Friday, 30 August 2013

The words no one wants to hear: “tax reform”

"It's sad, so sad; it's a sad, sad situation; and it's getting more and more absurd..." Elton John’s timeless lyrics could well be applied to the lack of real tax reform plans in Australia today.

As part of the president’s role and as part of The Tax Institute’s advocacy, I have met with a number of politicians and their advisers on various tax changes. On every occasion, I have used the opportunity to raise the issue of "tax reform".

These must be the dirtiest words in politics. I can understand why. They mean that someone has to give up "something" on the promise of a theoretical "something else". This involves a feeling of impending loss and grief, maybe even triggering the memory of a previous change that failed to meet expectations.

It’s time to remember that our political leaders are there to represent the community, their shareholders, and to put the interest of the shareholders ahead of their own.

Tax reform is not new. Ken Henry delivered his report officially to government on 23 December 2009. The 138 recommendations are now covered in dust.

The introduction to the report outlined the need for tax reform:

“… Australia is now facing a different set of economic, social and environmental circumstances to those that have shaped tax and transfer policy since federation. Emerging demographic, health and other pressures on budgets at all levels of government, and expected challenges to our economic circumstances, call into question the durability of the tax and transfer system.”

These issues are as real today as they were in 2009.

The Intergenerational Report 2010 provided some startling numbers. It referred to GDP being a function of the three Ps: Population, Productivity and Participation. It stated that Australia’s population is to increase to 35.9 million by the year 2050. Those aged over 65 are to increase from 13.4% to 25% of the population. And those aged over 85 are to grow to 5% of the population (1.6 million people). These numbers will have a dramatic impact on the government spending requirements necessary to maintain and deliver social and health services to this segment of the community.

It is estimated that government spending will need to increase by 4.7% of GDP (from 22.4% in 2015-16 to 27.1% in 2049-50) to provide these services. Our current tax revenues for 2015-16 are estimated at 25% of GDP. At this rate, our expenditure on health and aged care will exceed our revenue collections based on our current tax profile.

If we also consider the percentage of our population participating in the workforce (those aged between 15 and 65), we see this segment of the population decreasing by 7%. That is, from 5 workers supporting 1 person who is over 65 to 2.6 workers supporting 1 person over 65. To round out the discussion, we add the third dimension: productivity. There has been considerable discussion, following the federal Budget, on our need to move our economy away from being dependent on the mining sector to other sectors.

Our current reliance on the collection of personal tax cannot support projected government spending. Likewise, the prospect of increasing company tax does not lead to positive outcomes for businesses operating in a global environment when overseas locations provide both reduced labour costs and lower corporate tax outcomes.

For state governments, the issues are wider. Rightly or wrongly, state governments have increased spending instead of eliminating the inefficient taxes that were promised as part of the introduction of GST. This spending level has grown disproportionally to actual GST revenue shared between the states (GST revenue is increasing but not as much as was expected). The effect of this is that the states are running deficit budgets, and they have decreased credit ratings and increasingly rely on inefficient taxes. The argument then becomes multi-dimensional — not only with the federal government to increase state funding, but then, between states, as to how the pie is sliced.

The federal and state governments need to consider the impacts of an ageing population on our economy, the effect on tax receipts from our working population as the age mix changes, and the mix of these tax receipts. They need to work collectively to improve the efficiency of our tax system. This is called “tax reform”.

There is no white knight on the horizon that will put dollars on the table to fund a redistribution of tax revenues. It will only come through debate, consultation and policy change. Time continues to run down, our population is ageing, and businesses continue to decide where they will locate their business in the 21st century.

It’s not for me to say whether broadening the GST base and increasing the rate are the solution. It’s not for me to say broaden the land tax base and abolish stamp duty. It is up to each of us to consider these issues and put forward our views. We are the leaders in our profession, tax. We should show leadership and start conversations. The more conversations, the more people will listen, and maybe this will lead to research and debate. Then we may have reform.

By the way, did you have a beer or a glass of wine to celebrate our 70th anniversary on 16 July 2013?

Till next time...

Stephen
Westaway
Stephen Westaway is President of the National Council at The Tax Institute.

The Tax Institute is 
Australia's leading professional association in tax. Its 13,000 members include tax agents, accountants and lawyers as well as tax practitioners in corporations, government and academia.

Thursday, 29 August 2013

The Tax Specialist – download free highlights from 2013

Download a copy of these five free articles from The Tax Specialist.

These popular articles from 2013 include:

  • Garnishee notices: FCT v Park - Dr Philip Bender
  • The life estate and testamentary discretionary trust in modern wills - Emma Munro and Kevin Munro, CTA
  • Actual v deemed - the edge of reality - Dr Damien Lockie, CTA-Life
  • Capital management of financial institutions and the related tax issues - Julian Pinson, Tricia Ho-Hudson and Anthony Frost, CTA
  • Changing perpetuity periods and vesting dates - David Marks, CTA

Download the articles [PDF], and subscribe to The Tax Specialist on our website today.

The Tax Specialist
Australia’s leading journal for corporate tax professionals, The Tax Specialist features in-depth commentary from the profession’s leaders.

The Tax Institute is Australia’s leading professional association in tax. Its 13,000 members include tax agents, accountants and lawyers as well as tax practitioners in corporations, government and academia.

Monday, 26 August 2013

2013 Tax Time Issues

Tax Time 2013

As members would be aware, Tax Time 2013 is now well underway. For the most part, the systems seem to be functioning well from both the perspective of tax practitioners and the ATO.

Members should note that The Tax Institute meets regularly with the ATO to discuss any issues that have arisen during this very busy time for tax agents and taxpayers alike. Consequently, any concerns members may have will be brought to the attention of the people who can assist to resolve these issues. We also regularly report the latest issues so that members are aware of them - the details of the latest Tax Time 2013 issues can be found in the TaxVine newsletter.

Members are always encouraged to report to us their experiences (positive or negative) with issues relating to Tax Time 2013, even if they just seem like small hiccups, as reporting the issues and having them addressed quickly will help everyone relying on essential systems, such as the Portal, during this time. If there is something concerning you, please get in touch.

Election 2013

We are slowly seeing the tax policies of the Federal Government and Opposition come to light over the course of the election campaign. So far, we have seen promises of a company tax rate cut (in varying forms) and the possible removal of the carbon and mining taxes.

Once the parties have released all their tax policies, we will have a better picture of what the tax landscape may look like under the next government.

The Tax Institute
Stephanie Caredes CTA is Tax Counsel of The Tax Institute.

The Tax Institute is Australia’s leading professional association in tax. Its 13,000 members include tax agents, accountants and lawyers as well as tax practitioners in corporations, government and academia.

Friday, 23 August 2013

Voices from history: Sharyn Long CTA

Sharyn Long CTA
Sharyn Long, CTA, Managing Partner, Sharyn Long Chartered Accountants

Sharyn Long is a Chartered Tax Adviser, and has been a member of the Institute for 27 years. A long-time presenter and volunteer at Tax Institute events, we sat down with Sharyn at the Perth national convention to talk about her memories of The Tax Institute.

What have some of the highlights of your time as a member been?

The first time I presented at the national convention in Melbourne years ago, it was the most people I had ever spoken to.

The launch of the education program that allows candidates to achieve their qualifications in tax — this was a great initiative and we have put a number of our staff through the program, with great results.

I’ve gained a number of long-standing loyal clients from my involvement with the Institute.

How has the Institute helped shaped the profession over the years?

I specialise in superannuation and, while this is now a mainstream area for many accounting firms, that hasn’t always been the case.

I’ve also given many presentations for The Tax Institute, including at several national conventions, over the years — these forums have helped me to develop my technical knowledge, as well as my presentation skills.

Do you have a message for the Institute and its members on the 70th anniversary?

Without a doubt, the Institute has played a critical role in the development of tax professionals in Australia — congratulations on reaching 70.

70 years supporting the tax profession
In 2013, The Tax Institute is celebrating 70 years of supporting the tax profession.

The Tax Institute is Australia’s leading professional association in tax. Its 13,000 members include tax agents, accountants and lawyers as well as tax practitioners in corporations, government and academia.

Monday, 19 August 2013

GST just ammunition in slanging match

There has been a lot of political sparring over the GST in the last week and most of it has been part of a tried and true scare campaign.

It is disappointing to see such a fundamental component of our tax system reduced to ammunition in a political slanging match.

The Tax Institute has long called for a mature debate on our future tax system - a debate that must include the $50 billion per year GST. This has also featured as a high priority in our recent member survey of election priorities, particularly the reform of State taxes supported by increased funding from the GST. It is clear that tax professionals want the Government to take a leadership position on State tax reform, which includes increasing reliance on the GST and abolishing inefficient and complicated State taxes, such as conveyance duties and insurance duties.

The Federal Coalition’s proposed tax policy white paper has the potential to soon mark the beginning of a mature political debate on the role of the GST in our tax system.

Without reform, our tax system will not be able to provide sufficient revenue to meet the significant spending commitments of the coming years. Worse still, our current tax system continues to hamper economic growth, with State taxes such as stamp duties on homes and insurance duties amongst the most inefficient taxes in the country.

We know that 90% of the entire tax take in Australia is generated by only 10 taxes, with an additional 115 taxes generating the remaining 10% of revenue.

We will continue to advocate for a mature debate on constructing a simplified tax system that supports economic growth and a shift towards more robust revenue streams.

Here’s hoping our political leaders are listening; after all, it is essential to safeguard Australia’s future.

Robert Jeremenko
Robert
Jeremenko
Robert Jeremenko CTA is Senior Tax Counsel of The Tax Institute.

The Tax Institute is Australia’s leading professional association in tax. Its 13,000 members include tax agents, accountants and lawyers as well as tax practitioners in corporations, government and academia.

Friday, 16 August 2013

Update your CPD calendar

Upcoming events

In addition to the CPD events held every week in each state, there are a number of flagship events coming up in August — if you’re not already registered, visit our website for more information so that you don’t miss out. Some events allow you to earn more than 10 structured CPD hours in one go:


Accounting for common tax transactions

Our popular new series of practical workshop events were recently held in locations around the country. If you missed a session, you can now catch up online, with each workshop running as a webinar throughout August and September.

CTA1 Foundations intensive option

Our intensive study format for the CTA1 Foundations introductory tax course has proved popular with up-and-coming tax professionals who are looking to gain the Course in Australian Taxation Law qualification.

What’s the difference? The intensive format is condensed over a six-week period, concluding with an exam. But all candidates still receive the usual support through online and printed resources, as well as web/teleconference tutorials for some units.

Early bird enrolments don’t close until 9 September 2013. Find out more on our website.

New titles out now

Our publishing team has been hard at work preparing new editions of some of our most popular titles.

We’ve just published the 10th edition of Trust Structures Guide, and the 7th edition of CGT Small Business Reliefs, both of which are also available in new eBook format for your iPad or Kindle. We have a range of other new editions still to come in 2013, including our brand new title, The Tax Adviser’s Guide to Part IVA.

Noel Rowland
Noel
Rowland
Noel Rowland is Chief Executive Officer of The Tax Institute.

The Tax Institute is Australia’s leading professional association in tax. Its 13,000 members include tax agents, accountants and lawyers as well as tax practitioners in corporations, government and academia.

Monday, 12 August 2013

Company tax rate reduction & more on the self-education expenses cap

Self-education expenses cap

Last Friday, the Federal Government's Economic Statement contained the decision to defer the start date of the self-education expenses cap to 1 July 2015 to allow for further consultation.

The Government has demonstrated that it is starting to listen to community concern by announcing this delay. It is a welcome first small step in the right direction in the Government's handling of this policy measure.

At the same time, the Government has acknowledged the need to minimise the potential impact of this measure on genuine continuing professional development and other education needs.

The Tax Institute has been deeply concerned for some time now by the intention of the Government to use such a blunt policy instrument to target certain perceived excessive claims since the measure was first announced in April this year.

It has been especially concerning as there are potentially much more suitable alternatives, such as tightening the Tax Office's administration of the existing law, that could be used to target the so-called excessive claims causing concern to the Government.

A blunt instrument like the proposed cap unfairly penalises Australians who are endeavouring to improve their qualifications for work or business who are not incurring unnecessarily excessive costs.

Building an educated workforce should be one of the key objectives of Government.

Opposition's pledge to reduce the company tax rate

The Federal Opposition's announced reduction in the company tax rate is a welcome development for small and medium business across the country. The pledge to reduce the rate of company tax by 1.5% is an overwhelmingly positive move that will deliver economy-wide benefits.

The Tax Institute has long-supported reducing the company tax rate in the medium term from its current 30% to the 25% recommended by the Henry Tax Review. The proposed modest cut to a 28.5% rate is a step in the right direction and Australians across the board will stand to share in the benefits of increasing Australia's attractiveness as a destination for foreign investment.

When this announcement is coupled with the Opposition's policy to increase the company tax rate on companies with a taxable income of more than $5 million to fund a paid parental leave scheme, the company tax rate cut will be neutral to those businesses and a real reduction for companies earning less than $5 million.

Reducing the burden of company tax for small and medium business will encourage innovation and entrepreneurship and allow companies to pass on the savings to their workers in the form of increased wages or additional recruitment, increasing both productivity and employment.

Election campaign (officially) begins

With the Prime Minister having set 7 September 2013 as the Federal Election date, the government has officially assumed a 'caretaker role'. This convention acknowledges that because the Parliament has been dissolved for the period of the election campaign, the Executive arm of government cannot be held accountable for its decisions in the same way. This caretaker period continues until the election result is clear, or if there is a change of government, until the new government is appointed.

During this time the ordinary business of government continues, but the government must not act to bind an incoming government. This means that the government avoids: making major policy decisions that are likely to commit an incoming government; making significant appointments; and entering major contracts. If the government does do any of the above, it must consult the Opposition beforehand.

However, the convention applies only to the making of decisions rather than their announcement, so decisions made by the government before the dissolution of Parliament can be announced during the caretaker period without breach.

The effect of this on The Tax Institute's advocacy on behalf of members is that whilst interaction with the various arms of government can and will continue, the active decision making of government will not recommence before the election.

Robert Jeremenko
Robert
Jeremenko
Robert Jeremenko CTA is Senior Tax Counsel of The Tax Institute.

The Tax Institute is Australia’s leading professional association in tax. Its 13,000 members include tax agents, accountants and lawyers as well as tax practitioners in corporations, government and academia.

Friday, 9 August 2013

The Tax Institute in the 1960s

Celebrating 70 years of supporting the tax profession: 1960s

Last month, we related the founding of The Tax Institute in a special anniversary edition of Taxation in Australia. This month, we look at the Institute’s history during the booming 1950s and 1960s, as it begins to take the shape of the organisation we know today.

1960s

As the 1960s began, the Liberal Party remained in government and made few changes to the tax system. Decimal currency was introduced in 1966 and the economy continued to boom, with the mining sector growing from the lifting of restrictions on iron ore exports.

Institute membership also continued to grow, reaching 2,000 members part way through the decade, and the first state conventions were held around the country.

The 1960s also marked the birth of Taxation in Australia, with the journal replacing traditional circulars and memorandums in September 1963. By the end of the decade, the journal was at 32 pages and featured news, reports of changes in tax legislation, and articles by some of the best and brightest in the profession — sound familiar?

70 years supporting the tax profession
In 2013, The Tax Institute is celebrating 70 years of supporting the tax profession.

The Tax Institute is Australia’s leading professional association in tax. Its 13,000 members include tax agents, accountants and lawyers as well as tax practitioners in corporations, government and academia.

Thursday, 8 August 2013

The Tax Institute in the 1950s

Celebrating 70 years of supporting the tax profession: 1950s

Last month, we related the founding of The Tax Institute in a special anniversary edition of Taxation in Australia. This month, we look at the Institute’s history during the booming 1950s and 1960s, as it begins to take the shape of the organisation we know today.

1950s

After a long period of depression and war, the 1950s marked the beginning of a period of economic strength. In Australia, the government and the country’s tax landscape were largely stable and there were low levels of unemployment.

Things were looking up, and Australia was beginning to make an appearance on the world stage with a wave of European migration, the Queen’s visit in 1954, and the Olympics held in Melbourne in 1956.

The Tax Institute was incorporated as a company limited by guarantee in the Australian Capital Territory on 15 July 1952, and by 1953, membership had grown to a respectable 1,275. The first membership committee was formed in 1953, along with the legislation and service committee, a publicity committee and a tax administration committee.

Since its inception, The Tax Institute was actively involved in organising submissions to Treasury for the betterment of the tax system. In 1950, the Institute was invited to discuss with the newly formed Commonwealth Committee on Taxation any suggested amendments to the Commonwealth Income Tax Assessment Act.

Some of the Institute’s suggestions were later adopted, including the merging into one levy of social services contribution and income tax, the reversion to a system of treating concessional allowances for dependants, medical, dental and optical expenses, life insurance premiums, rates on non-income-producing property and gifts, by way of a direct deduction from a taxpayer’s assessable income (instead of by way of rebate as previously) and the replacement of the former closely graduated scale of rates by a system of “stepped” rates applicable to various brackets of income.

Despite only occasional success, the valuable contributions and dedication by committee volunteers and tax experts meant that advocating for change to benefit the tax-paying public continued well into the 1950s and 1960s and beyond.

The 1950s also marked the expansion of the Institute’s education offerings, with the first national convention held in Katoomba in 1954, with 47 attendees. Attendees participated in games of bowls, golf and tennis. The convention became an annual event, moving to Bowral in the late 1950s and 113 delegates attending by 1960.

70 years supporting the tax profession
In 2013, The Tax Institute is celebrating 70 years of supporting the tax profession.

The Tax Institute is Australia’s leading professional association in tax. Its 13,000 members include tax agents, accountants and lawyers as well as tax practitioners in corporations, government and academia.

Wednesday, 7 August 2013

July’s free member tax presentations

Here’s a selection of presentations from our leading events series.

Members of The Tax Institute can access these presentations for free by clicking the links below (make sure you’re logged in to our website first). Non-members can purchase the presentations for only $12 each.

Many presentations have a related technical paper, which can also be found on the presentation’s page.


Tax Knowledge eXchange
The Tax Institute runs over 300 CPD seminars a year, and all papers and PowerPoint presentations provided by the speakers from our seminars are available through the website individually or through a Tax Knowledge eXchange subscription.

Monday, 5 August 2013

#ScrapTheCap and the taxing of trusts

Modernising the taxation of trusts

The Tax Institute continues to be at the forefront of advocating for reform of the rules governing the taxation of trust income. For many members who struggle daily with the complexities of the current laws, modernisation of the tax laws affecting trusts would be welcome.

The Tax Institute has been working hard over the years to advocate for trust tax reform and to ensure that the reform project does not stall. With the Government’s most recent focus being on certain trust tax integrity measures, we have been part of the conversations and have made a further submission to the Government. This submission has also re-emphasised the importance of holistic reform of Division 6.

Capping of self-education expenses

The groundswell of concern about the Government’s intention to impose a $2,000 cap on self-education expenses continues to gain momentum. This week The Tax Institute, and other members of the #ScrapTheCap alliance, met with advisers to the Treasurer, the Hon Chris Bowen MP. We took the opportunity to once again outline the adverse impact of the changes on legitimate claims for self-education expenses.

I urge members who feel strongly about this issue to contact their local Federal Member of Parliament to express their views. You can locate your federal electorate and local federal member on the AEC website. Then go to the #ScrapTheCap website, which has a facility on it that allows you to email your federal member directly.

Payroll tax

Last week The Tax Institute held its 13th Annual States’ Taxation Conference. This conference provided the ideal platform for the Tasmanian Commissioner of State Revenue to launch a new initiative on behalf of all of the State and Territory governments: www.payrolltax.gov.au.

For members who wade through the various States’ and Territories’ payroll legislation on a daily basis and for others who just dabble occasionally, this new website provides a gateway to all States’ payroll tax legislation. This initiative stems from the project to harmonise aspects of payroll tax legislation that has been underway for some years now.

Robert Jeremenko
Robert
Jeremenko
Robert Jeremenko CTA is Senior Tax Counsel of The Tax Institute.

The Tax Institute is Australia’s leading professional association in tax. Its 13,000 members include tax agents, accountants and lawyers as well as tax practitioners in corporations, government and academia.

Friday, 2 August 2013

Announcing the winners of the membership renewal competition

This month, we announce the winners of the early bird renewal competition.

Congratulations to our membership renewal early bird winners

Congratulations to Ms Bee Lim, FTI, Ms Lauren Moses, Mr Michael Briffa, ATI, Mr Mario Pleno, ATI, and Ms Elizabeth Goodwin, CTA, for winning a $1,000 each in Day to Day accounts with HSBC Bank Australia just for renewing their membership online.

Thanks to all members who entered, and to our business alliance partner HSBC for the generous prizes.
In the event that you have overlooked your membership renewal, we have extended your benefits to date. Please renew your membership by Friday 16 August to maintain your exclusive membership benefits.

New student and graduate careers resources

Know any students or recent graduates considering a career in tax? Let them know about The Tax Institute’s new blog at CareersInTaxBlog.taxinstitute.com.au and Facebook page at facebook.com/CareersInTax.

Voices from history

This month, we continue our 70th anniversary celebrations with more voices from history and platinum jubilee dinners held at state events around the country. Visit the blog for regular stories from the Institute’s past and visit taxinstitute.com.au/70 to watch the 70th anniversary video.

Tax rates table 2013-14

In this month’s journal, you’ll find your complimentary copy of the Institute’s handy desktop tax rates table — an indispensable aid for access to the most commonly used tax rates at your fingertips, including the Medicare levy, tax offsets, superannuation, eligible termination payments, FBT, CPI indexes, and more. We hope you find this resource valuable.

Noel Rowland
Noel
Rowland
Noel Rowland is Chief Executive Officer of The Tax Institute.

The Tax Institute is Australia’s leading professional association in tax. Its 13,000 members include tax agents, accountants and lawyers as well as tax practitioners in corporations, government and academia.