Calls for holistic tax and super reform at BDO Budget Breakfast

Accounting and professional services firm BDO has prepared an excellent guide to the 2014-15 Federal Budget Time to Pull on the Reins, which notes “The budget measures continue to tinker around the edges of real tax reform.” This was a major theme at BDO’s Budget Breakfast at the Brisbane Convention Centre which I attended yesterday morning. In answering a question about the GST I asked from the floor, BDO Tax partner and one of Australia’s leading taxation experts Mark Molesworth answered that GST exemptions (e.g. fresh food and some health and education items) should be examined as part of a holistic review of the tax system. I’ve previously commented that the GST base should be broadened (see Dr Parkinson right that the GST should be broadened). Of course, as noted by one panelist at the Breakfast yesterday, any changes to the GST would need to be accompanied by compensation to low-income earners to compensate for the GST’s regressive impact. 

In his presentation, Mark made several insightful points, including:

  • super contribution limits appear even less desirable now that there will be a large gap between the age you can access super and the pension age; and
  • the Government’s stated justification for trimming the R&D tax incentive (i.e. the company tax rate is being reduced as well) is inconsistent with the rationale for the current version of the R&D tax incentive, which was designed to deliver an incentive to companies that is independent of the rate of company tax. This is a pretty technical point, but demonstrates Treasury is struggling to maintain its corporate knowledge.

Well done to BDO for an excellent and informative Budget Breakfast, and thanks in particular to Paul Rafton for inviting me along.

As a final comment, I’d note that this has been an excellent year so far for business breakfasts in Brisbane. Indeed, next Monday morning, the Queensland branch of the Economic Society (of which I’m Deputy Secretary) is hosting the head of the RBA’s Economic Analysis Department Jonathan Kearns at a breakfast at the Polo Club where Jonathan will discuss Current Economic Conditions. It’s probably not too late to book a place if you get in touch with the Society today.

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7 Responses to Calls for holistic tax and super reform at BDO Budget Breakfast

  1. Katrina Drake says:

    One might ask what you were doing on the floor before breakfast ?

    On a more serious note, I agree with your observations that the tax-payer and State governments are being ‘worked wide’ and mustered to the inevitable increase in the GST and it tax base. Thanks for the head up on this one .

    I have long been of the opinion that Super is the biggest rort that has been to be wrought on the Australian people. A large pool of compulsory taxpayer funds, which the government, financial advisers, management fees and insurers can suck on for 50 years without restriction, while the only person who cannot access or manage the funds is the owner.

    • Gene Tunny says:

      Katrina, thanks. If you ever find the time to prepare a comprehensive list of rorts I’d love to read it and post it on this blog. Re. Super, I’d worry that if it weren’t compulsory we’d end up with a lot of people totally reliant on the pension at retirement because they didn’t save enough during their working lives.

  2. Gene, How about you use your obviously considerable influence within the ESA QLD to get some regional events? Having said that, next Tues we have an AICD breakfast with Michael Workman from Comm Bank and on Weds an Advance Cairns breakfast with Warren Hogan from ANZ. Women on Boards are also back in Cairns on Monday and Tues next week. It’s a busy few days up North!

  3. Katrina Drake says:

    Thanks Gene ! I agree that compulsory super could be a very good saving mechanism in a low tax environment.

    Despite having super most of their working lives, most people are still going to be reliant on pensions because of the drip drip drip of taxes and fees from their balance.

    My gripe with super is that so many third parties are able to draw on the funds in super, while the owners of the money in the fund have limited control on what is withdrawn and by whom.

    For example,

    > The tax office and government, can dip in each year for tax contributions tax, excess contributions tax, etc, just by announcing a new rate in a budget.

    > When was anyone ever been offered a quote for death and disability insurers within their super, or discounts for non-smoking etc. There is no competition in this annual price, the fee is just deducted.

    > Advisor fees, totally independant of the quality of the results they have achieved.

    > Administration fees, not surprisingly these are high with the increasing complexity and continuing legislative changes.

    > Mis-management fees, oops, I meant management fees.

    I think most people would be surprised that at the end of the day, the only super they will get, is the contributions they have made. While the great gift of compounding interest over time has been eroded by tax and fees and charges withdrawn by other parties over the longterm.

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