TAX POLICY POLITICAL BATTLEGROUND OF 2019
18th January 2019
Author: Carl Valentine
“It would undoubtedly take a brave leader, and one who genuinely cares about our future economic prosperity, to seriously look at tackling our taxation system and committing to a complete overhaul.”
With the Federal Election due within the next four months, much has been made of the differing taxation policies of the Coalition and the Opposition.
There’s a great policy divide that is fast becoming the political battleground of 2019. On one hand we have the incumbents focused on “reward for effort” and “aspiration”, on the other the alternative government is promising a “fairer go” by making the “top end of town pay their fair share”.
These sentiments sound catchy in five second news grabs but what do they really mean for those living and working in regional Australia?
Over the next eight weeks, I’m going to try and sort the wheat from the chaff by drilling down into the most significant of the proposed changes and what they would deliver in real life terms.
Among the key areas I’ll be touching on are proposed changes to:
- Capital Gains Tax
- Negative Gearing
- Discretionary Trusts
- Imputation Credits
The incumbent Coalition Government is essentially proposing to maintain the status quo of our taxation system with its policies already implemented, including tax rate reductions.
The proposals put forward by Federal Labor would have long lasting impacts which would require an entire re-think of the structuring and financial decisions of many regional Australians.
On a positive note, Federal Labor is to be applauded for its decision to take these policies to the Australian people ahead of the 2019 election. It allows businesses and individuals the opportunity to discuss and dissect the proposed changes which is an important, and sometimes overlooked, part of the democratic process.
Arguably, both major parties are missing the point and putting popularist politics ahead of the greater good of the Australian people.
The Australian tax system is crying out for broad-based reform.
For far too long, governments of all persuasions have been playing around the edges of taxation legislation. It means we’re at the political whim of three-year Federal election cycles and that’s far from ideal no matter which side of the political fence you sit.
It also means that our taxation rules continue to grow in complexity, creating confusion and increasing the compliance burden for businesses and families.
Taxation is too important to be a mere political football.
As PVW Partners recently flagged in its submission to the Australian Government on proposed changes to Division 7A (https://www.pvwpartners.com/news/pvw-news/pvw-partners-submission-division-7a-integrity-rules-proposed-amendments/) , taxation policy should enable and facilitate appropriate structuring, not unduly discriminate against legitimate structuring decisions.
The Australian taxation system needs to be looked at holistically, rather than the current situation of reactive individual policy items which have the potential to seriously damage the economic prosperity of our nation. The sustainability, fairness and efficiency of our tax system must be enhanced.
We need broad-based tax reform to address the root of the issues rather than continually changing the goal posts by attacking the symptoms of inefficient tax legislation.
It would undoubtedly take a brave leader, and one who genuinely cares about our future economic prosperity, to seriously look at tackling our taxation system and committing to a complete overhaul.
But it can be done.
Former New Zealand Prime Minister John Key proved that in 2010 when he successfully argued the case for the introduction of the largest broad-based tax reform package that country had seen in over a quarter of a century.
It included a rise in the GST from 12.5 to 15 per cent, along with an across the board reduction in tax rates, including marginal and company tax rates.
Key took the New Zealand public on the journey with his government and spent 12 months explaining the changes to the community before they were implemented.
While I live in hope that such foresight will eventually be displayed in Australia, in the interests of longevity I will not hold my breath waiting. In the meantime, I look forward to discussing Federal Labor’s proposed changes with you over the coming weeks.