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The Taxation Institute of Australia says that the 2009-10 Budget has both innovative and negative aspects.

Taxation Institute President, Joan Roberts FTIA, in acknowledging the Government’s need to reduce expenditure, questioned whether the policy options adopted are consistent with the aspirations of Australia’s Future Tax System Review (the so called “Henry Review”) of a sustainable tax system for the 21st century that exhibits simplicity, equity and efficiency.

"The new thresholds for private heath insurance rebate, up front tax exemption for employee share schemes, and the three private insurance tiers are examples where short term revenue savings policies have the potential to entrench high effective marginal rates," Ms. Roberts said today. "There is also a loss of simplicity through multiple tests".

"We believe that serious thought should be given to minimizing the potential for these thresholds to entrench high effective marginal rates."

Opportunities include the adoption of the Board of Taxation’s recommendations regarding managed investment trusts, off market buy backs, foreign source income anti-tax-deferral (attribution) regimes and GST administration.

“The up lift in the rate of the small business tax break and its extension of time combined with an increase in the R & D expenditure cap are further opportunities that should provide a strong impetuous for small business to invest. The simplified R & D Tax Credit scheme has the potential to continue that growth. It is a pity that the issue of the flow through of the tax break from lessor to lessee is not addressed as this will be a major impediment to taxpayers leasing business assets," she said.

"The reintroduction of the application of the foreign tax offset to income earned by Australians working offshore for in excess of 90 days will introduce large compliance costs challenges for affected taxpayers" said Ms Roberts. "The original compliance costs savings that underlay the introduction of the exemption appear to have been ignored. For a relatively modest gain ordinary Australians working offshore will once again face that compliance cost nightmare."

"In summary the 2009-10 budget offers both opportunities and challenges." said Ms Roberts. "The Taxation Institute looks forward to examining the Budget announcements in more detail and consulting with the Government to ensure the opportunities are delivered efficiently and with minimum compliance cost."

For a copy of the Taxation Institute's media release, 12 May 2009, go here

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