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Henry Tax Report and Government's Response Released
Executive Summary of the report from the Institute of Chartered Accountants and Thomson Reuters
On Sunday, 2 May 2010, 4 months and 9 days after the Government received the final report of the Australia’s Future Tax System review team (the Henry Report, as it has become known), the Government publicly released the report and its initial response. However, although the Henry Report contains sweeping recommendations to reform Australia’s tax system, the Government has initially focused on the resources sector and superannuation. The company tax rate is also to be reduced and there are some benefits for small business.
Main reforms
The highlights are:
• a Resource Super Profits Tax that will tax non-renewable resource projects (at a rate of 40%) on their profits rather than just their production (taxpayers will be eligible for a credit for royalties paid to State and Territory Governments) - this will apply from 1 July 2012;
• a refundable tax offset (the Resource Exploration Rebate) at the company level, set at the prevailing company tax rate, for exploration expenditure in Australia incurred on or after 1 July 2011;
• reduction in company tax rate to 28% - small businesses will benefit from 2012-13, but it will be phased in for other companies (29% for 2013-14 and 28% from 2014-15);
• small businesses will be able to immediately write-off assets valued at under $5,000 (currently $1,000) and all other assets (except buildings) will be written off in a single depreciation pool at a rate of 30% - this will apply from 1 July 2012;
• super contributions cap concession: workers aged 50 and over with super balances below $500,000 will be able to make up to $50,000 in annual, concessional superannuation contributions - to apply from 1 July 2012;
• Superannuation Guarantee age limit will be increased from 70 to 75 from 1 July 2013;
• Superannuation Guarantee rate will rise to 12% by 2019-20 (to be phased in); and
• Government will provide a $500 annual superannuation contribution to individuals with an adjusted taxable income up to $37,000.
The Henry Report is in 3 volumes (totalling about 1300 pages) - an Overview (Vol 1) and 2 Detailed Analysis reports - and contains 138 recommendations. The Government’s initial response - called Stronger-Fairer-Simpler, A tax plan for reform - deals with less than 50 of the recommendations and is contained in 3 short booklets, a number of fact sheets and 3 media releases.
The Prime Minister and the Treasurer said that “the first wave of [its] agenda is to reform resource, company and small business taxes and superannuation”. They also said that they are “attracted to developing changes in a number of other areas considered by the [Henry Report], especially making tax time simpler for everyday Australians, improving incentives to save and improving the governance and transparency of the tax system.” However, these will be considered in the government’s second term (if re-elected).
Some Henry Report recommendations have been specifically rejected, including: removing the CGT exemption for pre-CGT assets; applying a discount to negative gearing deductions; reducing indexation of the age pension; including the family home in means tests; removing the Medicare levy; introducing a bequests tax; indexing fuel to CPI; removing the luxury car tax; and changing alcohol tax (in the middle of a wine glut and where there is an industry restructure underway).
The Prime Minister and the Treasurer said that other recommendations in the Henry Report are not government policy and should be debated further in the coming years.
To view the whole summary report prepared by the Institute of Chartered Accountants and Thompson Reuters, click here.
To connect to the Chartered Accountants website:
www.charteredaccountants.com.au/henryreview
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