Australian Tax Review Consultation Paper Published

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

15 December 2008

Australia's Treasury Secretary, Ken Henry, has unveiled the first in a series of consultation papers which are aimed at simplifying the country's tax system in a bid to attract greater investment.

The paper is Australia's biggest taxation review in nearly 40 years, and is seeking to find ways of amending the current tax system so that it enriches and enhances the lives of the country's citizens - particularly those suffering from the impacts of low income or poverty.

Currently, individuals in Australia are subject to 125 different taxes, but the vast majority of government revenue (about 90%) is derived from only 10% of these levies. However, Henry is looking to amend - and where possible abolish - many of these tax regimes.

The review, which was first proposed back in May of this year, explores the possibility of cutting company tax rates, taxing fringe benefits in the hands of workers, drafting a new consumption tax regime, eliminating the need for personal income tax returns, and abolishing the stamp duty currently levied on the sale of property.

The new luxury car tax regime also came under Henry's fire, with the suggestion that it should be replaced with the more appropriately named "higher polluting" car tax. Proposals for a five-stage plan to reduce the formalities involved with tax administration have also been discussed.

In addition to this, Henry has also hinted that the country's pension system needs to be drastically re-structured in order to make life easier for retirees. The Treasury Secretary also pointed out that placing a ban on pensioners withdrawing their superannuation savings in one go upon reaching retirement would go some way to prolonging their income.

An exemption on income tax for over-65s choosing to work beyond retirement was also discussed, along with the possible effects of raising the age at which an individual becomes eligible for a state pension.

Henry's suggestions (which are yet to become recommendations) were welcomed by the country's Treasurer, Wayne Swan, who announced that he is keen to take some of them to the next stage.

However, Swan said that it would impossible for all of the recommendations to be implemented quickly, and proposed a "roadmap" for longer-term tax reform.

Henry is now calling for more widespread public input on the suggestions.

Recommended