After a slow start, the current Federal Government are finally getting on with long overdue tax reform. While Mr Abbott’s first year of Government will be remembered for removing the Mining and Carbon Taxes, the Government is finally getting moving with proposals that have been flagged for years, but haven’t been enacted.
Three key items have recently been issued by Treasury:
- Tax Discussion Paper
- Reform of the Employee Share Scheme Rules
- Introduction of draft legislation reforming Managed Investment Trusts
The tax discussion paper is really just a platform for the Government to raise the fact that Australia’s tax system is outdated and uncompetitive on a global stage. Australia raises far more from income taxes and stamp duties than the global average and relies far less on GST. The Government appears to be gathering Australia’s opinion on how to reform taxes and planting the seed that reform will occur to allow it to take policies to the next election. Whether this consists of broadening the GST base or raising the rate, reducing the company tax rate, tampering with superannuation or other measures, only time will tell.
The reform of the Employee Share Scheme rules is again long overdue. The rules were reformed in 2009 and while some positives came out of that reform, there were many negatives. Accordingly, the Government is having another go at reforming the rules. The ‘big stick’ which has always caused confrontation is that employees can be subject to tax on a ‘discount’ provided for employee shares or options where there is no market to sell the shares or options to pay the tax. Under the new Bill currently before Parliament, there is an avenue to defer or exempt the ‘discount’ for shares offered by small start-up companies. This is a step in the right direction, but perhaps the reforms do not go far enough.
The Treasury has also released a long overdue exposure draft of legislation in relation to Managed Investment Trusts (MIT). This is designed to make Australia more internationally competitive. A MIT will be able to attribute on a reasonable basis the taxable income, exempt income and other income of the trust rather than relying on the current ‘present entitlement’ system which all trusts must comply with. This should provide more certainty and ease of reporting for MITs to investors.
The MIT tax system has been discussed for a number of years and been put on the backburner by successive Governments. The current Government has committed to moving forward with various ‘announced but not enacted’ measures, some more than 10 years old to provide certainty to taxpayers. Lets hope they can deliver on their promises.
To discuss how these propose changes impact your position, please speak with your usual Hanrick Curran adviser or call our tax Partner Jamie Towers on 07 3218 3900. Alternatively, register for a complimentary Tax Consulting Evaluation to determine opportunities to maximise after tax earnings in the future.