aged over 60 but at this stage
Rec.19 is still on the table.
This could have significant implications
for SMSFs with large unrealised capital
gains and trustees in this situation should
review their options and see whether any
changes need to be made.
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