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Good Budget, Bad Budget: full of positive intentions but a missed opportunity for tax reform

Publication date: 09 May 17 | Source: THE TAX INSTITUTE

Date: 9 May 2017

The Tax Institute welcomes the 2017-18 Federal Budget as a positive step towards delivering the Government’s agenda of jobs and growth, guaranteeing essential services, addressing cost of living pressures and living within its means. 

However, overall the Budget is a missed opportunity to achieve much needed tax reform for the benefit of all taxpayers. 

Tax Institute President Matthew Pawson said: “While The Tax Institute welcomes measures to increase resources to Treasury and the ATO to aid better tax policy formulation and tax system administration, which is in line with our submissions to the Budget process, the Government has not taken the opportunity to reduce rates, broaden the base or bring genuine simplification to the tax system.” 

The centrepiece of the Government’s strategy is around housing affordability. This includes the introduction of a range of measures which are broadly designed to encourage investors, primarily Managed Investment Trusts and wealthier individuals, to invest in affordable housing for the benefit of low income earners by providing new tax incentives. 

The Tax Institute’s Senior Tax Counsel Professor Robert Deutsch said: “For individual investors, while the increase to the CGT discount to 60% for providing affordable housing will likely be a very attractive proposition, the overall effect of this measure may be to increase the effect of negative gearing as rental income will be limited but investment costs will likely stay the same.” 

“The First Home Super Saver Scheme is also a significant measure and appears to be attractive on its face. However, upon closer inspection, the relative saving of only paying tax at the super fund rate on the relevant contributions has only marginal utility to first home buyers who are likely to be on lower income tax rates. Downsizing by older Australians has also been made more attractive by allowing $300,000 of the net sale proceeds from the family home, or $600,000 for couples, to be put into super tax-free,” said Professor Deutsch. 

Professor Deutsch also said: “The Tax Institute applauds the Government for otherwise leaving super relatively unscathed by the Treasurer’s scalpel.” 

Somewhat controversially, the Government is proposing a bank levy of 0.06%p.a. on liabilities exceeding $100 billion. “This is a new tax” said Professor Deutsch. “It is unclear at this stage how it will be treated – will it be deductible to the bank or will it give rise to franking credits? This remains to be seen.” 

The Medicare levy is also being increased. Professor Deutsch said: “While the increase in the Medicare Levy from 2% to 2.5% will impact taxpayers from 2019 who are required to pay it, for lower income earners, the increase in the low-income threshold will alleviate some of the burden.” 

The Tax Institute also supports the extension of the immediate deductibility rules allowing small businesses an immediate deduction for eligible assets costing less than $20,000 to 30 June 2018 as this is a significant boost for small businesses. Additional incentives to the States and Territories to reduce red tape for taxpayers, particularly small businesses, are also welcome. 

In conclusion, Mr Pawson said: “Notwithstanding the positive intentions set out in this Budget, The Tax Institute remains of the view that the Government, and Parliament as a whole, have an overriding responsibility to deliver a stronger, fairer and more simplified tax system for Australia.” 


For more information, please contact:

Professor Robert Deutsch, The Tax Institute: 0438 043 833

Stephanie Conway, Media Relations Contact: 02 8223 0011


The Tax Institute is Australia’s leading professional association and educator in tax. Its 12,000 members include tax agents, accountants and lawyers as well as tax practitioners in corporations, government and academia. The Tax Institute supports the tax profession through education and professional development and works to continually improve tax law and its administration.