ELECTION COMMITMENTS COMMITMENT TO TAXATION WHITE PAPER RELEASING HENRY REVIEW INFORMATIOI COMPANY TAX RATE REDUCTION PAID PARENTAL LEAVE SCHEME. INCREASE THE EDUCATION TAX REFUND. ‘SIGNIFICANT INFRASTRUCTURE ELECTION COMMITMENTS .. BROADBAND SUPERANNUATION. EXTEND CONSUMER UNFAIR CONTRACT PROVISIONS TO SMALL BUSINESS. COMPREHENSIVE AND INDEPENDENT REVIEW OF THE TRADE PRACTICES ACT 1974 POPULATION AND THE PRODUCTIVITY AND SUSTAINABILITY Commission ESTABLISHMENT OF A PARLIAMENTARY BUDGET OFFICE .. IMPACT OF PROPOSED SAVINGS COMMITMENTS ON THE TREASURY ...Commitment to Taxation White Paper Outline Election commitment: Taxation White Paper of issue Key Poinis The Government has made a commitment to develop a Taxation Green Paper, followed by a White Paper. It will use this process to develop a second-term tax reform agenda which it will put to the people at the next election (Lower, Fairer and Simpler Taxes, page 5, paragraph 6). Sensitivities “These processes could be used to promote public debate on substantial reform of Australian’s tax and transfer system, but they could also provide a platform for various interest groups to oppose specific reforms. $36 EP SN TET Next Steps Contact Brant Pridmore 6263 4336 Tax System Division Revenue GroupPROTECTED eee Releasing Henry Review information ‘Outline Election commitment: Releasing Henry Review information of issue Key Points ‘The Government has made a commitment to release all the costings, modelling and other data underlying the Henry Review recommendations within 30 days of coming to government (election policy Lower, Fairer and Simpler Taxes, page 4). Sensitivities “Some judgments will need to be made about what range of work falls within the scope of the commitment. ‘The provision of information will also adhere to the conventions that limit disclosure of advice provided to a previous government. Much of the information for the Henry Review was prepared for internal use and does not lend itself to publication in its original form. It may be necessary to consider preparing a summary of (or notes on) some of the information, Next Steps “We will provide a brief proposing a process for assembling and releasing the information within 10 days of the Government taking office. Contact Brant Pridmore 6263 4336 ‘Tax System Division Revenue GroupCompany tax rate reduction ‘Outline of issue Election commitment. Reduce the company tax rate from 30 per cent to 28.5 per cent from 1 July 2013 Key Points ‘The Government will reduce the company tax rate from 30 per cent to 28.5 per cent from 1 July 2013. ‘The Government has also indicated an objective to further cut the company tax rate to 25 per cent. Sensitivities “The election commitment to reduce the company tax rate from 30 per cent to Next Steps 28.5 per cent will be simple to implement. S36 The Government will also introduce a 1.5 per cent levy on companies with taxable incomes in excess of $5 million to finance the Paid Parental Leave Scheme from 1 July 2012. $36 We will provide further briefing on the implementation of the measure to impose a levy on companies with taxable incomes in excess of $5 million to finance the Paid Parental Leave Scheme, including the interaction with the ‘measure to reduce the company tax rate, within 10 days of the Government taking office. ‘Contact ‘Tony Regan 6263 3334 Business Tax Division Revenue GroupPROTECTED —— Paid parental leave scheme —_—_ Outline ‘You have committed to introduce a paid parental leave scheme which will of issue provide 26 weeks of paid parental leave and 9 per cent superannuation contributions, funded by a 1.5 per cent levy on companies with taxable -omes in excess of $5 million. Key Points The Government has made a commitment to introduce the Paid Parental Leave scheme from 1 July 2012 which will provide primary carers with 26 weeks of paid leave at the greater of full replacement pay (up to a maximum salary of $150,000 per annum) or the national minimum wage, including superannuation contributions of 9 per cent, The scheme is to be funded by a 1.5 per cont levy on companies with taxable incomes in excess of $5 million. This levy will be offset by a 1.5 per cent cut in the company tax rate from 1 July 2013. This briefing focuses on areas for which Treasury has policy responsibility. However it is important to note that issues of specific policy design for which Treasury does not have responsibility (such as the scope of eligibility for certain payments, delivery mechanisms and interactions with existing employer-provided parental leave arrangements) will impact upon the overall cost of the proposal. a ae iaeearmeape sen eatae Under the dividend imputation system company tax is effectively a withholding tax on Australian resident shareholders. When a company pays income tax, a credit arises in the company’s franking account to reflect the company tax paid. When corporate profits are distributed to shareholders (by paying dividends), the company attaches the franking credits to the dividends paid, Shareholders include the amount of dividends and franking credits received in taxable income, and are entitled to a refundable tax offset for the amount of the franking credits. As a result, tax is effectively paid on the corporate profits at the marginal tax rates of shareholders. Next Steps We will provide further briefing on the implementation of this measure within 10 days of the Government taking office. Contact Tony Regan 6263 3334 Business Tax Revenue GroupIncrease the Education Tax Refund Outline of issue Election commitment: Increase the Education Tax Refund The Government announced it will increase the Education Tax Refund (ETR) from a maximum of $390 per year per child in primary school (relating to eligible education-related expenses of up to $780 per year) to $500 (relating to eligible education-related expenses of up to $1,000 per year) and from a ‘maximum of $779 per year per child in high school (relating to eligible education-related expenses of up to $1,558 per yeat) to $1,000 (relating to eligible education-related expenses of up to $2,000 per year). The Government will also expand the range of expenses that are eligible for the ETR to include school fees, school camps and excursions, special education costs for children with disabilities like dyslexia, extra-curricular activities such as music, dance or drama lessons, tutoring costs, musical instrument required for lessons, school photos, sporting fees and equipment for both primary and secondary school students. Eligible families will be able to claim the increased and expanded ETR in respect of eligible expenses incurred from 1 January 2011. Key Points The ETR is designed to assist parents with the costs of schooling their children, with eligible families able to claim a refund for education expenses such as personal computers, intemet connection, school textbooks and stationery. Eligible families may claim 50 per cent of their eligible education expenses up to the maximum claimable amounts, which are indexed each year. As at 8 June 2010, the ETR has been paid in respect of approximately 1.7 million children, Eligibility is generally linked to eligibility for Family Tax Benefit Part A. In 2009-10, the maximum claimable amounts are $780 (maximum refund of $390) for each primary school child and $1,558 (maximum refund of $779) for each secondary school child, ‘The Government also announced that it supports the previous Government's commitment to extend the ETR to school uniforms. We envisage that this extension would also take effect from 1 January 2011. To implement the announced changes legislative amendments to the Income Tax Assessment Act 1997 will be required. It will be preferable to have these amendments in place prior to the announced commencement date for the expanded ETR eligibility criteria to provide certainty for families as to their entitlements. The Government indicated prior to the election that increasing and expanding, the scope of the ETR would cost $760 million over the forward estimates. This commitment hes not been independently costed.