Australian Tax Review Report Released

May 3, 2010 Taxation in Australia

Prime Minister of Australia, Kevin Rudd addresses the world's mediaThe long-awaited review of Australia’s tax system has been released, marking the initial steps in the Government’s promised overhaul of the nation’s tax system. According to Government statements, the tax reforms recommended in the review are refined to work in unison with the recovering international economy, while making the national tax system simpler, fairer and more beneficial to Australia.

On May 2nd the Australian Government released its Australia’s Future Tax System report, which has come to be commonly called the “Henry Review”. The release was accompanied by the Australian Government’s immediate initial assessment of the report’s recommendations. The report was commissioned in 2008 by the Australian Government to take a “root and branch” appraisal of the national tax system, and recommend appropriate changes. According to Wayne Swann, Treasurer of Australia, and Kevin Rudd, Prime Minister of Australia, the report addresses issues and means of improving the broad economic growth in Australia, directly assisting the nation’s resource sector, and improving measures designed to increase national personal savings.

Among its many recommendations, the report suggests reducing corporate tax rates. In its response, the Australian Government has already committed to lowering the corporate rate to 28 percent by mid-2014, through a phased series of cuts. The Government also revealed that in excess of 700 000 Australian small and medium-sized businesses will receive an early reduction in their tax liability, and an additional AUD 5 000 (approx. USD 4 624) tax write-off for assets. As proposed in the report, the Australian employer pension levy contribution will rise by an additional 3 percent, eventually reaching 12 percent, over the coming ten years. The Government has already commented that the increases will begin with an 0.25 percent increment in June 2014. On July 1st 2012 a new 40 percent Resources Super Profit Tax (RSPT) will also be introduced for all mining and energy firms operating in Australia. The new RSPT is expected to provide significant funding for the proposed Resource State Infrastructure Fund. The fund will be used to pay for developing public project spending across Australia, and is estimated to deliver AUD 700 (approx. USD 647.4 million) million in new spending over 2012 and 2013.

Business figures and Australian politicians have already issued responses to the report and the Government’s subsequent comments, both positive and negative in nature. Among all commentary, the treatment of pensions and resource corporations are the most discussed. The increased employer pension contribution has received nearly unanimous approval across Australia. But the energy and mining firm tax change is being subjected to wide-spread debate with industry commentators objecting to it, while other groups extol the benefits it will have on public infrastructure.

Photo by London Summit