Australian Government May Bring Forward Planned Tax Cuts

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

15 January 2009

Pressure to bolster the economy against the effects of the current financial downturn has prompted the Australian government to consider accelerating its tax cut proposals by as much as twelve months, it has been revealed.

The tax cuts were first announced in the budget in May 2008, when Treasurer Wayne Swan outlined a tax reduction program which would, among other measures, introduce a AUD46.7bn four-year package of personal income tax cuts, in addition to a cut in withholding tax for managed funds to help boost the country's financial services sector.

The introduction of the tax cuts was due to be staged in three phases over four years, with the first coming into effect on July 1 of this year, although the latest news suggests that their introduction will be fast-tracked.

The tax concession package is aimed primarily at lowering tax burdens for the country's low and middle earners.

This latest move by the Rudd government reverses the previous reluctance of the government to bring forward tax cuts. Shortly after details of the stimulus package were released by the Treasurer, Mr Rudd had dismissed a suggestion from the opposition that some tax cuts should be brought forward, arguing that it was more important that the government concentrate on its "nation-building agenda" of infrastructure investment.

One of the most significant tax cuts announced by Swan relates to the reduction of withholding tax on certain distributions from Australian managed investment trusts (MITs) to foreign investors, from a non-final rate of 30% to 7.5%, making Australia's withholding tax rate one of the most competitive in the world.

Recommended