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The future of tax and super: the Henry and Cooper Reviews

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The Henry Review

This broad examination of the Australian tax system was handed down on May 2, along with the government’s response. The government will adopt the following key changes in the first phase:

  • the introduction of a 40% ‘resource super profit tax’ on the mining sector
  • an increase in the compulsory super guarantee rate from 9% to 12%
  • a reduction in the company tax rate from 30% to 28%
  • an increase in the eligibility age for the super guarantee from 70 to 75
  • a reinstatement of the $50,000 concessional contributions cap from 1 July 2012 for those aged 50 or over who have a super balance of less than $500,000
  • the creation of a new $700 million infrastructure fund for the states and territories
  • improvements to the depreciation rules that apply to small businesses.

These changes will be implemented gradually, assuming they pass successfully through parliament. Many commentators expect additional changes to be announced during the federal election campaign including:

  • simpler tax returns
  • an increase in the tax free threshold from $6,000 to $25,000 
  • a 40% discount on non-business related savings income, including all residential rental income and losses, and capital gains.

The following key recommendations may be revisited by the current or future governments:

  • the abolition of super contributions tax
  • a halving of tax on super fund earnings to 7.5%
  • a reduction of the company tax rate to 25%
  • the simplification of the Capital Gains Tax regime
  • the abolition of stamp duty.

The Rudd government has permanently ruled out the following:

  • means testing or imposing a land tax on the family home
  • the removal of the Medicare levy
  • the removal of dividend imputation
  • the abolition of the luxury car tax
  • an increase in the rate of the GST
  • the removal of tax-free super payments for those aged over 60.

Further light will be shed on the Rudd government’s intentions leading up to the federal election. As always, we will update you as information comes to hand.

The Cooper Review

Since the introduction of the Super Guarantee in 1992, all Australians who meet the definition of ‘employee’ have had compulsory super contributions made on their behalf. Changes to the superannuation system therefore affect the majority of the working population.

The Cooper Review aims to ensure Australia’s superannuation system works in the best interests of all members to maximise retirement incomes.

At the time of writing, the Cooper panel had released a number of preliminary recommendations. Those that may affect your circumstances include changes to the Self Managed Super Fund (SMSF) rules relating to in-house assets, related party transactions, and allowable investments.

The final report of the Cooper Review should be handed down on June 30 this year. We will keep you fully informed of issues expected to affect you.

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