Speech Gives Australian Tax Hints

August 21, 2009 Taxation in Australia  No comments

Indications to possible outcomes of the current Australian tax review were given on the 20th of August by Ken Henry, Australian Treasury Secretary.

In his speech to the Australian Industry Group, Ken Henry gave indications as to the direction of some changes to the Australian taxation system that will take as a result of its current review procedure.

Significant attention was given to the concept of changing Australia’s future taxation system to maximize its efficiency and improve incentives for investment. The key point indicated by Ken Henry was the possibility of shifting taxation arrangements to increase the competitiveness of equity investments over debt investments, both from local and international business. The reason for suggested changes is a propensity of debt based financing to encourage increases leverage for economy. The tax system in Australia currently greatly favors debt based investments, due to their inherent tax benefits rising from interest expense write-offs.

Other sections of the speech were dedicated to Australia’s economic conditions. While Ken Henry did acknowledge that Australia was performing better than predicted economically, he advised against strong expectations in foreseeable future. Cautioning on the seeming recovery Ken Henry said, “We would want to be a little careful not to prematurely declare that the war is over.”

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