The 2011-12 Budget builds on the Gillard Government's long-term plan to strengthen the economy and make the tax system simpler and fairer for Australian businesses and the broader Australian community.
All up, the Government has now announced 12 measures since the 2010-11 Budget that deliver on reform directions identified by the Australia's Future Tax System Review (the tax review):
- Removing the unintended tax incentive for people to drive more than they need to in order to obtain a larger tax concession, by reforming the "statutory formula" method for valuing car fringe benefits (implements recommendation 9[b]);
- Improving participation incentives for spouses without children, by phasing out the Dependent Spouse Tax Offset (consistent with recommendation 6[a]);
- Better targeting tax incentives, by replacing the Entrepreneurs Tax Offset (ETO) (consistent with recommendation 6[c]);
- Improving small business tax rules, by replacing the ETO with a small business tax package that includes a $5,000 immediate deduction for motor vehicles (consistent with the intent of recommendation 29);
- Improving certainty for investors, by allowing infrastructure projects of national significance to carry forward losses with an uplift factor to maintain their value (consistent with the intent of recommendation 31);
- Increasing support for families, by increasing Family Tax Benefit Part A payments for 16 to 19 year olds (consistent with recommendation 91[a]);
- Reforming family payments, by reducing the overlap between Family Tax Benefit Part A and Youth Allowance (consistent with recommendation 98);
- Improving regulation and reducing red tape for the not-for-profit sector, by establishing the Australian Charities and Not-for-profits Commission (consistent with recommendation 41);
- Improving certainty for the not-for-profit sector, by introducing a statutory definition of ‘charity' (consistent with recommendation 41);
- Improving tax system governance, by committing to a principles-based approach to tax law design (consistent with recommendation 112);
- Allowing the Board of Taxation to initiate its own reviews of how tax policies and laws are operating (consistent with recommendation 113); and
- Establishing a new Tax System Advisory Board (consistent with recommendation 115).
As well as delivering on reform directions identified by the tax review, the 2011-12 Budget also includes a number of measures that support the integrity of the tax system. We are:
- Reducing access to income splitting by high-income earners, by removing the Low Income Tax Offset for the unearned income of minors; and
- Increasing fairness in the tax system, by improving the reporting of taxable payments made to some contractors, and taking stronger action against fraudulent ‘phoenix' activity, fraudulent tax refunds, and non-payment of tax on government payments.
We will continue to work methodically through the tax review's recommendations as we consider further ways to take full advantage of the opportunities presented by the mining boom.
The upcoming Tax Forum will provide an important opportunity for both participants and the broader Australian community to have their say about options for further reforming our tax and transfer system.
10 May 2011