Cuts in tax paperwork to save $1bn
The Sydney Morning Herald
By Toni O'Loughlin
The Government today will unveil new tax laws that are expected to slash paperwork, crack down on tax avoidance and save business up to $1 billion over the next three years.
The vast bulk of savings will go to big businesses who have the most to gain under the new "consolidation" regime and have lobbied ardently for the change.
It relieves companies from the tedium and costs of filing a tax return for every subsidiary, enabling corporations to lodge just one return at the end of the financial year.
With less than five months to go before the new system begins, companies, especially smaller ones, face substantial costs as they race against the clock working out whether or not to opt into the new system.
The tax manager of the Institute of Chartered Accountant, Ms Margaret MacDonald, said: "There's going to be a lot of work involved depending on the complexity of your group, which shouldn't be underestimated."
But industry group Australian Business Limited (ABL), which represents 8,500 businesses including the top 100, was enthusiastic about the long-awaited new laws.
Its chief executive, Mark Bethwaite, said: "I don't see anybody losing from this. This is an opportunity for business to achieve a simpler, less costly reporting regime."
Nevertheless, big corporations with complex structures would gain the most from the new simplicity, he said.
"Where there's a small corporate structure it won't have the same impact as the big end of town," Mr Bethwaite said. "This is clearly an initiative where the benefit is the greatest for the most complex structures."
While adoption is optional, some companies may wind up paying more tax if they do not participate in the new system.
From July 1, the grouping measures - which allow losses in one subsidiary to be offset against profit in another to claim a tax advantage and move assets between entities without paying income tax - will be removed.
But companies that opt into the consolidation measures will be allowed to continue pooling losses and credits, and transfer assets tax-free within the group.
However, some companies may be disadvantaged by electing to use the new system, such as those that currently are not eligible to use the current grouping measures.
Tax advisers warn that smaller businesses should think carefully before deciding to opt in or out of the new regime.
The Tax Institute of Australia's tax director, Mr Michael Dirkis, said: "The risk of not going in is that you will pay more tax than you should because losses will be trapped in individual entities."
The release of the new measures - albeit in draft form - follows a prolonged gestation period.
It is one of the last measures recommended by businessman John Ralph, who reviewed the business tax system for the Government in 2000.
The new laws also make it more difficult for businesses to contrive arrangements to avoid tax. For instance, it will stop companies from creating multiple tax losses based on one initial economic loss.
But unlike other anti-avoidance measures, like the plan to tax trusts as if they were companies, which was aborted by the Government in the face of stiff opposition and severe drafting problems, the Minister for Revenue and Assistant Treasurer, Senator Helen Coonan, is keen to iron out potential difficulties through closely consulting the business community.
"The consultation process is a first step in giving taxpayers a greater say in the development of tax law," Senator Coonan said.