Review delivers big for business

JOHN Ralph’s Review of Business Taxation has delivered big and will change the face of the income tax system forever, according to specialist tax advisers Greenwoods & Freehills and national law firm Freehill Hollingdale & Page.

This view is shared by most industry groups and tax advisers.

Westpac general manager economics Bill Evans said: “The system will be positive for economic growth and the efficiency of resource allocation by lowering the current level of distortion in the business tax system.”

Put simply, the report seeks to simplify the tax system, reduce compliance costs, set up an advisory board and clamp down on tax avoidance.

Capital gains tax will be reduced for most individuals to an effective rate of 24.25 per cent, bringing it into line with other countries.

Companies with turnover of less than $1 million will have access to a simplified tax system from 1 July 2001 that will reduce their paperwork and compliance burden.

The WA Farmers’ Federation has welcomed the initiative.

Federation economics portfolio holder Marie Dilley said: “It is also pleasing to see CGT relaxed on assets held for fifteen years or more, an initiative which will provide peace of mind to many farmers thinking of selling the farm and retiring or moving on.”

However, Mrs Dilley said the Federation held concerns that the benefits would not be shared by the estimated 2.4 per cent of WA family farms with turnover in excess of $1 million.

Another recommendation proposed by Ralph is the establishment of an advisory board.

The ten member board would include seven members from the private sector and would oversee the development, design and implementation of new tax laws.

Deloitte Touche Tohmatsu tax partner Dale Judd says the objectives of the board would be to optimise economic growth, promote equity and promote simplification and certainty.”

“Previously, taxation policy was formulated and often released as law with little consideration for the practical impact on business,” Ms Judd said.

In order to pay for the CGT cuts the government will remove accelerated depreciation benefits. This change is likely to hit mining and manufacturing hard.

The Australasian Institute of Mining and Metallurgy, representing more than 8,500 members, believes there are not sufficient incentives for exploration and capital investment.

AusIMM president Mike Law-rence described the tax reform as a mixed bag.

“The deletion of the accelerated depreciation provisions will impact the medium to large companies who are the major employees and investors in the industry,” he said.

However, Mr Lawrence welcomed the continuing immediate deductibility for exploration and prospecting expenditure.

WA Chamber of Commerce chief executive Lyndon Rowe also had reservations about the reform.

“Overall the changes will be good for business, except for the withdrawal of accelerated depreciation which is disturbing news for WA,” Mr Rowe said.