ICA Calls For Different Approach To Australian Budget Tax Changes

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

02 February 2010

In its 2010-11 pre-budget submissions, Australia’s Institute of Chartered Accountants (ICA) has called on the government to overhaul its budget consultation processes, by making policy-only announcements in relation to tax when announcing the budget.

The ICA’s Tax Counsel, Yasser El-Ansary, said: “Some of the tax changes announced as part of last year’s federal budget resulted in significant disruption to the activities of many Australian businesses, and jeopardised the remuneration structures of many employees across Australia. What we would like to see is an alternative approach formalised and adopted by the government to safeguard the stability of Australia’s tax system at a critical time in fiscal planning for the year ahead.”

It is believed that the ICA is referring, in particular, to the government’s announcement in the 2009-10 budget of changes to the tax treatment of employee share schemes. Subsequently, the government had to address the concerns expressed by stakeholders, resulting in further legislation which was not finalised until October last year.

Mr El-Ansary added this would mean that budget announcements would become more about the government’s desire to modify the underlying policy in a particular area, rather than the detail of how the laws will actually be changed. “Well-established protocols exist to undertake consultation on tax policy matters during the course of the year, and a similar approach should be adopted on tax policy matters dealt with in the context of the federal budget,” he said.

The ICA has also made a number of recommendations regarding tax and superannuation policy, including a revamp of the tax laws that apply to private companies and a review of the government’s recent policy announcements in relation to the research and development tax regime.

The Institute is calling for reform of the superannuation excess contributions tax, which imposes extreme penalties for those who breach the contributions caps, and the abolition of tax laws that deny deductions, in certain situations, for taxpayers who make personal superannuation contributions in addition to employer contributions. The objective would be to create a level playing field for all employees, regardless of their salary sacrifice or work arrangements.

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