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Issue 122, 10 March 2006
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and accounting professionals.
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Editorial
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Benchmarking
the Australian tax system: Treasurer calls for review
The Treasurer has announced that he has asked Mr Richard (Dick)
Warburton and Mr Peter Hendy to lead a study examining how
Australia’s tax system compares with other developed economies.
This will involve a comparison of overall taxation levels and
rates and coverage of the indirect tax, income tax and company tax
systems. Mr Costello says the aim of the study is to provide a
public document that compares Australian taxes to those in other
countries. This will identify those areas where Australia leads
comparable countries and those areas where it lags. The study will
cover taxes collected at national, state and local government
levels. Personal, business, indirect, property, transaction and
superannuation taxes will be included. The study will be supported
by a small secretariat in Treasury, and the Treasurer has asked
for the report by 3 April 2006.
The Treasurer’s press release can be found at www.treasurer.gov.au/tsr/content/pressreleases/2006/008.asp
Reactions: In welcoming the review, CPA Australia said
that, in its pre-budget submission 2006/07, it urges the Federal
Government to pursue enduring personal tax reform to ensure
Australia has a personal tax system that encourages sustainable
economic growth, private savings and is internationally
competitive. The Business Council of Australia welcomed the
announcement of the review. BCA Chief Executive, Ms Katie Lahey,
said the review was recognition of the centrality of a competitive
tax regime to the country’s future prosperity. The Chief
Executive of the Australian Industry Group Heather Ridout, said
the review presents a new opportunity to focus attention on areas
of tax reform that can improve Australia’s international
competitiveness.
This article appeared in Thomson’s daily Latest
Tax News. With tax fast-moving and ever-changing EVERY DAY,
practitioners rely on Thomson ATP’s daily Latest Tax News for
quick, accurate, comprehensive information — no compromises.
When you need to know what’s new in tax and related news every
day, there’s only one place to look — LTN.
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Businesses struggling with new
reporting standards: ICAA survey
Australian businesses are experiencing difficulty with certain
aspects of the new Australian International Financial Reporting
Standards (AIFRS) according to a survey of over 200 Australian
businesses conducted by the Institute of Chartered Accountants in
Australia (ICAA). The ICAA says the survey of those businesses,
which have been applying the new AIFRS for the past six months,
revealed concerns around the application of the standards on
financial instruments (AASB 132/139), Income tax (AASB 112) and
Impairment of assets (AASB 136). More than 60% of respondents
identified financial instruments as the most difficult standards
to adopt, and 55% thought the standard on income tax was
complicated. The Institute’s Technical Standards Adviser, Keith
Reilly said the problem with AASB 112 was not unexpected because
people perceived income tax to be a difficult area to account for.
He said the new tax consolidation treatment made the whole tax
area more complex for major businesses and had aggravated that
perception.
For more information, see the ICAA media alert, 27 February
2006.
This article appeared in Thomson’s daily Latest
Tax News. With tax fast-moving and ever-changing EVERY DAY,
practitioners rely on Thomson ATP’s daily Latest Tax News for
quick, accurate, comprehensive information — no compromises.
When you need to know what’s new in tax and related news every
day, there’s only one place to look — LTN.
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Reporting of employer
superannuation contributions to continue
The new Assistant Treasurer, Peter Dutton, has announced that
the practice of requiring superannuation providers to report
details of employer contributions to the Tax Office on an annual
basis will continue. Superannuation providers have previously been
required to report details of employer contributions to the Tax
Office and will be required to do so in the future, he said.
The Assistant Treasurer said this information provides
important data to the Tax Office for its administration of the
superannuation guarantee. The Tax Office use this information to
screen out employers who meet their superannuation guarantee
obligations from possible audit action by the Tax Office, to
prioritise cases of non-compliance and to inform the auditor of
the likely level of non-compliance. Without this data, the Tax
Office would be forced to rely on direct audit activities in order
to undertake its compliance programmes, Mr Dutton said. He said
these activities are necessarily intrusive and disruptive to
employers and superannuation providers as they involve demands for
information on an ad hoc basis and may also entail visits to the
superannuation provider or employer.
Mr Dutton said the reporting system will capture information
necessary to ensure that employees receive their superannuation
guarantee entitlements while minimising disruption to employers
and superannuation providers. Under the revised arrangements,
superannuation providers will give reports to the Tax Office by 31
October each year containing details of all employer
superannuation contributions and total contributions paid to all
members’ accounts for the previous financial year.
See the Assistant Treasurer’s press release, 2 February 2006
for further information.
Thomson comment
This announcement appears to be in response to the abolition of
the superannuation contributions surcharge since July 2005 and the
industry expectation that reporting member contribution statements
for surcharge purposes would no longer be required.
However, the surcharge reporting system has become an integral
part of the Tax Office’s administration of several other
regimes, including the Government co-contribution and
superannuation guarantee. In addition, superannuation providers
will also be required to report spouse contribution splitting
details to the Tax Office each 31 October: see Thomson’s 2005
Superannuation & Financial Services Bulletin No. 10 para.
[405].
This article appeared in Thomson’s Superannuation
& Financial Service Bulletin. Superannuation &
Financial Service Bulletin is a comprehensive and informative
superannuation news service, covering all superannuation
developments, from cases, new legislation, rulings, Tax Office and
APRA developments and major announcements to detailed practitioner
articles. Special coverage is given to newly introduced
legislation with contributions from business-focused experts.
(Also available as part of Australian Superannuation Practice.)
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Superannuation choice of fund:
ASFA report
The Association of Superannuation Funds of Australia Ltd (ASFA)
has released a report outlining the impact to date on the
superannuation industry following the introduction of the choice
of fund regime in July 2005. The Report is available on the ASFA
website at www.asfa.asn.au/policy/rc0602_choice.pdf
ASFA CEO, Philippa Smith, said the study suggests that the rate
of changing funds will continue at 11% or 12% of employees a year,
with around half of that due to active choice by employees and the
rest due to a job change or fund closure. On a positive note, Ms
Smith said choice of fund will lead to the consolidation of
multiple accounts, but the problem of some members losing contact
with one or more of their super accounts will remain.
The ASFA study compared some of the documented predictions for
choice of fund with what has actually happened to date. The study
used data and feedback from member surveys, super funds, and
clearing houses for super contributions made by employers to
determine actual movements related to choice of fund. ASFA also
noted that data from published and unpublished findings by ANOP
Research Services Pty Ltd from late 2005 suggested that there is
only a modest level of interest in changing funds, which often is
only triggered by key events such as changing jobs or wanting to
consolidate numerous small accounts. Clearing house and super fund
feedback also suggested that the great bulk of employers have not
had any employees exercising choice.
Industry funds v. retail funds
ASFA suggests that neither industry funds nor retail super
funds have suffered significant outflows following choice.
However, ASFA said there is some evidence that industry funds have
fared better from choice of fund than some commentators expected,
and have continued to close the gap of market share. According to
ASFA, industry funds are also now able to attract and retain
members without needing to rely on provisions in industrial
awards. Furthermore, the account balances of those in industry
(and other super funds) continue to grow.
The ASFA paper predicts that both retail and industry funds are
set to jointly dominate the market for superannuation in the
future, with neither likely to significantly gain an upper hand.
This reflects market developments, such as the closure of many
corporate super funds, ASFA said.
SMSF implications
ASFA believes that the choice of fund regime has not resulted
in a mass exodus to self-managed superannuation funds (SMSFs). In
particular, ASFA found that of those employees who have exercised
choice, only 3% requested their contributions be paid into a SMSF,
with most of the SMSFs nominated already established funds, rather
than new entities formed to receive the contributions. Possible
reasons for the movement to SMSFs being lower than was predicted
include:
- strong investment returns;
- regulatory restrictions on the
selling of SMSF options; and
- greater public awareness of the
responsibilities involved in running an SMSF.
Nevertheless, when investment returns from managed investments
decline, as they inevitably will, ASFA considers that there may be
increased interest in SMSFs.
ASFA also noted that the ANOP research commissioned by ASFA in
late 2005 found that the number of people nominating a SMSF as
their main fund had risen markedly. However, on further analysis
of the names of the funds they nominated, ASFA found that a
significant number had confused an individual account through a
wrap or a master trust, with a SMSF.
Extension of choice
The ASFA paper also looks at the likely impact of choice of
fund being extended to employees covered by State Awards from 1
July 2006 (see 2006 Superannuation & Financial Services
Bulletin No. 1 para. [22]), and the impact of new industrial
relations legislation on State and Commonwealth agreements. ASFA
estimates that these changes could see an additional million
employees having access to choice of fund from 1 July 2008 (i.e.
after the end of the transition period for default funds specified
in federal awards).
From 1 July 2008 (following the end of the transitional
period), ASFA anticipates that 6.3 million employees may have
choice of fund, up from around 5.2 million in July 2005.
Further details can be obtained in the ASFA media release, 14
February 2006.
This article appeared in Thomson’s Superannuation
& Financial Service Bulletin. Superannuation &
Financial Service Bulletin is a comprehensive and informative
superannuation news service, covering all superannuation
developments, from cases, new legislation, rulings, Tax Office and
APRA developments and major announcements to detailed practitioner
articles. Special coverage is given to newly introduced
legislation with contributions from business-focused experts.
(Also available as part of Australian Superannuation Practice.)
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Thomson special offers and product alert
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Preparing financial accounts with a completely new suite of
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For more information call 1300 304 197 or email LRA.Support@thomson.com
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