The Taxation Framework

Like all financial products leasing and other equipment finance operate within the framework provided by the Commonwealth, State and Territory Governments’ taxation statutes.

Over the years there has been a series of reports on and inquiries into various aspects of the Australian taxation system. Some have set down the principles which should underpin a better system (e.g. simplicity, efficiency, equity); some have dealt with changes necessary to address external factors (e.g. inflation), while others have attempted to set an agenda for overall change; similar reviews have taken place at the State level. In addition, other wider-ranging inquiries (e.g. the Campbell Financial System Report, the Wallis Financial System Inquiry and the Financial System Inquiry) made observations and recommendations concerning tax. In May 2009 the Government released its response to the Board of Taxation’s review of the legal framework for the administration of the Goods and Services Tax, and in May 2010 released the Review of Australia’s Future Tax System (AFTS), the Henry Review. In March 2015 the Government released the Tax White Paper, the first element of the Tax White Paper reform process.

Contemporaneously the various statutes have been continuously amended or added to, as governments have responded to social, fiscal and commercial developments.

Many changes have been made, and while AELA does not necessarily agree with all of them, it is fair to say that the general direction has consistently been towards improvement. The framework itself however has become overburdened by continuous amendment, resulting in excessive complexity, increased scope for ‘unintended consequences’ and major distortions caused by the narrowness, overlap and economic shift in the various tax bases. Given the complexity of modern commercial transactions, this outcome while regrettable, is nonetheless understandable.

Commonwealth Taxation

On 30 March 2015 the Government released the Tax Discussion Paper, the first element of the Tax White Paper reform process. It outlined the process for considering the future direction of Australia’s tax system and invited submissions to inform the Government’s tax options Green Paper; feedback on these options is to provide the basis for the 2016 Tax White Paper policy proposals.

Previously, the Review of Australia’s Future Tax System (AFTS) was released by the Treasurer on 2 May 2010. The 1997 Task Force on Taxation culminated in the 1 July 2000 commencement of the Goods and Services Tax (GST), which replaced the previous Wholesale Sales Tax (WST) regime and Financial Institutions Duty (from 1 July 2001) with a 10% GST coincident with a reduction in personal income tax. At the same time the 1999 Review of Business Taxation (RBT) process was an attempt to deliver enduring tax simplification and a lower rate of company tax. The various issues for the industry arising from these are dealt with in the following sections.

A role of bodies like AELA has always been to assist members and other market participants with the interpretation of statute amendments, as well as to offer informed advice to governments on their drafting and revision. In the context of the major taxation reforms, this role has been even more necessary and encompassing.