Treasurer Joe Hockey yesterday told media that the Federal Government plans to drop a number of tax changes that were announced by the Labor Party while they were still in power, but will retain several more. Importantly, Mr. Hockey also highlighted that a number of pieces of tax legislation that have been announced to the public over more than 12 years had never yet been legislated.
96 tax announcements dating back to the Labor Government, and even before that to 2001 when Peter Costello was Treasurer, have somehow become waylaid in the Federal Government pending tray and never been legally enacted as legislation.
“You cannot go forward with a complicated and unresolved taxation system if you want to give business and consumers the best hope that what they work hard to achieve will be achieved,” Mr. Hockey told reporters in Sydney.
Some of the tax changes to be axed include:
- The self-education expenses cap – Labor planned to limit self-education expense claims to $2000, but the Liberal Government has reversed that decision and claims will remain uncapped.
- Fringe Benefits Tax crackdown on salary sacrificed cars – back in July, Kevin Rudd announced that the ‘Statutory Formula’ method of accounting for personal use of a motor vehicle would be scrapped, which would leave many people in a worse financial situation than they had been. The car industry predicted a significant slump in motor vehicle sales, and within days salary packaging companies like NLC had laid off as many as half their staff. The Liberal Party promised during the election campaign that they would reverse that decision, and Mr. Hockey yesterday confirmed that decision. As this was one piece of legislation that had not yet been passed through Parliament, there is in fact no further legislative action required. The traditional options of ‘Statutory Formula’ or ‘Operating Cost Method’ continue to be available. (And NLC has already restored 23 of the 72 jobs that it axed.)
- 15% tax on Super Pensions above $100,000 per annum – all Australians get a tax break on their super contributions, and then expect to withdraw their savings as a tax-free pension when the time comes. The Labor Government proposed to tax the money coming out of those funds if it was greater than $100,000 per annum, but the Liberal Government has knocked that on the head as well. For now, your superannuation pensions will continue to be paid out tax free.
However, there are several Labor initiatives that the Liberal Government has pragmatically decided it will retain. The one which will get least argument in this regard is a series of increases to the cigarette tax. But they’re also phasing out the tax break for people with high medical expenses. And, as per the Labor initiative, they’re cutting tax breaks on R&D for companies with income of $20 billion or more.
As we anticipated before the election, a number of Labor announcements have never made it into legislation. And the current Commonwealth Government certainly appears to be committed to improving consistency and transparency surrounding tax issues. A number of initiatives which were announced over the past decade may now make it formally into legislation, whilst others may be rescinded (expect more announcements to come over the next six months), but at the very least we expect that there will be greater clarity and less ambiguity.