2 Apr 2015
The Federal Treasurer has released a discussion paper on Australian tax reform canvassing a wide range of issues including income tax, company tax, the tax treatment of superannuation, dividend imputation, capital gains, the rate and scope of the GST and international tax issues.
The discussion paper is aimed at beginning a significant public debate about tax reform and the future of the taxation system.
Public and industry responses will inform the Government's tax options Green Paper, due to be released in the second half of 2015. The Government will seek further feedback on those options before putting forward policy proposals for consideration by the Australian people in a white paper in 2016.
The Government is warning that Australia's ‘heavy reliance’ on business and personal income taxes may become unsustainable in coming decades, and says the country needs to quickly reform its tax regime to adapt to changes in the global economy. Among several issues pertinent to investors is the fact the Government is questioning Australia's dividend imputation system and pushing the case to cut the corporate tax rate.
Essentially the Government is using this discussion paper to kick-start debate about Australia's tax system, saying the current system was ‘designed before the 1950s and is ill-suited to the 2050s’.
Today's release will kick-start ongoing debate around Australian tax reform which has potential to both positively and negatively impact Australian corporates, investors and constituents in both the short and long term. For better or worse, debate around such topics as dividend imputation and CGT has potential to create uncertainty in these areas, potentially weighing against markets.
There’s no need to act on today's news, aside from being aware and informed, and to get ready to consider these issues more deeply as more news comes to hand over the coming 6 to 12 months.
As more information becomes available, we will keep you informed.
Some key (and interesting) stats
- the current tax system was designed before the 1950s
- around 300,000 Australians are expected to move into the second highest tax bracket over the next two years
- in just 10 years, nearly half of all taxpayers will be in the top two tax brackets – an increase from 27% today to 43% in 10 years’ time
- about 70% of Commonwealth tax revenue is collected from personal and company income taxes
- a dozen companies pay around one third of Australia’s company tax
- the Federal Government’s Social Services portfolio alone currently represents over one third of all Commonwealth Government spending (coming in at $150bn this year); that amount of spending is equivalent of around 80% of all income tax currently collected
- the number of Australians aged below 65 is falling dramatically; it is the under 65s who traditionally pay the most personal income tax
- of all the tax collected across the OECD (the world’s developed economies), around 34% comes from personal and company income taxes; the Australian Government collects over 70% from those same sources
Source of stats: Australian Government Better Tax http://bettertax.gov.au/publications/discussion-paper/