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Australia: Tax changes in store with new government

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Tom Seymour, PwC

With a newly elected Australian federal government, it is opportune to consider the tax-related changes it proposes in its first term of office. These changes include not only a commitment to abolish the recently implemented carbon tax and mining tax, but also corporate tax rate changes. The following is a snapshot of the main business tax measures that are on the new government's agenda:

  • Reduce the company tax rate from 30% to 28.5% from July 1 2015;

  • Apply a 1.5% levy on companies with more than A$5 million ($4.8 million) in taxable income to fund a paid parental leave scheme which is to provide mothers with 26 weeks of paid leave at their actual wage (capped at A$150,000 per annum) or the national minimum wage (whichever is greater), plus superannuation;

  • Abolish the carbon tax;

  • Discontinue the company loss carry-back measure;

  • Remove for small businesses the increase to the instant asset write off threshold and the A$5,000 upfront deduction for the cost of a motor vehicle;

  • Abolish the minerals resource rent tax which applies to Australian iron ore and coal miners;

  • Introduce an exploration development incentive to provide investors in small minerals exploration companies a tax credit for exploration expenditure;

  • Delay the progressive increases in the compulsory superannuation paid by employers;

  • Discontinue the phase-down of interest withholding tax on financial institutions;

  • Reject the previous government's proposal to remove the statutory formula method for determining fringe benefits tax on employer-provided motor vehicles; and

  • Provide greater taxpayer certainty by requiring all new tax legislation to express the government's policy intent.

At the time of writing, the new government was yet to indicate its position on a number of the former government's un-enacted proposals, for example modified thin capitalisation rules and limiting tax concessions for foreign investment by Australian companies, but has "reserved the right to implement" these measures.

Business will be keenly interested in the government proposal to produce a white paper on tax reform with a view to canvass a range of future options to support lower, simpler, fairer taxes for higher economic growth and better sustained services.

With the government's declaration that "Australia is once more open for business" its first term tax agenda is designed to remove some impediments to growth, with the removal of the carbon tax being the centrepiece of its tax reform agenda.

Tom Seymour (tom.seymour@au.pwc.com)

PwC

Tel: +61 (7) 3257 8623

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