|A senior academic at the Australian School of Business says the income tax changes related to the Carbon Tax partly implement recommendations from the Henry Review. However Dale Boccabella, Associate Professor of Taxation Law, says they don’t go far enough, and furthermore now he has examined the changes in detail, he says there are some alterations to the tax scheme that have received little publicity.
He says “The government’s carbon tax reform is designed to deliver tax cuts to those below $80,000 of taxable income. It is a small step on from Henry, up the path of tax reform. The increase of the tax free threshold helps: obviously it takes a lot of people out of the tax system.”
Dale Boccabella adds that the changes are very messy, and another change has also received little publicity. “This is the first time in decades that marginal tax rates have been increased.”
The 15% rate goes up to 19%, while the 30% rate goes up to 32.5%. The low income tax offset will be reduced, and the tax-free threshold will rise to $18,200 from 1 July 2012 and $19,400 from July 2015
He says “The increase in the tax free threshold, on its own, would go some way towards implementing the Henry Review ‘indicative’ recommendations. However it doesn’t go nearly as far as the review recommended, which was to raise the tax-free threshold to around $25,000, and then a much broader sweep, having a flat 35% rate all the way up to $180,000 of taxable income.”
“Indeed, the combination of a higher threshold along with increases in two marginal rate bands ensures that those with taxable income above $80,000 are in the same position as they were in before the carbon tax changes. Accordingly any assertion that tax rates have gone up is calculated to mislead.”
The federal government estimates that around an extra one million people will not have to lodge a tax return, both due to the raising of the tax-free threshold, and because the deductions claimed for work-related expenses are proposed to rise from $300 to $500 in 2012 and $1,000 from July 2013.
However Dale Boccabella says the one million figure is inaccurate, and an over-estimation. “While this change is welcome, and it makes life easier for those with very simple tax affairs, a lot of people have a small number of shares because of the round of de-mutualisation and de-nationalisations over the decades. Even if they have only a tiny amount of shares, they still have to lodge a tax return.”
Tax agents are arguing against the changes, saying that people still enjoy having their accountant at the end of the year claim back as much as they can, and these changes will deprive accountants of income. However Dale Boccabella says “People can still file a tax return if they want to.”
For comment please contact Associate Professor Dale Boccabella on 02 9385 3365 or Email email@example.com.