BDO flags key areas for ‘bite-sized tax reform’
The accounting firm highlights modest changes that would still improve the economy with the government shying away from sweeping tax reform.
BDO tax technical national leader Lance Cunningham said while the government is reluctant to embrace holistic tax reform, smaller, digestible changes could still improve the tax system.
“Tax reform is not just about tax cuts, it entails a rational identification of how all aspects of the tax system interact with each other without causing much distortion to the economy,” said Mr Cunningham.
“While holistic tax reform still ranks as a high priority for us, there are some modest changes that the government can get over the line to create a simpler, more efficient, and fairer tax system that will have direct benefits to the economy and community.”
One of the areas that BDO would like to see addressed is the tax concessions for small business, with the current laws far too complex in this area.
“Small business CGT provisions, for example, are one of the most complex pieces of tax legislation and it is very difficult for small business and some of their advisers to understand and follow them correctly without specialist help,” said Mr Cunningham.
“As a start, the various small business thresholds should be aligned again.”
The taxation of trusts is another area which needs to be simplified, according to BDO.
“The current rules around taxing trusts and their beneficiaries are some of the most complicated and outdated rules in the tax Acts,” said Mr Cunningham.
“This is mainly because of awkward interactions between trust law and tax law. These interactions need to be reviewed and the tax law changed to simplify the taxing of trusts and their beneficiaries.”
Other relatively easier changes could include progressing and implementing tax law changes that have been the subject of prolonged review and discussion for years, said Mr Cunningham.
“These include the review of Controlled Foreign Company rules (CFC), the Division 7A rewrite, the public release and implementation of the review of CGT rollovers, and reform of individual and corporate tax residency rules.”
Treasurer Jim Chalmers has largely ruled out broader tax reforms beyond the tax measures it took to the election relating to multinationals, high balance superannuation accounts, compliance, cigarettes and PRRT reform.
The Institute of Public Accountants previously said that broad and holistic tax reform would be critical in addressing some of fiscal challenges Australia will face in coming decades.
IPA general manager technical policy Tony Greco said tax reform will help the government create jobs, and grow the economy.
“Tax reform can also help the Australian Government to manage long-term fiscal sustainability, and long-term debt to lower the risk from structural expenditures,” said Mr Greco.
“To ignore tax reform is like putting your head in the sand while allowing debt to climb as deficits are locked in for at least the next ten years in order to fund essential services.”
About the author
