The Tax Institute has sent the Albanese government a report outlining key tax and superannuation measures it should fix as a priority.
It said the government faced immense economic, fiscal and social challenges in a globally volatile environment and it needed to act quickly on unfinished business from the Morrison government.
“Taxpayers require certainty and urgent clarity is needed around the government’s position on dozens of measures announced but not enacted by the former government,” said Julie Abdalla, tax counsel at the institute.
Leftovers that needed resolving included budget measures on technology and training, superannuation penalties, patent incentives, and rules on corporate residency.
Ms Abdalla said continuing uncertainty around corporate residency rules was increasing compliance costs and disputes with the ATO.
“The announced technical changes that would treat a foreign incorporated company as an Australian tax resident where it has a significant economic connection to Australia, were welcomed across the profession,” she said.
“The former government also floated the idea of expanding the definition to apply to trusts and corporate limited partnerships.
“Implementation of the amendments would provide greater certainty to taxpayers, and has a bigger picture implication in terms of supporting foreign investment in Australia. Consultation on the proposed changes should be progressed without any further delay.”
Another priority concerned the patent box regime, which had the potential to promote Australia as an innovation hub and encourage investment in medical, agricultural and low-emissions and biotechnology.
“There is broad support across the profession for the introduction of the regime, but further consultation is needed on the detailed design of the measures,” she said.
One previous budget measure unenacted was the small-business skills and training and technology investment boosts.
Senior advocate at the Tax Institute, Robyn Jacobson, said without legislative certainty, there was a high risk that small businesses would fail to spend on digital uptake or training their employees, exacerbating the skill shortages.
“The technology investment boost will support small businesses [to] improve their digital adoption which would allow the Australian economy to keep pace with other developed countries,” Ms Jacobson said.
“The government should commit to legislating the boosts in the first parliamentary session.”
She said other pressing Morrison government pledges involved the non-arm’s length income (NALI) and superannuation guarantee.
“The former government announced that it would amend the law to ensure the NALI provisions operate as envisaged,” she said.
“In their current form, the rules are likely to have a significant and unintended impact on the superannuation balances of many Australians. We keenly await a public response from the government committing to making the necessary legislative amendments to ensure that the NALI rules do not result in excessive and unintended consequences.”
Penalties under the superannuation guarantee rules were another area requiring action.
“We also seek legislative reform of the superannuation guarantee regime to remove the draconian and disproportionate penalties imposed on employers even where they only make minor transgressions in paying their employees’ superannuation,” she said.
“Employers who pay SG contributions just one day late and fail to report this to the ATO are treated the same as an employer who deliberately evades their obligations to their employees.
“This is wrong and fails to uphold the overarching need for the law to protect workers’ entitlements, while acting as a disincentive for employers who fail to meet their SG obligations.”
Ms Jacobson also highlighted an inconsistent tax treatment of the various Commonwealth, state and territory pandemic and natural disaster payments.
“Some payments are non-assessable non-exempt income; others are not,” she said. “All such payments should be tax-free so that the full benefit of the payment is available to recipients.”
In a covering letter in the report to the Treasurer, general manager of tax policy and advocacy at the Tax Institute, Scott Treatt, said the legacy of the pandemic meant other measures, including wholesale tax reform, were crucial.
“Business owners and practitioners are still catching up following the immense pressures they have faced over the past 2½ years,” Mr Treatt said. “The toll on their mental health has been significant and this factor should weigh heavily in determining the timing of future changes.
“The need for genuine and holistic tax reform remains crucial to Australia’s future prosperity and its importance cannot be understated or forgotten.”