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Reforms 'Restore Integrity' To Australian Tax System

by Mary Swire,, Hong Kong

20 December 2013

The Australian Government has announced the outcome of its consultations on a number of unlegislated tax and superannuation measures.

Shortly after it came to power, the Coalition began a review of 92 outstanding tax proposals. It confirmed that 18 would be continued with, three would be amended and seven would not go ahead.

Consultations were subsequently launched on the remaining 64 measures. Of these, 16 will proceed, and 48 will be scrapped. These decisions will have a net negative financial impact of AUD3.1bn (USD2.77bn) in fiscal balance terms, and AUD2.9bn in underlying cash balance terms over the forward estimates period.

According to Assistant Treasurer Arthur Sinodinos, the blame for this cost lies with the former Labor Government, which introduced reforms that were undeliverable or unrealisable.

The majority of the measures given the green light date from the 2010-11, 2011-12, and 2012-13 Budgets. The Coalition will implement Labor's planned changes to the capital gains tax (CGT) treatment of earn-out arrangements, the income tax treatment of instalment warrants, and the goods and services tax (GST) reverse charge for going concerns. The oldest unresolved proposal was made in the 2004-05 Mid-Year Economic and Fiscal Outlook (MYEFO), and relates to the taxation of financial arrangements.

Among the schemes that will be axed are a research and development tax incentive, new tax credits, and a series of superannuation and GST reliefs.

The verdict on the delayed superannuation overhaul is intended to provide certainty for an industry the Government says has been swamped by modifications over the last few years. Although it will not proceed with recommendations for not-for-profit tax concessions at this stage, the Government will explore simpler alternatives to address the risks to revenue. It will also consider the barriers to the development of longevity insurance products, as part of a broader review of the regulatory arrangements for retirement income streams.

Sinodinos said that "clarifying the status of these measures is about the Government taking the necessary decisions to finally provide certainty on a large number of announced by unenacted taxation measures, the bulk of which were left behind by the ad hoc dysfunctional process of decision-making of the former Labor Government."

"We have delivered on our commitment to clear the backlog of tax measures and provide significant operational certainty for businesses and consumers," he added.

TAGS: capital gains tax (CGT) | Budgets | tax | business | insurance | retirement | goods and services tax (GST) | Australia | tax credits | ministry of finance | revenue statistics | tax reform | services | research and development

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