Australia Refining Tax Election System

June 17, 2010 Taxation in Australia

Cashmoney IIThe Australian Government has set out to refine the current system which allows individual taxpayers and businesses to make “elections”, or treatment choices, in their tax returns.

On June 16th Nick Sherry, Australian Assistant Treasurer, announced the release of a consultation paper which aims to gather public feedback on possible refinements to the nation’s “election” tax system. In the current form, Australian taxpayers are able to make choices in how their income is determined and reported. There are currently 216 such “elections” in Australian tax law. Explaining the need for the review, Nick Sherry said, “…these elections have been identified as a potential source of complexity and inconsistency, so I want to have them thoroughly reviewed so we can remove any uncertainty or red tape, both for businesses and for individual taxpayers.”

According to Nick Sherry, the inherent complexities in the current system can often lead to higher compliance costs. A revision of the elections system will streamline tax returns, ensure appropriate handling of future elections and reduce compliance costs.

The consultation paper presents five proposed changes to the elections, although submitters are welcome to address any aspect of the system in general. The paper proposes that the terminology used throughout tax returns should be standardized, with attention paid to removing any inherent ambiguities. Deadlines also need to be set, with elections needing to be finalized at the same time that tax returns are submitted. In regards to future elections, taxpayers should not be required to specifically lodge an election with their tax return, on the condition that their tax preferences are self-evident in the tax return. A grace period has also been proposed that allows taxpayers to withdraw or alter their elections for a set period following their lodgment. It was also proposed that new standards for record keeping be instated for taxpayers, which will mandate that adequate documentation is kept to justify the application of tax elections.

Commenting on the consultation paper and its intentions, Nick Sherry said, “…this is closely tied to our commitment to a simple, clear, modern and flexible set of tax laws for Australia.” Australian taxation industry analysts have also commented that an overhaul to the election system could be aimed at reducing complications for the Australian Tax Office when conducting its own audits on taxpayers.

Photo by Martin Kingsley