Treasurer dumps Labor taxation plans Economy Coalition moves welcomed
Only 18 of the backlog of 96 tax measures are set to survive; 11 have been dumped, three partially dumped and 64 put out to consultation with the expectation they will be dumped.
Mr Hockey and Assistant Treasurer Arthur Sinodinos will announce the result of the review by the end of the month.
Pre-eminent among the measures dumped is a plan announced in May to abolish section 25-90 of the Income Tax Assessment Act to fight multinational profit shifting.
Section 25-90 allows companies to deduct debt run up for the purpose of earning income overseas. Labor wanted it abolished as part of a suite of measures to ensure multinationals paid tax in Australia. The associated tightening of the so-called thin capitalisation rules will proceed as planned.
Tax professionals say some Australian companies borrowing to legitimately expand overseas risked being caught by the change and were reconsidering their plans.
"Many Australian companies have been relying on the provision in relation to legitimate offshore borrowing programs," said Steven Munchenberg, chief executive of the Australian Bankers Association. "The association is pleased it will now continue."
The Coalition has also scrapped Labor's plan to impose a $2000 annual cap on work-related self-education expenses. Universities Australia chief executive Belinda Robinson said the decision lifted "one of the most serious threats to Australia's productivity and competitiveness".
Super funds will also be freed of an administrative headache that would have required them to impose a 15 per cent tax on fund earnings in excess of $100,000 a year during the drawdown phase. At the moment all earnings supporting retirement income streams are tax exempt.
The plan was a face-saving compromise after a drawn-out battle with the industry and was set to bring in only $267 million over the next four years. "Not proceeding with this policy, alongside the government's commitment not to make any detrimental, unexpected changes during this parliamentary term, will deliver certainty," Association of Superannuation Funds chief executive Pauline Vamos said.
However, an associated Labor plan that would have created a council of superannuation guardians will also now not see the light of day.
As expected Labor's plan to tighten the fringe benefits applying to cars provided by employers has also been dumped.
The changes will the cost the budget about $3 billion over four years.
Hockey’s tax tweaks
Restoring $1.8b fringe benefi ts tax break for car leasing
Scrapping $313m of taxes on big superannuation accounts
Watering down moves to stop companies shifting profits off shore
Cutting R&D tax breaks for toptier companies
Will dilute measures to close $320m in tax loopholes under the Off shore Banking Unit regime
Scrapping Labor’s plan to establish a council of superannuation guardians
Frequently Asked Questions about this Article…
Treasurer Joe Hockey has scrapped a number of tax measures announced by Labor, including plans to abolish section 25-90 of the Income Tax Assessment Act, which allows companies to deduct debt for earning income overseas. He also removed the $2000 cap on work-related self-education expenses and scrapped taxes on big superannuation accounts.
Treasurer Joe Hockey has scrapped a number of tax measures announced by Labor, retaining only 18 out of 96. These changes include removing plans to abolish section 25-90 of the Income Tax Assessment Act, which allows companies to deduct debt for earning income overseas, and scrapping the $2000 cap on work-related self-education expenses.
The decision to keep section 25-90 means Australian companies can continue to deduct debt incurred for earning income overseas, which supports their legitimate offshore expansion plans. This change is welcomed by many businesses that rely on this provision.
The decision to retain section 25-90 means Australian companies can continue to deduct debt incurred for the purpose of earning income overseas. This is beneficial for companies planning to expand internationally, as it removes the risk of being caught by changes that could have affected legitimate offshore borrowing programs.
The removal of the $2000 cap on work-related self-education expenses is seen as a positive move for Australia's productivity and competitiveness, as it allows individuals to invest more in their education without financial constraints.
By scrapping the $2000 cap on work-related self-education expenses, the government has lifted a significant threat to Australia's productivity and competitiveness. This decision is welcomed by educational institutions as it encourages ongoing professional development without financial constraints.
Superannuation funds will no longer face the administrative burden of imposing a 15% tax on fund earnings over $100,000 during the drawdown phase. This change provides certainty and stability for super funds and their members.
Superannuation funds will no longer face the administrative burden of imposing a 15% tax on fund earnings exceeding $100,000 during the drawdown phase. This change provides certainty and stability for super funds, as all earnings supporting retirement income streams remain tax-exempt.
The decision to scrap Labor's plan to tighten fringe benefits for employer-provided cars was expected and is part of a broader move to reduce the tax burden on businesses and individuals.
The decision to scrap the plan for a council of superannuation guardians means that there will be no new oversight body for super funds. This aligns with the government's commitment to avoid unexpected changes during the current parliamentary term, providing stability for the superannuation industry.
The changes are expected to cost the Australian budget about $3 billion over four years, as they involve restoring tax breaks and scrapping certain taxes.
The restoration of the $1.8 billion fringe benefits tax break for car leasing means that employers can continue to provide cars to employees without facing tightened tax rules. This decision is expected to benefit both employers and employees by maintaining the current tax advantages associated with car leasing.
Cutting R&D tax breaks for top-tier companies may reduce incentives for large corporations to invest in research and development, potentially impacting innovation and growth in certain sectors.
The changes are expected to cost the budget approximately $3 billion over four years. This includes the scrapping of taxes on big superannuation accounts and the restoration of fringe benefits tax breaks, among other measures.
The plan to establish a council of superannuation guardians was scrapped as part of the broader review of tax measures, aligning with the government's commitment to avoid unexpected changes during the parliamentary term.
The watering down of measures to stop companies from shifting profits offshore means that multinational companies may face less stringent regulations. However, the government still plans to proceed with tightening thin capitalisation rules to ensure multinationals pay their fair share of tax in Australia.
Call 1300 880 160
Start a chat
Schedule a call
