SYDNEY, 22 June 2022: The economic, fiscal and social challenges facing the new Government are immense in an uncertain and globally volatile environment.

The Tax Institute has prepared a report, Incoming Government Brief: June 2022 (the Brief) to assist the Government in prioritising those tax and superannuation measures that should be progressed as soon as possible. The Brief was provided to the Treasurer, the Hon Dr Jim Chalmers MP on 20 June 2022.

The Brief sets out:

• the current status of the key tax and superannuation legislative measures following the dissolution of the 46th Parliament ahead of the Federal election held on 21 May 2022; and
• a synopsis of the priorities identified by The Tax Institute’s Tax Policy and Advocacy team. 

Scott Treatt, General Manager of Tax Policy and Advocacy at The Tax Institute explained, ‘In ranking the priorities of the key outstanding tax and superannuation measures, we have started with what is important for the system as a whole. This is not to say that other measures are not important; they should remain a priority in the system.’

'Business owners and practitioners are still catching up following the immense pressures they have faced over the past 2½ years. The toll on their mental health has been significant and this factor should weigh heavily in determining the timing of future changes’, said Scott.

He reinforced that, ‘The need for genuine and holistic tax reform remains crucial to Australia’s future prosperity and its importance cannot be understated or forgotten.’

‘The Tax Institute stands ready to assist the Government, Treasury and the ATO so that measures can be designed and implemented effectively and equitably’, emphasised Scott.

A number of key announced tax and superannuation measures remain unenacted and these should be the Government’s first priority. Our comments on some of the key measures are set out at Appendix A.

APPENDIX A

Some key measures

‘Taxpayers need certainty and urgent clarity is needed around the Government’s position on dozens of outstanding measures announced but not enacted by the former government’, said Julie Abdalla, Tax Counsel at The Tax Institute.

Small business skills and training and technology investment boosts

Robyn Jacobson, Senior Advocate at The Tax Institute explained, ‘Without legislative certainty, there is a high risk that small businesses will not commit to expenditure on training their employees, exacerbating the skill shortages.’ She continued by saying, ‘The technology investment boost will support small businesses improve their digital adoption which would allow the Australian economy to keep pace with other developed countries. The Government should commit to legislating the boosts in the first Parliamentary session.’

Corporate residency

Julie said: ‘There is continuing uncertainty around the current corporate residency rules. This increases compliance costs for taxpayers and the number of disputes with the ATO. The announced technical changes that would treat a foreign incorporated company as an Australian tax resident where it has a significant economic connection to Australia, were welcomed across the profession. The former government also floated the idea of expanding the definition to apply to trusts and corporate limited partnerships.’

She explained, ‘Implementation of the amendments would provide greater certainty to taxpayers, and has a bigger picture implication in terms of supporting foreign investment in Australia. Consultation on the proposed changes should be progressed without any further delay.’

Non-arm’s length income (NALI) and superannuation guarantee regime

Robyn encouraged the Government to press on with making changes to the NALI provisions. She explained, ‘The former government announced that it would amend the law to ensure the NALI provisions operate as envisaged after consultation with relevant industry stakeholders. In their current form, the rules are likely to have a significant and unintended impact on the superannuation balances of many Australians. We keenly await a public response from the Government committing to making the necessary legislative amendments to ensure that the NALI rules do not result in excessive and unintended consequences.’

Robyn also raised the issue of much needed reform to the superannuation guarantee (SG) regime. She urged the Government to ‘make legislative reform of the SG regime to remove the draconian and disproportionate penalties imposed on employers even where they only make minor transgressions in paying their employees’ superannuation. Employers who pay SG contributions just one day late and fail to report this to the ATO are treated the same as an employer who deliberately evades their obligations to their employees. This is wrong and fails to uphold the overarching need for the law to protect workers’ entitlements, while acting as a disincentive for employers who fail to meet their SG obligations.’

Patent box regime

Julie was supportive of the proposed patent box regime and said, ‘The patent box regime will promote Australia’s competitiveness as an innovation hub and encourage further investment and growth in the medical, biotechnology, agricultural and low emissions technology sectors. This would support Australian businesses to retain and commercialise their intellectual property in Australia, creating more jobs and generating greater economic activity here.’

She observed there is broad support across the profession for the introduction of the regime, but further consultation is needed on the detailed design of the measures. She encouraged the Government to progress this as a priority.

COVID-19 and natural disaster payments

Robyn pointed out that the current law applies inconsistently to various Commonwealth, State and Territory government small business support payments made in response to the COVID-19 pandemic, and disaster payments following the recent floods. ‘Some payments are non-assessable non-exempt (NANE) income; others are not. All such payments should be tax-free so that the full benefit of the payment is available to recipients,’ she said.