Tax

Tax review panel looks at property, superannuation tax reform

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The long process of reforming Australia’s tax system has begun, with the leader of the review, Treasury Secretary Ken Henry, suggesting major changes to property and superannuation taxes, and the welfare system will be looked at closely as well.

The long process of reforming Australia’s tax system has begun, with the leader of the review, Treasury Secretary Ken Henry, suggesting major changes to property and superannuation taxes, and the welfare system will be looked at closely as well.

But in a bitter blow to business, Henry says the likelihood of cutting the company tax rate and reforming the goods and services tax is low.

Henry’s pronouncements follow the release of two consultation papers yesterday.

The papers also consider reforms to housing and property taxation, questioning the impact that capital gains tax concessions and negative gearing have had on housing affordability.

“The existing treatment of property losses and capital gains for individual investors potentially crowds out housing investment by companies, which do not receive a CGT discount, and superannuation funds, which are unable to borrow,” the paper says.

The review will also consider changes to retirement income structures, and raises questions regarding pension payments and whether current levels of superannuation payments should be changed.

In a blow to retirees, the paper also considers whether superannuation tax concession – which already cost between $4.6 billion and $26 billion a year – should be raised to 12% or 15% of pre-retirement salaries.

The reports questions whether “the current level of superannuation income tax concessions [is] appropriate and sustainable into the future”.

Even the retirement age is on the table, with the review questioning whether it is feasible to raise the retirement age from 65, but does not specify a target age.

Family and individual taxation reform will also be put under the microscope, with the papers asking whether taxes are too high and complex.

But despite the hundreds of options released in the papers yesterday, the review panel has taken no firm stance on any specific measures.

Henry says reforms of personal income tax, company taxes, tax offsets and investment taxes all remain “on the table”, in the first review of the tax system in 50 years.

But Henry says cuts to the 30% company tax rate are unlikely, arguing it is already below the developed-country average.

Henry also warned that omitting the GST from terms of reference was “not ideal”, but flagged options for consumption tax reform. “GST is not the only form of consumption taxation that we have in the economy.”

Other areas the report flags for investigation are simplifying the individual tax return system, possible changes to fuel excises and the introduction of an expenditure, or “cashflow” tax system.

The tax review panel has received over 500 submissions from businesses and individuals, and will hold public hearings from 16 to 27 March before a two-day conference in June. It will then release its findings towards late next year.

Federal Treasurer Wayne Swan commissioned the review following the 2020 summit, and says its findings will form part of a major taxation reform plan.

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