On the 30th of March 2015, the Treasurer released a Discussion Paper on tax reform, “Re:think: Better tax, better Australia” (“Discussion Paper”).
To help you understand what this Discussion Paper means, we’ve provided an overview of the Discussion Paper, the reform process and some of the major issues that are likely to impact upon Crowe Horwath clients as the national tax reform debate is played out over the coming years.
1. The tax reform process
The Government states that the purpose of the Discussion Paper is to start a national conversation about tax. Following consideration of submissions and issues raised in the Discussion Paper, an options (green) paper will be developed and published in mid to late 2015. The Government will then release its plan on how to improve the tax system before the next election.
2. What are the big issues the Government is considering?
It is important to note that there are no recommendations or proposals in the Discussion Paper. The Discussion Paper is a consultation document that will provide the backdrop to an ongoing tax policy debate.
The Discussion Paper notes the following general themes about the current tax system:
3. What’s in it for me?
The good news is that there are likely to be winners from the next round of tax reform if the Government is able to convince the Australian people that its vision for a future tax system is better than the status quo. Specifically:
4. The kicker
One of the Government’s biggest priorities is Budget repair. A reduction in tax rates as outlined above will not help this cause without countervailing revenue boosting measures. In this regard, not much is left off the table including:
To emphasise, the Discussion Paper contains no proposals on any of the above issues. However the Government is aiming to open up a debate about whether the tax concessions available to taxpayers that have access to the above are always appropriate in a modern competitive Australia.
Given the emphasis placed on the tax mix in the opening two chapters, it seems that a potential increase in the GST base or rate (and the revenue generated by this change) could be offered to state governments as an incentive to scrap some of the more inefficient state taxes such as payroll tax or stamp duty.
5. What to do now?
A watching brief should be applied to the tax reform space over the next 18 months for all Crowe Horwath clients. As proposals take shape it may be necessary to take action to shore up existing positions.