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Government to await white paper before enacting tax reform
Fri 13 February 2015 - 11:08 amEditor's Choice | News | Tax
According to the Inspector-General of Taxation (IGT) Ali Norooz, there are a number of changes the government could make to the landscape of taxation which would make it cheaper and less time-consuming for small business owners conducting valuations.
Currently when a business owner or manager conducts a valuation to access tax breaks such as capital gains tax concessions or deductions for gifts, it can be a very difficult process to get right without employing outside expert assistance.
For this reason, many business owners do not bother access their potential tax breaks, because the cost of professional assistance can at times outweigh the tax break being sought – sometimes to the tune of between $10,000 to $20,000.
In his latest report presented to Acting Assistant Treasurer Mathias Cormann, the Review into the Australian Taxation Office’s (ATO) administration of valuation matters, Mr Norooz described the current valuation process as having become “too subjective to be efficient”. He highlighted the problem that concepts like “market value” are too hard to define, hence the commonality of appointing professional valuers.
Assistant Treasurer, Josh Frydenberg, has so far agreed that the current valuation requirements are a concern for taxpayers, and welcomed the report which identified the difficulties associated with the cost of conducting valuations. Frydenberg added that while the government is considering the IGT recommendations, it is also waiting to receive the upcoming taxation white paper before making wide-reaching reform.
“The government will give full consideration to these recommendations, noting that the upcoming tax white paper will be an opportunity to provide a longer-term, considered approach to tax reform,” Mr Frydenberg said, when publicly releasing the IGT’s report on Monday.
An ATO spokesperson said it welcomed the Inspector-General’s report and had already begun developing strategies to implement solutions.
In total Mr Norooz’s report proposed twelve recommendations – nine directed to the Tax Office, and a further three to the government which urged for the introduction of a more practical and transparent approach.
The IGT also made the following three recommendations for the government’s consideration:
• consideration of ways to limit the need for valuations when developing tax law, including shortcuts or safe harbours as an alternative to full valuations;
• consultation on ways to reduce reliance on valuations to access the small business capital gains tax concessions; and
• tapering the eligibility criteria for tax concessions.