Editorial - Your Association working for you

During the lead up to the election, we updated Taxpayers Australia Inc‘s Top Ten Tax Policy Objectives, which are included at page 216 in issue 14 of The Taxpayer.

Many of the objectives remain unchanged as there has not been any progress on some issues and it is important they are not forgotten. The indexing of our tax thresholds for inflation is an example. During the election campaign neither party indicated any intention to address the impact of bracket creep. Avoiding the indexation of the tax tables allows Treasury to play Father Christmas during budget time. Since the GST was introduced we have had a procession of tax cuts announced around Federal Budget week and taxpayers have become accustomed to this annual handout and will be disappointed when no tax cuts are forthcoming.

Another objective is the simplication of our tax laws to provide more certainty and less complexity. There has been some progress made towards simplification, but there is a long way to go before we can take this issue off the list. It is interesting to see though that New Zealand’s Tax Act was recently overhauled, and this will come into effect for the 2008/09 income year. The task is a difficult one but not impossible, and necessary to improve the efficiency, fairness and administration of tax system.

A new objective on our list is for the tax system to play its part in addressing Australia’s chronic balance of payments situation. Our tax system penalises taxpayers when they invest surplus funds in interest-bearing accounts. After taking into account the impact of inflation and income tax there is little left for the investor to reward them for not spending their money. Incentives for private savings are needed, apart from the first home buyer accounts promised during the election.

Another important policy objective, which is also high on the new Government’s political agenda, is the reassessment and realignment of the allocation of responsibilities between Federal and State bureaucracies with the aim of improving accountability, efficiency and reducing public sector waste. The Rudd Government is keen to hit the ground running on this issue which should result in some much needed progress, particularly if the State Governments also recognise the importance of ameliorating the current inefficiencies for the good of the nation as a whole, and provide their support.

The superannuation environment has now been simplified and made more attractive by eliminating exit taxes. This demonstrates that where there is political will much can be done to streamline the administration of taxes. We are however still left with two layers of taxes and an exit tax if you start to draw down your retirement savings before reaching 60 years of age. In addition, there is very little incentive other than the co-contribution initiative for low income earners to increase their retirement savings. Reducing the contribution tax for low income earners would go a long way in growing the retirement balances for this sector of the taxpaying community, as there is little benefit for them in the recent superannuation reforms.

Finally, the new Federal Government has continued the tradition of calling for pre-budget submissions. By the time you receive this edition of The Taxpayer, submissions will have closed but you can rest assured that our Top Ten Tax Policy Objectives and many more items to benefit our members form the basis of Taxpayers Australia Inc’s submission.

The full submission can be viewed here.