On 30 March 2015, the Treasurer released the expected tax discussion paper. Mr Hockey said the paper “begins a dialogue on how we create a tax system that supports higher economic growth and living standards, improves our international competitiveness and adjusts to a changing economy and new opportunities.” He said the “problem we face is that our current tax system, which was designed before the 1950s, is ill-suited to the 2050s.”
Mr Hockey added that a result of changes driven by globalisation and the rise of the digital economy, Australia’s heavy reliance on income taxes “may be unsustainable.” He said this over-reliance is projected to increase further, largely as a result of wages growth leading to individuals paying higher average rates of tax (bracket creep). The Treasurer also said that we need a more competitive corporate tax regime to encourage investment.
Following community consultation, the Government plans to issue a Green Paper covering tax options due to be released in the 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 2016.
The 203-page tax discussion paper is available on the Government’s bettertax.gov.au website.
The paper contains 66 questions for community consultation. Some questions posed by the paper are as follows:
- What should our individuals income tax system look like and why?
- Under what circumstances is it appropriate for assistance to be delivered through tax offsets?
- To what extent do our arrangements for work-related expense deductions strike the right balance between simplicity and fairness? What could be done to improve this?
- To what extent are the concessions and exemptions in the FBT system appropriate?
- To what extent is the rationale for the CGT discount, and the size of the discount, still appropriate?
- To what extent does the dividend imputation system impact savings decisions?
- Do the CGT and negative gearing influence savings and investment decisions, and if so, how?
- How appropriate are the tax arrangements for superannuation in terms of their fairness and complexity? How could they be improved?
- How important is Australia’s corporate tax rate in attracting foreign investment? How should Australia respond to the global trend of reduced corporate tax rates?
- To what extent does the tax treatment of losses discourage risk-taking and innovation and hinder businesses restructuring? Would alternative approaches be preferable and, if so, why?
- How could the current tax treatment of intangible assets be improved?
- How can tax avoidance practices such as transfer pricing be addressed without imposing an excessive regulatory burden and discouraging investment?
- Does the R&D tax incentive encourage companies to conduct R&D activities that would otherwise not be conducted in the absence of government support? Would alternative approaches better achieve this objective and, if so, how?
- How effective is the current range of tax concessions (such as CGT and industry specific concessions) at supporting small business engagement with the tax system?
- To what extent do the benefits they provide outweigh the compliance, complexity and revenue costs they introduce?
- To what extent are the tax settings (that is, the rate, base and administration) for the GST appropriate? What changes, if any, could be made to these settings to make a better tax system to deliver taxes that are lower, simpler, fairer?
Submissions are due by 1 June 2015.
Thomson Reuters will be preparing a special issue of Weekly Tax Bulletin.