Henry Tax Review the Root & Branch Review

The Henry Tax Review has recently released its first background paper.  This paper attempts to describe the structure – or in the words of the Review  - “the architecture” of the current taxation and transfer system in Australia – at the Federal, State and Local Government levels.

Transfers mean the various government payments (eg Social Security) and subsidies (eg council rate relief for pensioners) provided as income payments and support.

It is only very early days in the Henry Review.

However, some (freely inferred by us) possibilities are:

• removal of many minor taxes which raise little revenue – the review identified 125 separate taxes being imposed but just 10 taxes raised 90% of total tax revenue; and
• decrease in the company tax rate from 30% to 25% - however, this reduction could only be achieved by removal of the imputation system (significantly bad news for superannuation funds as imputation credits can significantly reduce the impact of contributions tax).