Australian Minister Sets Out Tax Reform Agenda

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

11 April 2011

Bill Shorten, Australian Assistant Treasurer, took the opportunity when giving the keynote address at the Institute of Chartered Accountants in Australia’s national tax conference, to promote the fact that his government’s tax reforms have a central role to play in encouraging investment.

He said that if Australia is to take the best advantage of its abundant natural resources and skilled workforce the country needs physical capital as well: the computers, electronics, industrial machinery, trucks, trains and all the other equipment that powers a modern economy.

“It is to all our benefit that we remain able to attract investment from overseas. With more and better tools at their disposal, working Australians are more productive and command higher wages,” said the Assistant Treasurer.

He stressed that the government's tax reform agenda has a strong focus on ensuring that Australia remains an attractive place to invest.

“Cutting the company tax rate is an important step along this road. This recognizes the benefits to investment and growth from lower company tax rates and a trend to lower rates across the OECD over the past 30 years.”

Referring to the corporate tax rate being reduced to 29% for the 2013-14 income year as a result of the Mineral Resource Rent Tax, he said that small businesses will also benefit from getting a head start to the company tax rate cut in the 2012‑13 income year.

Shorten said that there were approximately 770,000 companies that can benefit from the corporate tax reduction, and out of those approximately 720,000 are small business sized enterprises.

“Making depreciation rules for small businesses more generous and simplifying them at the same time will encourage small businesses to invest in productive assets and reduces the red tape with which they have to contend,” he said.

From the 2012-13 income year small businesses will be able to immediately write‐off assets costing up to AUD5,000 (up from AUD1,000 under the present law), and write-off all other assets (except buildings and other capital works) in a single depreciation pool at a rate of 30%.

“As part of our fiscal strategy, the Gillard Government has committed to keeping the tax burden (taxation as a share of GDP) on average below the 2007‑08 level to ensure budget surpluses are delivered through disciplined spending and not higher taxation,” he said.

According to his figures, Australia’s tax-to-GDP ratio has dropped from 23.5% in 2007-08, when his party came to office, to 20.3% in 2009-10. He said that among the 30 OECD countries, Australia's tax to GDP ratio is the sixth lowest, with Chile, Mexico and Turkey having ratios a few percentage points lower than Australia's. Korea and the US are lower but by no more than one percentage point of GDP. The other 24 OECD countries all have higher total tax burdens than Australia does, he stressed.

“We're determined to keep Australia a lowed taxed OECD economy where taxes are fair, simple, sustainable and pro-growth."

“We want to keep the tax burden low for Australian families for many of the same reasons we want to keep it as low as reasonably possible for business – it all comes down to incentives."

“One of the best ways of ensuring that all Australians have a chance to share in a prosperous economy is to ensure that they have good incentives to go out and work."

“In this context it's important to remember that our government has delivered, in full, the tax cuts it announced before the 2007 election."

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