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Investment drive taxes Government

PROPOSALS from Federal Treasury for a major overhaul of Australia’s international tax system could have a fundamental impact on WA’s ability to attract business investment and talented individuals.

Businesses and the community have until October 30 to voice their opinions to the Board of Taxation on the raft of measures put forward.

The treasury proposals cover four principle areas: the need to attract equity capital for offshore expansion; promotion of Australia as a location for internationally focused companies; promotion of Australia as a global financial service centre; and improving the tax treatment of foreign expatriates.

PricewaterhouseCoopers partner and Board of Taxation advisory panel member Ian Farmer said methods for increasing the attractiveness of equity capital would be watched closely by industry.

“The options that suggest allowing ‘dividend streaming’ will be particularly welcomed and we would expect this aspect will be a major focus of submissions by companies,” he said.

The current controlled foreign company regime, which gives rise to tax payments to Australian companies in respect of certain passive investments owned by offshore subsidiaries, is also being called into question by treasury.

The foreign source investment income exemptions have been welcomed by business as improving the competitiveness of Australia as a destination for skilled labour.

Taxation arrangements relating to superannuation also have been brought to the fore through the review but these do not go far enough, according to PWC partner Mike Forsdick.

“The effective tax management of retirement benefits for people who move between countries is becoming even more of an imperative as, globally, many such people have had to take responsibility for building their retirement capital personally,” Mr Forsdick said.

Releasing the taxation proposals, Treasurer Peter Costello said reforming the tax system would encourage regional headquarters into Australia and promote Australia as a financial centre.

However, Mr Costello poured cold water on any suggestion that Australia would follow inter-national trends away from dividend imputation.

“I doubt that we would move away from dividend imputation. It is so much a feature of the Australian taxation system and it is understood, particularly by Australian shareholders,” Mr Costello said.

“I note that some other companies, some other countries, have done that. But I do not see Australia moving away from that because it is so firmly fixed in our landscape and I think it is very much one of the reasons why Australian investors like equities, and in fact we have enhanced the dividend imputation system in Australia in recent years.”

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