First glimpse of Henry! And it's not a pretty sight!

In a very interesting speech recently given by the Federal Treasurer, Wayne Swan, the Treasurer discussed in general terms, tax reforms and the timing of any changes which arises from the Henry Tax Review.

While the Report of the Henry Tax Review will be provided to the Government in mid-December 2009, it seems the Report will only be released to the public in early 2010.

The Treasurer noted that as the Review is the most significant review of the taxation system in 25 years, the Report will not contain proposed legislative amendments but rather general suggestions as to how the tax/benefit system could be improved.  Consequently, some change may be implemented quite early while others may take some time to implement.  Also, some changes may be so significant that the Government would want to take them to the electorate for approval.

The Treasurer then considered superannuation.

In respect of superannuation, the Treasurer noted that the tax benefit of deductible contributions is far more significant for higher income earners than for others.  The benefit is simply the difference between their marginal tax rate and 15%.  The obvious implication of the Treasurer highlighting super contributions is that the current taxation treatment of super contributions will change and change for the worse.

We do not know whether the Treasurer is suggesting that the current tax deduction for superannuation contributions be replaced by a flat rate rebate?  Or, even worse, that the rate of tax paid by the fund on deductible contributions somehow relates to the marginal tax rate of the contributor?

Our collective memories still retain the memory of the Superannuation Contributions Surcharge.  The tax that wasn’t a tax because it was a surcharge and a surcharge is not a tax.