Australian Tax Cuts Face Twelve Month Legislative Delay

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

06 June 2005

Australian Tax Commissioner Michael Carmody has warned that taxpayers may be forced to wait for more than a year to receive the tax cuts announced in the last budget as a result of delaying tactics by the opposition Labor party in Parliament.

Mr Carmody told a Senate estimates committee last week that withholding-tax schedules need Parliament's approval to allow the cuts to come into effect on July 1, otherwise taxpayers will have to wait until they file their tax returns next year to get their money.

This was a fear echoed by Prime Minister John Howard, who stated in an Australian radio broadcast that Labor Party is using "nuisance" tactics to block the legislation, and urged Labor leader Kim Beazley to "come to his senses" and allow the tax cuts to pass.

"He's behaving very negatively by this nuisance gesture," Mr Howard remarked.

"It will cause an enormous amount of complexity for small business, it will irritate people, but it lacks long-term substance, it's not sensible opposition," he added.

Labor has objected to the proposals in the budget announced by Treasurer Peter Costello last month on the grounds that they do not give enough tax relief to those on low incomes.

However, Beazley has refuted the suggestion that Labor will obstruct the passing of the withholding tax schedules, and has claimed that only the government itself has the ability to delay the legislation.

"There is absolutely no chance that anything we could do could block tax cuts for 12 months," he responded, adding that:

"What (the government) is trying to do is to get us to say before the issue is properly debated in the Senate that 'Oh well it doesn't matter'.

"But it does matter, it does matter that ordinary Australian taxpayers are getting shortchanged."

Under the budget measures, Australia's 17% income tax rate will be reduced to 15% from 1 July 2005. Additionally, the tax threshold for the 42% and 47% rates will also be raised on 1 July 2005 and again on 1 July 2006, meaning that taxpayers will not reach the highest marginal tax rate until they earn around 3 times average weekly earnings.

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