Treasurer dumps Labor taxation plans
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 scrapped many of Labor's taxation plans, including abolishing section 25-90 of the Income Tax Assessment Act, which allowed companies to deduct debt for earning income overseas. He also removed the $2000 cap on work-related self-education expenses and eliminated a proposed 15% tax on super fund earnings over $100,000 during the drawdown phase.
Treasurer Joe Hockey scrapped many of Labor's taxation plans, including abolishing section 25-90 of the Income Tax Assessment Act, which would have affected multinational profit shifting. He also removed a $2000 cap on work-related self-education expenses and eliminated a proposed 15% tax on super fund earnings over $100,000 during the drawdown phase.
The decision to retain section 25-90 allows Australian companies to continue deducting debt incurred for overseas income, which supports their legitimate offshore expansion plans. This change is welcomed by many businesses as it removes uncertainty and potential financial strain.
The decision to retain section 25-90 allows Australian companies to continue deducting debt incurred for earning income overseas, which supports their legitimate offshore expansion plans without facing additional tax burdens.
Removing the $2000 cap on self-education expenses is seen as a positive move for Australian productivity and competitiveness. It allows individuals to invest more in their education without financial constraints, benefiting both personal development and the broader economy.
By removing the $2000 cap on work-related self-education expenses, the government has lifted a significant barrier to Australia's productivity and competitiveness, allowing individuals to invest more in their professional development without financial constraints.
Superannuation funds benefit from the removal of an administrative burden that would have required them to impose a 15% tax on earnings over $100,000 during the drawdown phase. This change provides certainty and stability for super funds and their members.
The proposed tax would have imposed a 15% levy on super fund earnings exceeding $100,000 during the drawdown phase. It was scrapped to avoid administrative burdens and to provide certainty to superannuation funds, ensuring that retirement income streams remain tax-exempt.
The plan to establish a council of superannuation guardians was scrapped, which aligns with the government's commitment to avoid unexpected changes. This decision is part of a broader effort to provide certainty and stability in the superannuation sector.
The changes are expected to cost the Australian budget approximately $3 billion over four years, as they involve scrapping various taxes and tax measures that were initially projected to generate revenue.
The changes are expected to cost the Australian budget about $3 billion over four years. This includes restoring tax breaks and scrapping certain taxes, which are part of the government's broader economic strategy.
The Australian Bankers Association expressed satisfaction with the decision to retain section 25-90, as it allows companies to continue their legitimate offshore borrowing programs without facing additional tax challenges.
Multinational companies benefit from the retention of section 25-90, which allows them to deduct debt for overseas income. However, the government will still proceed with tightening thin capitalisation rules to ensure fair tax contributions.
Labor's plan to tighten fringe benefits for employer-provided cars was also scrapped, which means that the existing tax breaks for car leasing will continue, benefiting both employers and employees.
Everyday investors may see positive impacts from these changes, such as increased opportunities for education and stable superannuation policies. The government's focus on providing certainty and reducing administrative burdens can create a more favorable investment environment.
Scrapping the plan to establish a council of superannuation guardians means that there will be no new oversight body for superannuation, maintaining the current regulatory framework without additional layers of governance.
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