The Henry Review: delay and surprises magnify the impact
By Rami Brass, RSM Bird Cameron Director, Tax Services
The Federal Treasurer’s weekend speculation regarding the release of the Henry review of the Australian tax system has merely added more fuel to the fire of the ongoing public open forum regarding what is and is not in the ‘root and branch’ review of all things tax.
The delay in releasing the Henry Review points to the Government’s concern about the political risk of unveiling the recommendations in this Review. It also magnifies the impact for business with potentially inadequate time to evaluate the proposed changes and respond with alternatives and/or opposition to Henry’s recommendations.
Some of the leaked information includes changes to the taxation rates on superannuation contribution, amendments to limit the deductibility of superannuation contribution made by high income earners, and removing the requirement to lodge personal income tax returns.
These suggested reforms, which have been leaked, won’t raise any concerns with the man on the street, unless of course they are high income earners.
What is of real concern, however, are recommendations that haven’t been discussed in detail, some suggest that one of these recommendations is to no longer allow negative gearing deductions to be offset against salary and wage income. This would have a significant impact on the rental property market with huge political and economic ramifications, something the Rudd Government is unlikely to welcome.
It has also been suggested that another recommendation includes the removal of the dividend imputation credits, whereby shareholders would not be allowed to claim franking credits and offset these against tax on other income. This would be seen by many as a large backward step to the pre-1987 corporate tax system whereby companies would pay tax on their profits and shareholders would then pay tax on their dividends without any ability to claim a credit for the underlying corporate tax. This effectively taxes corporate profits twice and its removal was a great leap forward in delivering rational and meaningful tax reform.
It’s not surprising that the Rudd Government is reluctant to release the contents of the Henry Review. Of course, if the Government did want to stop all this speculation and introduce real transparency in how they deal with taxpayers, they should release the Henry Review immediately and not have it caught up in the backwash of the 2010 Federal Budget.
Media contacts:
Rami Brass, Director, Tax Services
E: rami.brass@rsmi.com.au
T: +61 8 9261 9460
Mahesha De Silva, Marketing Advisor WA/SA
E: mahesha.desilva@rsmi.com.au
T: + 61 8 9261 9124