Australian Parties Confirm Election Tax Policies

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

21 July 2010

Following the Australian government’s announcement of an election to be held on August 21, the battle lines represented by the tax policies of both the government and the opposition have been quickly confirmed.

The Coalition opposition, led by Tony Abbott, the Liberal party leader, has concentrated on producing budget savings totalling AUD45.8bn (USD40bn) in the four fiscal years from 2010-11 to 2013-14. Those savings, it is said, should bring the budget back into surplus sooner than forecast by the government, thereby reducing pressure on inflation and interest rates.

The opposition has included, in its calculations, savings of over AUD9bn arising out of its cancellation of the tax reductions which the present government had programmed to fully finance from its introduction of the proposed minerals resource rent tax (MRRT).

Such savings include: AUD1.9bn as the company tax could not be lowered to 29%, or reduced at an earlier date for small businesses; over AUD1.4bn as investments could not be made into a state infrastructure fund; nearly AUD2.4bn from cancelled improvements to the country’s superannuation system; and AUD1bn as there could be no 50% tax reduction on interest income.

In fact, Abbott is proposing a rise in company tax to finance an increase from 18 weeks to 26 weeks in the paid parental leave scheme, which it is proposed would be paid for by a 1.7% annual levy on companies’ taxable profits over AUD5m.

The present government on the other hand is sticking by its previously-announced tax reforms, arising out of the Henry tax review and the 2010-11 budget announced in May this year.

In a recent interview, Wayne Swan, the Deputy Prime Minister and Treasurer, said that “we certainly won’t be changing our policy on the mining tax. We’ve made it very clear there is a revenue stream there. We’ve put a design out. We are consulting about that design and we have absolutely no intention of changing our policy.”

He told the interviewer that, in his opinion, the opposition would have to change their policy as “they are opposing a revenue stream (from the MRRT) of AUD10.5bn, which will deliver a very substantial tax cut to small business and a tax cut to the company rate as well.”

Finally, with regard to climate change policies, both sides appear to have delayed for some time any substantive dealing with the problem. For the government, the then Prime Minister, Kevin Rudd, announced earlier this year that the proposed emissions trading scheme (ETS) had been postponed until no earlier than 2013.

As far as he was concerned, Abbott confirmed that a coalition government would never introduce what he has called the “carbon tax” represented by the ETS. As global agreement on climate change policy is some way away, he has said that he would not revisit the coalition’s climate change policy before 2015. In the meanwhile, the opposition’s budget savings include the discontinuation of some planned climate change initiatives, such as AUD300m allocated to the study of carbon capture and storage.

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