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Ultimate Beneficiary Mess NOT fixed by Government changes

Publication date: 08 Feb 00 | Source: THE TAX INSTITUTE

"The tax compliance nightmare affecting vast numbers of innocent taxpayers, including many small businesses and farmers, has not been fixed by the Government's announced changes to the Ultimate Beneficiary Statement legislation", says Ray Conwell, Senior Vice President of the Taxation Institute of Australia.The legislation, which was rushed through the Parliament without proper scrutiny, imposes on trustees of trusts the requirement to trace through and identify the final recipient of trust income and advise the ATO of details, including the tax file numbers of these persons. While this sounds simple enough, in practice it imposes an intolerable burden on trustees to collect a mountain of information that is often not readily available or, in some cases, does not exist.

"This law is bad tax policy and the original legislation was poorly drafted", says Ray Conwell. "It makes compliance with the GST look like child's play by comparison. Its purpose was to catch a few wealthy tax cheats, but many innocent taxpayers have been caught up in the paperwork nightmare that has been created. The Government has missed the opportunity to fix up the legislation and remove the burden on honest taxpayers. Instead, it has chosen to make a few cosmetic changes without addressing the real issue, hoping the problems will go away."

With the Tax Office still trying to defend itself in light of the Auditor-General's findings that there are 3= million more tax file numbers issued than taxpayers in Australia, this legislation requires children, charities and the elderly to obtain a tax file number for no other purpose. The Tax File Number is becoming a defacto Australia Card, with many Australians being required to register for a TFN without good cause.

"I suppose we should be grateful for small mercies, but it is terribly frustrating to have spent many hours explaining the flaws in this legislation to the Tax Office and the Government and to receive the ill-conceived response we have", Conwell says. "It's a bit like losing your driver's licence for doing 61kph in a 60kph zone. It's not certain that the announced changes will even solve the case where an innocent transposition error on the form results in tax at 48.5%. The worst inequity is that where tax is paid at 48.5% by the trustee no credit or refund is available to the beneficiary on a lower tax rate."

An objective of the Taxation Institute of Australia is to ensure our tax laws in Australia are fair and equitable and this legislation", says Ray Conwell, "even with the announced changes, is neither fair nor equitable.

"The Government needs to urgently rethink its response on this matter."