The Cooper Review panel has released its preliminary report in relation to Phase 3 of the review (Self Managed Super Funds). The final report is due to be delivered to the Government by 30 June 2010.
The initial preliminary recommendations include:
- Abolishing the 5% in-house asset limit
- Making related party acquisitions/disposals to be at market value
- Introducing a prohibition into holding collectables and personal use assets
- Will look at installment warrants in a few years to gauge the take-up/success
- Introducing a sliding scale of penalties that can be imposed by the ATO
- ATO to be given more power to compel compliance
- No mandatory education of trustees unless they have breached the SIS rules
- Introducing SIS private binding rulings
- Increasing the competency requirements for financial planners in SMSF issues
- Set out some discussion points in relation to pre establishment of SMSF’s
- Become stricter on the SMSF auditor requirements
Once the final report and Government announcement has been made in relation to this review, we will report these onto you.
Shortly after the release of the Henry Review recommendations, the Federal Budget was handed down. Treasurer Swan announced the budget as being a “comprehensive strategy for guiding Australia in the aftermath of the worst global economic upheaval since the Great Depression.” He also stated that “this budget wasn’t designed to shift opinion polls and I don’t believe they will.” Let me assure everyone – they won’t!
The success of this budget will rely very heavily on the success of the Resources Super Profits Tax (“RSPT”).
A summary of the budget announcements include:
- Carried forward of 2007 tax cuts
- Tick and flick ITR’s ($500 from 1/7/2012 and $1,000 from 1/7/2013
- 50% discount on tax of first $1,00 of interest income from 1/7/2011
- Revamp of first home buyer accounts
- $2.2 billion on health ($772m on GP’s & $523m on training of nurses)
- $1 billion on infrastructure for Australian Rail
- $660m on training (70,000 new places, 22,500 youth apprenticeships and $120m on numeracy courses)
- Small business receive an extra $3,350 for new apprentices <19 yrs
- $273 m for child care (raising standards and increase child to staff ratio’s)
- Higher tax on cigarettes
- Changes to Pharmaceutical Benefits Scheme
- Super co-contribution slashed and income thresholds frozen
- Extend Deductible Gift Recipient to volunteer fire brigades
- $420m to ATO for a GST and Cash economy crackdown
- $65m over 4 years to Treasury to develop and implement the Governments response to the Henry tax review recommendations
On the 2 May 2010 the Government released the long awaited results of the review into the future of Australia’s taxation system. All in all the review comprised approximately 1300 pages and 138 recommendations.
The Government called this the “Root & Branch review” and the “A plan for the future”. The Government split up the recommendations into 3 approaches – now, later, never.
All in all the Government adopted 10 recommendations now and only a few in the future but also ruled out around 20 all together. The balances of the recommendations were not discussed at all.
Many commentators are saying that it was a lost opportunity for significant tax reform and that the Government’s commitment to genuine tax reform must be questioned. Clearly it was the wrong time to seek a review into Australia’s tax system considering it is an election year.
Below is a very brief summary of the recommendations split into the approaches:
“Now” recommendations
- Introduction of new Resources Super Profits Tax (“RSPT”) at 40%
- Increase Super Guarantee to 12% by 2020
- Increase Super Guarantee age from 70 to 75 on 1/7/2013
- Low income earners to receive a maximum amount of $500 from the Government in super from 1/7/2012
- Concessional super contributions of $50,000 for those >50 yrs after 1/7/2012 if their account balance is <$500,000
- Reduction in company tax rate to 28% from 1/7/2012 for small businesses and phased in for other companies
- Small business immediate write-off for assets <$5,000
- New Infrastructure fund for the States (Roads, Rail, Ports)
“Future” recommendations
- Make individual tax returns easier
- Improve incentives to save
- Improve the governance and transparency of the tax system
“Never” recommendations
- Changes to Capital Gains Tax (Pre 1985 and 50% discount)
- Remove negative gearing
- Changes to dividend imputation
- Introduction of an estate tax
- Aligning preservation age with age pension age
- Changing the rate of GST
- Abolishing the Luxury Car Tax
- Making the family home part of means testing
- Introducing a land tax on the family home
- Remove Medicare
- Remove tax free component of super lump sums and pensions for those >60
- Alter the alcohol tax rate
- Implementing a proposed savings income discount (60%)
Please note these recommendations/announcements will be subject to normal parliamentary process.
