The incoming government must act quickly to both define its tax agenda and either legislate or confirm whether or not promised tax changes not yet enacted in law will ever actually be put into practice.
This is the warning of a new report created by tax giant EY, which says there is a “critical need” for improvements due to different start dates for different laws and changes, uncertainty and a huge backlog of changes.
While the business community has welcomed the Coalition’s promise to lower company tax rates, erasing concessions such as the instant asset write-off have proven unpopular – businesses cannot make investment decisions if there is no information on when the benefit will disappear.
EY tax leader Craig Robson told SmartCompany this morning the Coalition needs to create a stocktake of everything that has been announced by the previous government which hasn’t yet been legislated – and then get to work on creating a reform agenda.
“The government needs to put forward a proposition in the tax system about how it will work, and how it will use a well-considered, well-thought through consultation process that will give the business community confidence.
“The business community needs confidence that decisions will be made as part of a bigger picture plan, rather than piecemeal decisions.”
The report, ‘Ensuring Australia’s economic sustainability – government agenda 2014’, outlines key areas of tax policy where the Coalition has pledged changes, including company tax, the resources tax, financial services and international tax rates.
But as the report points out, the details on these changes are sparse. For instance, no details have been given on delays to the superannuation guarantee rate increases. Other business concessions are set to be discontinued – but businesses have no idea as to when that will happen.
But Robson’s biggest concern isn’t necessarily the lack of detail, but rather the unpredictability in the tax system.
“That has had a massive impact on business confidence,” he says. “We see that played out with how foreign parties are looking to invest money in Australia, and whether they see this as a landscape they do or don’t want to invest in.”
Some of these changes are small tweaks to financial systems. Others, such as changes to the research and development grants, have been announced through press releases – but have yet to be legislated.
“They’re not massive ticket items, but people are still in the dark until they see the legislation,” says Robson.
Overall, Robson says the business community wants to see stability, and changes made within a long-term vision.
“A lot of these changes have been made in almost isolation, without any of them connected into the big picture of what the tax policy should look like,” he says.