Budget Will Be A Litmus Test Of Government’s Commitment
May 14th, 2010
Budget 2010 will be a real litmus test of the Govt’s commitment to use the tax system to achieve some of its transformational objectives. While it is clear GST will rise to 15% (probably from October 1) and depreciation on buildings will either be denied or significantly curtailed, again from October 1, the unknown issue is how far the Govt is willing to run with the substantive structural reforms recommended by the Tax Working Group. The TWG argued priority needs to be given to dropping personal tax rates across the board. A critical issue is whether the Govt will be as bold as reducing the top rate of 38% to 30% to achieve the alignment between the company, trust and PIE rate the TWG recommended.
Tax expert John Shewan, PriceWaterhouseCoopers’ chairman, says he would like to think the rates will drop from 12.5% to 11.5% on the first $14,000, from 21% to 18% up to $48,000 and to 30% on incomes over $48,000. While most commentators are punting for 33% or 35% as the new top rate, rates as high as this will not achieve the objectives set out in the TWG report. The company rate is likely to remain at 30%. Shewan says Aust’s drop to 29% in 3 years and 28% in 4 years will not have created any panic in the Beehive.
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Duncan Cotterill