Australia Reviews Former Government's Tax Programme

by Mary Swire, Tax-News.com, Hong Kong

19 May 2008

Kevin Rudd's recently-elected Labor government has announced that it is reviewing a raft of tax legislation proposed under the former coalition government of John Howard.

At the time the Parliament was dissolved on 15th October, 2007, prior to the federal elections, the previous government was still to enact almost 60 announced tax measures, and the Rudd government has been working its way through this stock of announced but unenacted measures with a view to arriving at a decision on each of them and eliminating the considerable uncertainty that exists around them.

The Rudd government has already acted to introduce legislation to implement a number of them, including urgent measures such as that proposing tax-free treatment for superannuation lump sums paid to persons suffering from a terminal medical condition.

Measures which the government has decided should proceed, but where it proposes to make changes to the announcements by the previous government, were detailed in last week's Budget. The government also announced those measures that it has decided should not proceed.

The government has also released for consultation draft regulations and an explanatory statement for one of those measures, to allow the Australian Taxation Office to charge for valuations required in the course of issuing private rulings.

Given the volume of unenacted measures, and the need to give each measure proper consideration, final decisions have not yet been reached in relation to some measures. The government said that it will announce its decision in relation to these remaining measures as soon as possible.

Measures which the government intends to proceed with include modifications to the income tax consolidation regime, and amendments to the thin capitalisation regime, to accommodate certain impacts arising from the 2005 adoption of Australian equivalents to International Financial Reporting Standards. It will also finalise the implementation of the simplified imputation system and proceed with new tax treaties with Japan and South Africa.

The government has not, however, decided whether to press ahead with a programme of Tax and Information Exchange Agreements (TIEAs) with offshore jurisdictions. Nor has it yet made a final decision on foreign dividend tax proposals, a review of tax secrecy, disclosure and anti-avoidance provisions, amendments to company residency rules, and modifications to transfer pricing provisions.

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