TAX professionals and business breathed a sigh of relief when Treasurer Peter Costello announced that he would defer Tax Option 2.
TAX professionals and business breathed a sigh of relief when Treasurer Peter Costello announced that he would defer Tax Option 2.
Most agree with the Option 2 principles but want to see more detail before they would consider supporting it.
Called the Tax Value Method, Option 2 will replace about 70 years of tax law and precedents.
It was to be introduced on July 1, 2001, but the Government has not set a new date for its implementation.
“It is clear there are many in business who believe they would not be ready by that date, particularly considering the changes on GST and Pay As You Go,” Mr Costello said.
“No additional revenue is budgeted to be raised from this option. In the circumstances there is no requirement for a July 1 start-up.
“The development of this option will be done with consultation through a new Board of Taxation providing input from business users and aiding in the educating process.
“It is expected the process will work on developing exposure legislation to allow the study of the full ramification of the changes.”
The Board of Taxation is made up of David Jones chairman Dick Warburton, Pricewaterhouse Coopers partner John Harvey, La Trobe University professor Alison McClelland, Wesfarmers CEO Michael Chaney, Corporate Advisory Group head Brett Heading, Pharmacy Guild of Australia national president John Bronger, Treasury Secretary Ted Evans, Tax Commissioner Phil Carmody and the First Parliamentary Counsel.
The theory of Option 2 is that it makes calculating taxable income easier. Jackson McDonald tax consultant Graham Harrison said tax advisors and business would face the most change.
“It will have a large impact on the accounting systems of large corporations,” Mr Harrison said.
“But the biggest change will be for tax advisors to business. For lawyers it means decades of legal precedent will go out the window.All case law to do with income and deductions will be gone.”
CPA Australia senior tax counsel Paul Drum said the society wanted more consultation about the proposal.
“Since February we’ve had no consultation,” Mr Drum said.
“We agree with the high-level principles but have not yet seen a complete model of what is proposed.
“Without an education campaign, the complete model and further demonstration of the benefits, we can’t support it.
“We want it proved that introducing Option 2 will cause minimum compliance costs and business interruption.”
Mr Drum said the old tax system has been criticised because its 70 years of precedent was choking the system.
“We understand those precedents. Does this mean if we introduce Option 2, we’ll be fighting over new precedents for the next 20 or 30 years?” he said.
Institute of Chartered Accountants in Australia vice president Geoff Brayshaw said more tax change on top of the GST and other tax changes would be too much.
He believes the jury is out on the benefits of Option 2.
“We must get it right. If there is to be any decision on further major business tax change in the form of Option 2, everyone must be involved in the process and agree on any change,” Mr Brayshaw said.
Law Society of WA president Gregory Boyle said the legal industry wanted more information on Option 2.
“It is better to get it right than rush into it,” Mr Boyle said.
Chamber of Commerce and Industry senior economist Dan Engles said the CCI favoured the proposal in principle.
“In theory this should be a better proposition. It’s moving closer to the economic definition of income,” Mr Engles said.
“However, Option 2 needs some clearer discussion. There is a need for clearer discussion and a lot of definition to what is an asset.
“We could end up with some unrealised gains becoming taxed. This is something the business community will be very unhappy with.”
Combined Small Business Associations of WA president Oliver Moon said Option 2 was “a dog”.
“We are totally against it,” Mr Moon said.
“Option 2 is poorly understood by small business. Even if it is to the benefit of small business it is not clear due to the scarce information available on it.”
Most agree with the Option 2 principles but want to see more detail before they would consider supporting it.
Called the Tax Value Method, Option 2 will replace about 70 years of tax law and precedents.
It was to be introduced on July 1, 2001, but the Government has not set a new date for its implementation.
“It is clear there are many in business who believe they would not be ready by that date, particularly considering the changes on GST and Pay As You Go,” Mr Costello said.
“No additional revenue is budgeted to be raised from this option. In the circumstances there is no requirement for a July 1 start-up.
“The development of this option will be done with consultation through a new Board of Taxation providing input from business users and aiding in the educating process.
“It is expected the process will work on developing exposure legislation to allow the study of the full ramification of the changes.”
The Board of Taxation is made up of David Jones chairman Dick Warburton, Pricewaterhouse Coopers partner John Harvey, La Trobe University professor Alison McClelland, Wesfarmers CEO Michael Chaney, Corporate Advisory Group head Brett Heading, Pharmacy Guild of Australia national president John Bronger, Treasury Secretary Ted Evans, Tax Commissioner Phil Carmody and the First Parliamentary Counsel.
The theory of Option 2 is that it makes calculating taxable income easier. Jackson McDonald tax consultant Graham Harrison said tax advisors and business would face the most change.
“It will have a large impact on the accounting systems of large corporations,” Mr Harrison said.
“But the biggest change will be for tax advisors to business. For lawyers it means decades of legal precedent will go out the window.All case law to do with income and deductions will be gone.”
CPA Australia senior tax counsel Paul Drum said the society wanted more consultation about the proposal.
“Since February we’ve had no consultation,” Mr Drum said.
“We agree with the high-level principles but have not yet seen a complete model of what is proposed.
“Without an education campaign, the complete model and further demonstration of the benefits, we can’t support it.
“We want it proved that introducing Option 2 will cause minimum compliance costs and business interruption.”
Mr Drum said the old tax system has been criticised because its 70 years of precedent was choking the system.
“We understand those precedents. Does this mean if we introduce Option 2, we’ll be fighting over new precedents for the next 20 or 30 years?” he said.
Institute of Chartered Accountants in Australia vice president Geoff Brayshaw said more tax change on top of the GST and other tax changes would be too much.
He believes the jury is out on the benefits of Option 2.
“We must get it right. If there is to be any decision on further major business tax change in the form of Option 2, everyone must be involved in the process and agree on any change,” Mr Brayshaw said.
Law Society of WA president Gregory Boyle said the legal industry wanted more information on Option 2.
“It is better to get it right than rush into it,” Mr Boyle said.
Chamber of Commerce and Industry senior economist Dan Engles said the CCI favoured the proposal in principle.
“In theory this should be a better proposition. It’s moving closer to the economic definition of income,” Mr Engles said.
“However, Option 2 needs some clearer discussion. There is a need for clearer discussion and a lot of definition to what is an asset.
“We could end up with some unrealised gains becoming taxed. This is something the business community will be very unhappy with.”
Combined Small Business Associations of WA president Oliver Moon said Option 2 was “a dog”.
“We are totally against it,” Mr Moon said.
“Option 2 is poorly understood by small business. Even if it is to the benefit of small business it is not clear due to the scarce information available on it.”