AFTER more than a year of dealing with numerous tax changes, weary small businesses have another tax bogey to fear.
AFTER more than a year of dealing with numerous tax changes, weary small businesses have another tax bogey to fear.
Despite no real benefits being immediately apparent from the Tax Value Method, the Federal Government is moving ahead with it and draft legislation is due in March or April next year.
The TVM proposes a new set of core rules for income tax. This means a more fundamental change than the GST or even plans to change how entities such as family trusts are taxed.
However, if the Government decides to go ahead with the TVM, legislation is not likely to enter Parliament until June 2003.
According to the Board of Taxation the TVM was a key recommendation of the Ralph Review of Business Taxation.
Treasurer Peter Costello said the TVM had the potential to underwrite the development of a stable, less ambiguous and more understandable tax system.
Under Australia’s current tax system, taxable income is worked out as assessable income minus deductions. Under the TVM the calculation becomes net income plus taxable income adjustment minus tax losses.
And this calculation is not just limited to business taxation. It is being applied to all taxpayers.
Accounting bodies believe there are other ways to solve a large number of the tax system’s problems than by adopting TVM.
TVM also could mean three taxation Acts are operating at the same time.
The taxation changes brought in following the Ralph review resulted in Australia having the Tax Act of 1936 running alongside the Tax Act of 1997. If the TVM becomes law, that would result in those two Acts running alongside the Tax Act of 2003.
There is also the argument that introducing TVM will throw out 70 years of legal precedent and rulings.
CPA Australia senior tax counsel Paul Drum said he did not believe the TVM would proceed.
“The rules are not at a
sufficiently advanced stage to do conclusive testing,” Mr Drum said.
“There are real risks about implementing this in the near future – if indeed it is found to actually work.
“This will create a brand new range of issues for our courts to deal with.”
Institute of Chartered Accountants in Australia tax spokesman Roger Sullivan said inflicting the TVM on business would create a significant amount of work.
“The whole accounting system has to change,” Mr Sullivan said.
“The basics of the recognition of income has to change.
“Part of the TVM problem is that we will have to completely rewrite the capital gains tax rules.”
Despite no real benefits being immediately apparent from the Tax Value Method, the Federal Government is moving ahead with it and draft legislation is due in March or April next year.
The TVM proposes a new set of core rules for income tax. This means a more fundamental change than the GST or even plans to change how entities such as family trusts are taxed.
However, if the Government decides to go ahead with the TVM, legislation is not likely to enter Parliament until June 2003.
According to the Board of Taxation the TVM was a key recommendation of the Ralph Review of Business Taxation.
Treasurer Peter Costello said the TVM had the potential to underwrite the development of a stable, less ambiguous and more understandable tax system.
Under Australia’s current tax system, taxable income is worked out as assessable income minus deductions. Under the TVM the calculation becomes net income plus taxable income adjustment minus tax losses.
And this calculation is not just limited to business taxation. It is being applied to all taxpayers.
Accounting bodies believe there are other ways to solve a large number of the tax system’s problems than by adopting TVM.
TVM also could mean three taxation Acts are operating at the same time.
The taxation changes brought in following the Ralph review resulted in Australia having the Tax Act of 1936 running alongside the Tax Act of 1997. If the TVM becomes law, that would result in those two Acts running alongside the Tax Act of 2003.
There is also the argument that introducing TVM will throw out 70 years of legal precedent and rulings.
CPA Australia senior tax counsel Paul Drum said he did not believe the TVM would proceed.
“The rules are not at a
sufficiently advanced stage to do conclusive testing,” Mr Drum said.
“There are real risks about implementing this in the near future – if indeed it is found to actually work.
“This will create a brand new range of issues for our courts to deal with.”
Institute of Chartered Accountants in Australia tax spokesman Roger Sullivan said inflicting the TVM on business would create a significant amount of work.
“The whole accounting system has to change,” Mr Sullivan said.
“The basics of the recognition of income has to change.
“Part of the TVM problem is that we will have to completely rewrite the capital gains tax rules.”
