Tax & Federation
Australia’s taxation system should encourage investment, workforce participation and entrepreneurship. State and federal governments should treat Australia as a single tax base and avoid duplication, complexity and over-taxation. An excessive tax burden harms the incentive to produce and limits economic growth.
- Encourage economic growth, raise living standards and grow job opportunities.
- Facilitate Australia’s competitiveness as a destination for investment and production by reducing the costs of doing business.
- Reduce the compliance burden on businesses.
- Improve and maintain incentives for entrepreneurship, effort and saving.
- Maintain equity.
- Tax reform: Improve the efficiency of the state tax mix by implementing the agreed schedule for the abolition of less efficient taxes.
- Federation reform: Clarify and simplify the roles and responsibilities of federal and state governments in public service provision. We must improve efficiency and reduce cost, blame-shifting and duplication or gaps in service delivery.
- Income tax:
- Reduce the number of personal income tax brackets
- Lower the top marginal rate of personal income tax to the top company tax rates
- Commit to regularly adjust personal income tax thresholds to reduce or eliminate bracket creep.
- Goods and services tax: Broaden the base of the GST to offset reductions in other inefficient taxes by at least as much as the increased tax. Only then should we consider increasing the rate of the GST if it will not lead to an increase in the overall burden of tax.
- Company tax:
- Create a clear timeline to cut the top company tax rate to no higher than 25 per cent, in line with the Henry Tax Review recommendation.
- A single rate of company tax is preferable to a two-tier scheme.
- Stamp duty: Federal, state and territory governments should cooperate to examine replacing stamp duties and other inefficient taxes with a broad-based land tax.
- Dividend imputation: Retain the existing system of dividend imputation.
- Negative gearing: Retain negative gearing as a fundamental feature of Australia’s tax system, which allows expenses incurred in producing income to be deducted. Oppose changes that discriminate between asset classes.
- Multinational taxation:
- Continue to address multinational taxation issues in conjunction with the OECD’s Base Erosion and Profit Shifting (BEPS) initiative.
- Refrain, as far as possible, from unilateral actions that may undermine foreign investment and economic growth.
- Complexity: Reduce the complexity of tax legislation, streamline tax administration and minimise the compliance burden on taxpayers.
- Loss carry-back: Extend the carry-back of tax loss provision to all entities regardless of the types of their business structure.
- Capital gains tax: Change the design of capital gains tax to avoid penalising the sale of long-held assets while retaining existing provisions for small business.
- Payroll tax: As part of a broader package of tax reform, state and territory governments should commit to reducing and eventually eliminating payroll tax.
- Fringe benefits tax: Simplify the FBT regime by increasing the use of market-based valuations. Where this is not possible, the Government should reduce the number of statutory valuation methods for a given type of fringe benefit, while examining further concessions for small businesses.
- Small business threshold: Increase the small business entity test threshold by immediately moving the aggregated turnover threshold to $3 million and then to $5 million within two years.
- Commonwealth Grants Commission:
- Reform the CGC to ensure Commonwealth and state financial arrangements meet the test of equity and efficiency.
- Enhance transparency and simplicity of horizontal equalisation methodology.
- Reward states for good performance.
- State expenditures: State governments should review their expenditure, with the aim of significantly reducing it, before considering raising more revenue. State governments should focus on the most efficient method of delivery for services and contract out functions to the private sector as appropriate.