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Budget 2007- 08: Is everyone a winner?

Publication date: 08 May 07 | Source: THE TAX INSTITUTE

“Many low and middle income Australian taxpayers are winners under the 2007-08 Budget” commented Peter Moltoni, President of the Taxation Institute of Australia.

“Whilst personal tax cuts of $5.3 billion, the increases in the low income tax and senior Australians offsets, the dependent spouse rebate and the Medicare levy low income thresholds, combined with the promise of more tax cuts in 2008-09 mean that many will be happy – it is clear that not all the outcomes of the Budget have resulted in winners” noted Mr Moltoni.

“Despite these wins the Taxation Institute is concerned that the Government has only been selective about reducing the complexity of our tax laws” said Mr Moltoni.

“It is clear small business is likely to suffer in the future, as the 2007-08 Budget will deliver increased compliance costs coupled with a lack of qualified tax accountants”

“This situation is exacerbated by the reduction of Government funding of accounting and business courses which will result in increased HECs for students in this area and will discourage them from pursuing an accounting career, therefore, impacting upon the entire tax profession in the future.

“Additionally, the use of offsets for delivering the tax cuts further entrenches complexity in the system, thereby making future tax rate simplification more problematic.

“Despite our compliance cost concerns, we acknowledge that individuals and some small business will benefit from proposals to simplify GST compliance and the PAYG for small business.

“In other areas wins have occurred with the conversion of the child care tax rebate into a direct payment and the implementation of pre-filling of tax returns.

“Business should benefit from the simplification around finance leases, consolidations, venture capital, and the loss recoupment rules (in particular, the removal of the $100 million cap on eligibility for losses under the same business test).

“The environment has received a boost with a depreciation concession for carbon sink forests and the film industry will benefit from the replacement of the Division 10BA and Division 10B tax incentives with a 40 per cent producer tax rebate.

“We continue to encourage the Government to work towards simplifying the tax system by removing the complexities that exist due to the wide gap between the corporate tax rate and the highest marginal tax rate for individuals” stressed Mr Moltoni.

“Although the budget from a tax prospective appears to deliver clear winners in all sectors of the Australian community”, summarised Mr Moltoni “not everyone is a winner and we hope that the Government will continue to address the areas that we have identified tonight”.