Australian Government Delays Certain Business Tax Reforms Until 2002

Mary Swire, Tax-news.com, Hong Kong

26 March 2001

The Australian government's much-vaunted business tax reform package is apparently too much all at once for some companies, says the government, which declared last week that some of the reforms would be held over until next year. The reason? A number of companies simply are not ready to embrace change so rapidly.

The government's tax package, entitled "Tax Reform: Not A New Tax, A New Tax System", included the Goods and Services Tax (GST), Australian Business Number, Pay As You Go (PAYG) and other tax reforms. It also set out plans for comprehensive business tax reform. It's essentially the result of a major review of business taxation begun in August 1998 which consulted with business and industry on possible reform of the tax system. As part of this process the Review Committee issued a number of discussion papers. The final report - Review of Business Taxation: A Tax System Redesigned - was released by the government in September 1999, along with the government's decisions on many of the measures recommended.

Yet it seems that many businesses cannot take on board so much change in a short space of time. Treasurer Peter Costello said in a statement: 'While some large businesses are prepared and ready for the consolidation regime, consultation has shown that the majority of business (particularly small and medium enterprises) is not yet ready.'

It's also true that the Government has been slow to issue detailed rules for a number of the proposed changes, leaving insufficient time for new systems to be installed by the original July 2001 implementation date. Some measures will start as originally intended on July 1, but a whole raft of measures will be delayed by a further 12 months. Several pieces of the jigsaw are already in place, but Mr Costello said an "orderly phasing" of further changes would take place to allow business to adjust to the new provisions: 'Those measures which will be deferred to 1 July 2002 include the consolidation regime, general value shifting rules, foreign income account and non resident withholding tax regime, and simplified imputation arrangements,' he stated.

The measures which will begin as planned from 1 July this year include the simplified tax system for small business, a new unified capital allowances system to streamline the present law and to recognise certain blackhole expenditures, the proposed thin capitalisation measures applying to multinational corporations which will strengthen the Australian tax base and a new test in the tax law to distinguish debt from equity.

According to the local press, Australia's largest accounting group, CPA Australia, have welcomed the delay, saying it helped restore the business community's faith in tax reform.

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