Tax reform post 2010 Federal Election

 

With the emergence of a minority Labour Government following the recent 2010 federal election it will be interesting to see what the future brings in terms of Labour keeping its pre-election tax reform promises.

 

Before the election, Labour highlighted tax reform initiatives, most of which flowed from the support of various recommendations proposed by Dr Ken Henry in his report released in May 2010. Currently few of these promised changes have been revoked, however the Government has agreed to the demands of NSW independent’s Tony Windsor and Rob Oakeshott by holding a tax summit scheduled before 30^th June 2011 to review the findings of the Henry Report.

 

Will the tax summit review the Government’s stance on Mineral Resources Rent Tax (MRRT)? We will have to wait and see if Labour will bow to demand that MRRT be discussed at the summit although Julia Gillard and Wayne Swan have already said this will be off the table. Although a national issue, NSW Central West can breathe a little easier as the MRRT will only impact the mining of coal and iron ore meaning the local gold and copper mines will not be subject to the MRRT.

 

One announced change to pre-election tax reform is the delay of the introduction of the 50% interest income discount (for up to $1,000 of interest income). Previously due to be introduced on 1^st July 2011 will now commence from 1^st July 2012.

 

Tax reform currently still supported by the Government include:-

·        Standard $500 tax deduction from 2012-13, increased to $1,000 from 2013-14.

·        Company tax rate to reduce to 29% in 2013-14 (2012-13 for small business companies).

·        From 2012-13 Small Business Entities will be able to immediately write off assets costing $5,000 or less. Other asset (apart from building write-off) can be pooled and a  30% depreciation rate used.

·        Businesses can obtain a 50% tax deduction for eligible assets/capital works to improve energy efficiency.

·        Increase in the maximum Family Tax Benefit Part A to $208 per fortnight for families with 16-18 year old children from 1^st January 2012.

·        Establishment of a Tax System Advisory Board to give ongoing recommendations to the ATO.

 

Only a fraction of the Henry report recommendations have been supported by the Government to date and it will be interesting to see if the tax summit is fruitful in terms of concessions for local businesses.