26th April 2007 
 
Tax Counsel for the Institute of Chartered Accountants in Australia, Ali Noroozi today said that at the top of the Institute’s Federal Budget key recommendations, was taxation reform for businesses. 
 
The 2006 / 2007 Budget, followed by a suite of other Government announcements affecting businesses, has directly addressed many of the Institute’s recommendations, however tax reform is an ongoing process and the Institute believes more tax reform is needed to maintain and improve Australia’s international competitiveness both in terms of business and personal tax.  
 
“The Institute’s Pre-Budget submission focuses heavily on business tax reform but also highlights other priorities the Institute believes the government must address in the upcoming budget,” Mr Noroozi said.  
 
Key recommendations include:  
 
Company Losses: In response to the Government’s request, the Institute provided, in January 2006, a number of options for improving the Same Business Test (SBT). Of these recommendations the Institute believes that, as a matter of priority, the Government should reinstate the ability of companies with income of more than $100 million to rely on the same business test (SBT) to recoup prior year losses and claim bad debt deductions. The Institute also recommends measures be introduced to allow consortium companies to flow through losses to their shareholders and introduce loss carry backs rules. 
 
International Tax: The Institute recommends that the Government revisit the remaining Board of Taxations recommendations arising from its review of International Taxations Arrangements, particularly, the provision of tax relief of domestic shareholders for unfranked dividends paid out of foreign source income. 
 
Capital Gains Tax: The Institute calls for CGT taper relief for business assets held for the medium to long term. 
 
Indirect Taxation: In May 2005, the Institute released its Indirect Tax Policy calling for a general post-implementation review of the legislation to deal with defects, inequitable outcomes and complexity. Whilst this remains the ultimate goal, the Institute recommends that, as a matter of priority, the Government reform the GST arrangements in relations to cross-border services, financial services and property transactions with the aim ensuring that the relevant legislation achieve their originally stated objectives and reflect commercial reality. 
 
Property Funds Industry - Divisions 6B and 6C: The efficiency and international competitiveness of the Australian property fund industry could be substantially enhanced by a number of legislative changes. The Institute made a submission to Treasury in December 2006 addressing this issue. Some of the recommendations in the submission have been partly addressed by a subsequent Government announcement, however a broader reform of Division 6c is still required. 
 
Taxation of rights: The Institute supports the development of a systematic approach to the treatment of rights, rather than the case-by-case approached adopted in the 2005 / 2006 Federal Budget. The approach should be principles-based and would include a level of flexibility for the tax system to respond to changes in the business environment. 
 
Personal Tax Reform: Whilst the Institute acknowledges the Government’s initiatives in the previous two Budgets, the Institute continues to recommend that the Government commence consultation on a more general reform of our personal tax regime including; addressing effective marginal tax rate inequities and optional tax returns (for taxpayers whose income is subject to withholding at its source). 
 
“With the Government’s commitment to ‘balance the budget and fund required services’, the continual reform of our tax system should also be a priority, in order to ensure that Australia remains or improves its international competitive positioning,” Mr Noroozi said.