New tax system ‘easier and quicker’

A MAJOR revamp of Australia’s tax system, Option 2, aims to dispose of 70 years of tax law and replace it with a new system.

Taxable income is calculated by subtracting allowable deductions from income.

Under Option 2, that formula will be replaced by Payments minus receipts plus or minus the change in tax value of assets.

Jackson McDonald tax consultant Graham Harrison said there was a particular meaning given to “tax value”.

“If it is a depreciating asset, it will be carried in the formula at its written down value,” Mr Harrison said.

“If it is an appreciating asset it will be carried in the formula at the cost price of the asset until that asset is sold.”

The new version is based on accounting and economic principles.

In theory Option 2 should derive the same result as the present system quicker and easier.

Mr Harrison said Option 2 was at the heart of the tax change measures the Federal Government was imposing.