Key points raised by the Taxation Institute in response to the questions posed by the AFTS Review include:
- One of the challenges for the Australia's tax-transfer system is that there are people currently in the tax system who, from an administrative point of view, should not be there. This is particularly so in the case individual taxpayers. Under a new tax transfer system there is a need to find ways to reduce compliance costs that also allow for the equitable taxing of these taxpayers. However, any removal from the tax system would only operate whilst the person was within the transfer system. Where their circumstances change, resulting in movement from the transfer system to employment/business, then the engagement with the tax system will recommence. This is crucial from a tax compliance view point to ensure that persons do not fall from one system into the shadow economy.
- Given that non-cash remuneration in association with employment provides economic benefit, in principle it should be taxed provided the mechanism for taxation satisfies the criteria of efficiency, equity and simplicity. The current taxation of non-cash benefits at the employer level via the Fringe Benefits Tax Assessment Act 1986 is complex, uncertain, distortionary, and imposes high compliance costs. Although it is politically easier to tax the employer/provider, rather than the employee, one reform option is to consider standardising the taxation on non-cash benefits by the taxing them in the hands of the persons providing the service that gave rise to the non-cash benefit, or consider simplifying the taxation of non-cash benefits by just targeting the major benefits widely offered as packaged benefits.
- Encouraging voluntary savings is essential for ensuring retirement income security both now and in the future, along with a government provided Age Pension and compulsory savings enforced through Superannuation Guarantee (SG).