11 May 2004

Australia’s peak business tax group, the Business Coalition for Tax Reform (BCTR), welcomes the Budget announcements on personal taxation, income support and retirement income.

The personal tax system directly impacts on business in a number of ways. Many small business operators pay tax at the personal marginal rate and Australia’s high marginal tax rates and the discrepancy between the company and top personal tax rates adds considerable complexity to the taxation of small and medium sized businesses. Uncompetitive rates detract from the rewards and incentives for higher levels of workforce participation and saving. They reduce the benefits that individuals reap from upgrading skills and seeking better employment opportunities.

“Reform of all areas of the tax system is fundamentally important for the health of the economy and the framework in which business operates” John Stanhope BCTR Chairman said.

The measures announced in the Budget indicate that Government has taken some steps on the broader issues of long-term growth, workforce participation and Australia’s skill base.

Implementing the announced business tax reform measures and the yet to be adopted Board of Taxation recommendations on international taxation remains the BCTR’s top priority. But, according to John Stanhope “Raising the thresholds for the top two brackets is a significant step in ensuring that Australia remains competitive.” The top two tax brackets previously applied at relatively low levels of income and therefore impacted on a substantial proportion of the population.

The Government’s adjustment to the Family Tax Benefit will go some way towards lessening the impact of some of the worst high effective marginal tax rates. High EMTRs are inequitable and impact unfavorably on workforce participation, perpetuating welfare dependency through an erosion of financial incentives to work. These work-related tax distortions currently occur at a number of levels in Australia.

These tax and income support changes are steps in the right direction in terms of improving the incentives for workforce participation, for saving and for investment and therefore Australia’s long-term growth.

However, these areas will require ongoing and further consideration. “Reducing the impacts of high marginal tax rates in the income tax system and at the intersection of the tax and income support systems is the central way these incentives can be improved” Mr Stanhope said.

The BCTR also welcomes the Government’s announcements on retirement savings as further steps in the right direction. Retirement incomes policy is an important long term issue in Australia which will need continuing focus.

The members of the BCTR include Australian Gas Association, Australian Constructors Association, Australian Food and Grocery Council, Australian Industry Group, Australian Institute of Company Directors, Australian Retailers Association, Australian Stock Exchange, Business Council of Australia, Corporate Tax Association of Australia, CPA Australia, International Banks & Securities Association Australia, Institute of Chartered Accountants, Insurance Council of Australia, Investment and Financial Services Association, Master Builders Australia, Minerals Council of Australia, Property Council of Australia and Real Estate Institute of Australia.

Contacts:

John Stanhope, Chair Business Coalition for Tax Reform through Jane Sullivan, General Manager Public Affairs Finance and Administration, Telstra (03) 9632 3701.

Paul Drum, Business Coalition for Tax Reform, Chair of Personal Tax Sub-committee, Senior Tax Counsel, CPA Australia (03) 9606 9701.

Freya Marsden, Business Coalition for Tax Reform Secretariat, Director Policy, Business Council of Australia (03) 8664 2664 / Mbl: 0402 290 167.