Appendix 1: Tax Reform — SUMMARY
| Measure | Description |
|---|---|
| Personal tax and transfer payments | |
| $47 billion worth of personal income tax cuts | The Government has improved participation incentives, by delivering personal income tax cuts worth a total of $47 billion in its first three Budgets. |
| Reform of the tax-free threshold and the Low Income Tax Offset | The Government will free over one million low-income earners from needing to lodge a tax return, improve incentives to participate in the workforce, and increase transparency and fairness, by increasing the tax-free threshold from $6,000 to $18,200 from 1 July 2012 and then increasing it further to $19,400 from 1 July 2015. [Reform consistent with Recommendation 2 of the AFTS Review]. |
| Convert the Education Tax Refund into the Schoolkids Bonus | The Government will transform the Education Tax Refund into the Schoolkids Bonus. This is a simple twice yearly payment, paid through the family payments system, to provide more flexible and timely assistance to families. [Reform consistent with Recommendation 6(c) of the AFTS Review]. |
| Reform of the tax concession for living-away-from-home allowances and benefits | The Government will better target the tax concession for living-away-from-home allowances and benefits, by ensuring it can only be used for the expenses of people who are legitimately maintaining a home away from their actual home for an initial period of 12 months, from 1 July 2012. [Reform consistent with Recommendation 9(c) of the AFTS Review]. |
| Reform of the fringe benefits tax treatment of motor vehicles | The Government has reformed the fringe benefits tax treatment of cars, to remove the unintended incentive for people to drive their vehicle further than they need to. The previous formula for valuing car fringe benefits is being replaced with a single statutory rate of 20 per cent, regardless of the kilometres travelled. [Reform consistent with Recommendation 9(b) of the AFTS Review]. |
| Reform of the fringe benefits tax treatment of airline transport | The Government will modernise the method for determining the taxable value of airline fringe benefits from stand by value to market value which is consistent with commercial practice. [Reform consistent with recommendation 9(a) of the AFTS Review.] |
| Consolidation of dependency tax offsets | The Government will remove barriers to participation by consolidating eight existing dependency tax offsets into a single offset for those maintaining a dependent that is genuinely unable to work. [Reform consistent with Recommendation 6(a) of the AFTS Review]. |
| Phasing out the Dependent Spouse Tax Offset (DSTO) | The Government will reduce outdated workforce participation disincentives for spouses without dependent children, by restricting the Dependent Spouse Tax Offset to taxpayers with spouses born before 1 July 1952, from 1 July 2012. [Reform consistent with Recommendation 6(a) of the AFTS Review]. |
| Phasing out the Mature Age Workers Tax Offset | The Government will be investing in better targeted participation programs and improve value for money through phasing out the mature age worker tax offset (MAWTO). The Government will be maintaining the MAWTO for people who are 55 or older on 1 July 2012, as they may have built the MAWTO into their household budgets. [Reform consistent with Recommendation 6(c) of the AFTS Review]. |
| Reforming the Net Medical Expense Tax Offset | The Government is ensuring the sustainability of tax revenues and the health system, while protecting those on modest incomes. From 1 July 2012, the Government will introduce a means test for the Net Medical Expense Tax Offset, preserving the benefit for those under the Medicare Levy Surcharge (MLS) threshold, and reducing the rate and threshold for those over the MLS threshold. |
| Better alignment between Family Tax Benefit Part A and Youth Allowance | The Government has provided greater consistency between family payments and Youth Allowance, by aligning the eligibility age for Family Tax Benefit Part A with the age of independence for Youth Allowance from 1 January 2012. [Reform consistent with Recommendation 98 of the AFTS Review]. |
| Increase in Family Tax Benefit (FTB) Part A for 16 to 19 year olds | The Government has improved support for families with children in full-time secondary school, and better reflected the cost of raising children, by increasing the rate of Family Tax Benefit Part A for 16 to 19 year olds in full-time secondary study to match that for 13 to 15 year olds from 1 January 2012. [Reform consistent with Recommendation 91(a) of the AFTS Review]. |
| Decrease in the taper rate of the Newstart Allowance for single principal carers | The Government will improve participation incentives for single parents, by decreasing the taper rate of Newstart Allowance for single principal carers from 50 or 60 per cent to 40 per cent from 1 January 2013, enabling these parents to earn almost $400 extra per fortnight before they lose eligibility for at least some income support. [Reform consistent with Recommendation 85 of the AFTS Review]. |
| Increase in the number of hours that people on the Disability Support Pension (DSP) can work | The Government will improve participation incentives for people with a disability, by increasing the number of hours that a person on the Disability Support Pension can work and retain access to their pension from 15 to 30 hours per week from 1 July 2012. [Reform consistent with recommendation 86 of the AFTS Review]. |
| Reduction in the age of the youngest child at which parents who were eligible for the Parenting Payment prior to 1 July 2006 lose eligibility | The Government will strengthen participation incentives for parents by removing grandfathering arrangements for parenting payment recipients from 1 January 2013. The age of the youngest child at which people move out of Parenting Payment to 6 years for partnered recipients and 8 years, for single parents for all payment recipients. [Reform consistent with Recommendation 85 of the AFTS Review]. |
| Fairer taxation arrangements for golden handshakes | The Government will improve the fairness of the tax system by applying a whole-of-income cap to tax concessions provided to certain employment terminations, which include golden handshakes. [Reform consistent with Recommendation 6(c) of the AFTS Review]. |
| Superannuation | |
| Increasing the Superannuation Guarantee from 9 to 12 per cent | The Government will boost retirement savings, by progressively increasing the rate of the superannuation guarantee from 9 to 12 per cent. |
| Introduction of the Low Income Superannuation Contribution | The Government will extend superannuation concessions to 3.6 million low-income earners, by introducing a Low Income Superannuation Contribution of up to $500 from 1 July 2012. [Reform consistent with recommendation 18(a) of the AFTS Review]. |
| Reduce the tax concession on superannuation contributions received by very high income earners | The Government will make the system of superannuation concessions fairer, by reducing the tax concession which people with income over $300,000 receive on their concessional contributions from 30 to 15 per cent (excluding the Medicare levy) from 1 July 2012. |
| Higher superannuation concessional contributions cap | The Government will help older Australians to make catch-up contributions to super, by working towards a targeted and fairer concessional cap for people over 50 years of age with low balances. [Reform consistent with Recommendation 18(a) of the AFTS Review]. |
| Increase in the Superannuation Guarantee age limit | The Government will increase incentives for mature workers to remain in the workforce, by removing the age limit for the superannuation guarantee. [Reform consistent with Recommendation 20 of the AFTS Review]. |
| Business Tax | |
| Introduction of the Minerals Resource Rent Tax | The Government will get a fairer return on our resource wealth, by introducing the Minerals Resource Rent Tax on iron ore and coal projects from 1 July 2012. [Reform consistent with Recommendations 45, 46, 47 and 48 of the AFTS Review]. |
| Extension of the Petroleum Resource Rent Tax | The Government will get a fairer return on our resource wealth, by extending the Petroleum Resource Rent Tax to onshore oil and gas projects from 1 July 2012. [Reform consistent with Recommendations 45, 46, 47 and 48 of the AFTS Review]. |
| Company Loss Carry-back | The Government will provide assistance by allowing companies to carry back a revenue loss to offset it against tax previously paid [Reform consistent with Recommendation 31 of the AFTS Review]. |
| Introduction of the uplift factor for losses of certain infrastructure projects | The Government will improve certainty for investors, by allowing infrastructure projects of national significance to carry forward losses with an uplift factor to maintain their value. [Reform consistent with the intent of Recommendation 31 of the AFTS Review]. |
| Replacement of the Entrepreneurs Tax Offset with better incentives for small business | The Government is better targeting tax incentives for small business, by replacing the Entrepreneurs Tax Offset with simpler and more effective measures. [Reform consistent with Recommendation 6(c) of the AFTS Review]. |
| Increase in the instant asset write-off threshold to $6,500 for small businesses | The Government will simplify tax for small businesses and boost their cash flow, by allowing small businesses to instantly write off each and every business asset costing less than $6,500 that is purchased from 2012-13. [Reform consistent with Recommendation 29 of the AFTS Review]. |
| Introduction of the single depreciation pool for assets costing $6,500 or more for small businesses | The Government will simplify tax for small businesses, by replacing the two depreciation pools that currently exist, with a single depreciation pool. [Reform consistent with Recommendation 29 of the AFTS Review]. |
| Introduction of the immediate deduction for the first $5,000 of the cost of a motor vehicle by small businesses | The Government will simplify tax for small businesses and boost their cash flow, by introducing an immediate deduction for the first $5,000 of the cost of a motor vehicle purchased from 2012-13. [Reform consistent with Recommendation 29 of the AFTS Review]. |
| Replacement of the R&D tax concession with the R&D tax incentive | The Government is supporting research and development, and has replaced the out-dated and complex R&D Tax Concession with a simplified R&D tax incentive which will provide larger and timelier assistance. |
| Phasing down of the interest withholding tax (IWT) paid by financial institutions | The Government will support competition in the banking sector, by phasing down the interest withholding tax paid by financial institutions on offshore borrowings from 2014-15. [Reform consistent with Recommendation 33 of the AFTS Review]. |
| Modernising the taxation of trust income | The Government will consider options which ensure that businesses and individuals can continue using trusts, with confidence that the tax outcomes applying to their circumstances are fair and consistent. [Reform consistent with Recommendation 36 of the AFTS Review]. |
| Managed Investment Trusts Withholding Tax | The Government has halved the withholding tax rate on managed investment trusts, from 30 per cent under the previous government to 15 per cent, continuing to promote Australia’s role as an internationally competitive financial centre. |
| Business Tax Working Group (BTWG) | The BTWG has provided advice on the tax treatment of losses, and will consider the longer term reform directions, including reducing the corporate tax rate or other reforms. Final report will be provided by the end of 2012. |
| Environmental and social taxes | |
| Increase in the excise on tobacco products and reduce the duty free allowance on tobacco | As part of its reforms, the Government increased the excise on tobacco products by 25 per cent, and will reduce the duty free allowance on tobacco to 50 cigarettes or 50 grams of other tobacco product. [Reform consistent with Recommendation 73 and 75 of the AFTS Review]. |
| Protect the integrity of the wine producer rebate | The Government will improve the integrity of the wine producer rebate by ensuring that wine producers cannot claim multiple rebates where wine is blended or further manufactured. |
| Reform of the taxation of fuels towards energy content based taxation | The Government is providing more consistent tax treatment of fuels, by bringing liquefied petroleum gas (LPG), liquefied natural gas (LNG) and compressed natural gas (CNG) into the tax system over time, but with a 50 per cent discount that recognises the potential environmental and fuel security benefits of their use. [Reform consistent with Recommendation 65 of the AFTS Review]. |
| Governance and institutions | |
| Establishment of the Tax System Advisory Board | The Government will enable the Australian Taxation Office to benefit from a wider range of perspectives and experiences, by establishing a Tax System Advisory Board. [Reform consistent with Recommendation 115 of the AFTS Review]. |
| Establishment of the Australian Charities and Not-for profits Commission | The Government will introduce smarter regulation, improve accountability and transparency, and reduce red tape for the not-for-profit sector, by establishing the Australian Charities and Not-for-profits Commission. [Reform consistent with Recommendation 41 of the AFTS Review]. |
| Establishment of the Tax Studies Institute | The Government will support additional research into Australia’s tax and transfer system, by establishing the Tax Studies Institute. [Reform consistent with Recommendation 134 of the AFTS Review]. |
Tax Reform: Road Map
