Tax reform consultation process ‘worries me’, specialists say

“It worries me because it means that the next time we’re in consultation, we’ll wonder if we should bother,” Sandow told Accountants Daily during a media briefing at the Tax Summit, hosted by The Tax Institute.

“It does feel like at the moment it’s just a waste of time, and it does feel very disingenuous as well.”

The government recently passed its Tax Reform No.2 Bill through both houses of parliament, which contained supplementary amendments to resolve issues related to its negative gearing reforms. The amendments sought to address issues raised when the first tranche of negative gearing reforms was released.

The latest bill states that where due to inheritance or relationship breakdown, a person acquires an ownership interest in a residential dwelling from their spouse or former spouse, or a co-owner, and that ownership interest was capable of being negatively geared, the person is entitled to the same treatment for the new ownership interest.

It also ensures that where a person acquires an ownership interest in a new residential dwelling through inheritance from a spouse or co-owner, or a relationship breakdown, the person can choose between applying the CGT discount or cost base indexation and the minimum tax on capital gains.

Erosion of trust in government

Birchstone associate director, lawyer, and experienced tax adviser Tracey Dunn told Accountants Daily at the briefing that while the change was welcome as it addressed concerns around the “widow’s tax”, “it can lead to distrust in the government”.

“I’m sure it wasn’t the intention of the government. I’m sure the intention was they were concerned about people’s worries about the widow’s tax, and thought perhaps that was the least contentious part of the exposure draft,” Dunn said.

“But Australian taxpayers need to have trust in the government and in the tax office. If the government says it’s open to consultation and that it wants to ensure that it’s listening to Australian people, but then it pushes these amendments through anyway, what message does that send?

“That really worries me.”

She continued: “In my entire life, and my 25-plus year career in public practice, I have never seen a situation where legislation that was currently open for consultation has actually been introduced and passed into law before that consultation has closed. Everybody should be concerned about that.”

While the tax profession broadly supports tax reform and has had a fruitful relationship with the tax office, these recent events could lead them to question whether it is worth committing the resources to contribute to consultations, Dunn warned.

“That would have a bad outcome for everybody because we’re the ones that are on the ground that understand in practice how this is going to work out,” she said.

Tax professionals told to keep calm and pause

When asked how accountants should navigate an environment of uncertainty, constant change, and tracking what has become law and what is proposed legislation, Dunn suggested that everyone “just needs to pause”.

“The starting point always has to be the end goal,” she told Accountants Daily.

“You need to work on what is the law as it stands now, not what it could be. People can’t put certain things on hold. Business owners have to make commercial and business decisions, as well as decisions about succession planning. They can’t wait until all of this is resolved. They have to make decisions based on what is law now.”

Sandow cautioned accountants to be sceptical of anyone who is pushing them to make any decisions in haste, and cited valuations as an example.

“There’s a lot of people saying you need to get valuations now. The answer is you don’t. You’ve got to be very sceptical about someone who is asking you to rush into doing something,” Sandow said.

The second tranche of CGT changes contain details on how taxpayers may apportion capital gains and losses as they transition to the new CGT regime from 1 July 2027.

The Institute of Public Accountants’ senior tax adviser Tony Greco said taxpayers would need to weigh up between the apportionment method and obtaining a valuation depending on which option might yield the best outcome for their circumstances.

RSM partner Nadine Marke said early engagement with trusted tax advisers is key to avoid ATO disputes and large investigation costs.