Australian Tax Forum

Articles from the current issue:

• Superannuation guarantee contributions as a tax: The case for reincarnation over reform

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  The superannuation guarantee charge, which aims to ensure that employers pay compulsory superannuation for their employees, is collected as a tax. This method of collection has advantages because it covers a range of workplaces and types of businesses, including where the workers are outside of the conventional notion of employment. However, despite this, unpaid superannuation guarantee obligations remain a significant concern for government, superannuation funds, trade unions and workers themselves. Attempts to improve recovery — both legislative and procedural — have arguably been tinkering around the edges of a fundamentally misconceptualised scheme.

  This article suggests an alternative approach which utilises the collection mechanisms of the Fair Work Act 2009 (Cth) and the worker‑focused Fair Work Ombudsman as the primary agency overseeing superannuation collection. This would see superannuation recast as “deferred wages”, recoverable in the same way as other employee entitlements. While a further referral of powers from the states to the federal government would be required — or perhaps a constitutional amendment — the article argues that reincarnating the superannuation guarantee in this way could significantly improve recovery for the benefit of workers.

• Tax deductibility of philanthropic donations: Reform of the specific listing provisions in Australia

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  There are currently 190 not‑for‑profits (NFPs) and other entities that are eligible for tax deductible donations through a system that specifically names them in the income tax legislation. These entities are referred to as deductible gift recipients (DGRs). The approach of naming them in legislation, when they don’t fit within an existing DGR category, has been criticised as being highly politicised and ad hoc. This article provides an in‑depth analysis of the system of specific listing DGRs through the use of four case studies to demonstrate the criticisms that have been raised by scholars and representatives of the NFP sector. It presents arguments that support many of these criticisms, although conceding that the system should not be completely abandoned. It concludes with suggestions as to how this system can be improved.

• On the meaning of “tax”

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  Common-law jurisprudence characterises a tax as a compulsory payment imposed by a public body for a public purpose under the authority of the legislature. While useful in many situations — and despite judicial statements that a tax is not a penalty, fine or user charge — this understanding of a tax fails to make clear how some other transactions should be classified. This is arguably because certain elements of the common-law characterisation are lexically inappropriate, logically redundant and inconsistent with extant decisions. This article proposes an alternative. It argues that a tax is a compulsory transfer of value imposed primarily for a redistributive purpose. This definition is purposive (it lends insight into the appropriate aims of taxation), universal (the focus on redistribution distinguishes taxes from other payments to government) and practicable (it promotes fiscal transparency and clarifies the actual financial contribution each and every natural and legal person makes to the public finances).

   

• Failing to see the wood for the trees? A critical analysis of Australia’s tax provisions for land and forest conservation

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  This article provides an overview of tax measures related to land and forest conservation in Australia. The article examines tax incentives for conservation currently offered in Australia, compares them with similar mechanisms and regulations in Canada, examines their effectiveness or otherwise, and draws conclusions about potential reforms that should be considered to support Australia’s land and forest conservation. The article demonstrates that current tax mechanisms can be improved subject to several substantial developments, including modification of tax deductions and, more generally, advancement of the taxation regime that affects conservation.

• Tax agents providing trust deeds and/or advising about trusts: Unauthorised legal practice?

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  Federal and state laws appear to be inconsistent on whether non‑lawyer tax agents can advise clients about trusts or supply clients with trust deeds. Trust‑related tax agent services are both authorised and prohibited. Federal laws allow tax agents to advise and represent clients in connection with tax liabilities. Broad and narrow formulations of state law proscribe the same activity when it amounts to legal practice. The nature of tax agent practices is examined. Consumer protection rationales of relevant statutes are explored together with the need to avoid fraudulent and abusive conduct. The supply of trust deeds and related advice is analysed and seen to be more than merely incidental to the supply of authorised tax services. In consequence, many of the tax agents who supply trust deeds and related advice are suggested to be engaged in unauthorised legal practice.

• Sugar taxes viewed through the lens of the New Zealand Treasury Living Standards Framework

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  The sugar tax debate is showing no sign of weakening. There are two opposing views, which are perhaps best represented by the ideologies of the health profession and the food and beverage industry. The former strongly advocates in favour of a sugar tax using population health to support their position. The latter uses individual choice and paternalism to argue against implementation of sugar taxes.

  This study examines a related component of the sugar tax problem, which is how we evaluate such a tax. An alternative theoretical framework, the New Zealand Treasury Living Standards Framework, which has a corrective rather than a revenue generation objective, is used to assess the sugar tax for consideration of a different, perhaps more relevant, criteria for tax.

  The study concludes that there is value in using alternative frameworks when evaluating non-traditional taxes. A framework that facilitates inclusion of a wide range of wellbeing measures is particularly relevant for a tax that has multiple objectives. However, the traditional tax policy criteria remain a valuable component of the tax policy evaluation toolkit.

• What use is a private ruling?

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  Australian tax legislation has provided a system of private rulings that are binding on the Commissioner of Taxation since 1992. This system has been modified and expanded over the ensuing years. The purpose of introducing the system of binding rulings was to promote certainty as part of a broader movement in taxation administration towards self-assessment. This article considers whether that goal has been achieved, or ever was achievable as a practical matter, in a variety of administrative and procedural scenarios. The conclusion is reached that a private ruling will have utility for a taxpayer only where a scheme is particularised with sufficient clarity such that it prevents the Commissioner from ruling on a different scheme and is the same scheme that the taxpayer, in fact, implements.

• The Commissioner’s obligation to make compensating adjustments for income tax and GST in Australia and New Zealand

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  Both Australia and New Zealand (NZ) have enacted general anti-avoidance rules (GAARs) for income tax and goods and services tax (GST) and the Commissioner may, if he/she believes the GAAR has been breached, issue a determination to negate the benefit the avoider or another taxpayer obtains from the transaction.

  The Commissioner in Australia may, if he believes it is fair and reasonable to do so, make a compensating adjustment in favour of a party adversely affected by a GAAR determination to ensure income tax or GST is not levied twice on the same income or transaction. In NZ, the Commissioner is directed to ensure there is no double taxation for income tax purposes. With GST the legislation is silent.

  It is the differences in approach between Australia and NZ that is the subject matter of this article. The authors conclude that the Australian regime although not free of difficulties does not present the same problems as does the NZ regime. In Australia the Commissioner must consider making a compensating adjustment and in exercising his discretion, may not use this discretion to impose a penalty on the disadvantaged taxpayer. In NZ, even though the legislation imposes an obligation of the Commissioner to make a compensating adjustment to avoid double taxation, it seems the courts have been reluctant to enforce this obligation. The authors suggest that even though the NZ GST legislation is silent on this point, the obligations of the Commissioner are the same as for income tax. In reaching these conclusions the authors consider the many problems arising in both countries with the right of taxpayers not to be double taxed after GAAR.