Tuesday, May 4, 2010
While it considers that there were many positives for the property industry from the Henry tax review and the Australian government’s announced tax programme, the Property Council of Australia (PCA) has called on the government to clarify its plans for a second wave of tax reforms, particularly in relation to inefficient property taxes.
The Henry tax review's recommendations and the Australian government's new tax reforms have largely been welcomed by the commercial property sector. The PCA’s chief executive, Peter Verwer, said: "The government has ruled out any tinkering with the negative gearing and capital gains tax regimes. The gradual increase in the superannuation rate to 12%, the reduction in company taxes, concessions to small business, and the establishment of an infrastructure fund are also big positives."
However, the government has also committed to further waves of reform, he added. “At the top of its list should be the modernization of Australia's outmoded property tax system. Dr Henry's report clearly demonstrates the critical importance of replacing inefficient property taxes with a modernized approach to real estate taxation."
The PCA looks for a detailed commitment in relation to the process for reforming state property taxes, particularly stamp duties. While this, it says, will be a highly political process it feels that the alternative would be higher (and new) property taxes in the future.
"The Henry review also recommended a major update and re-write of trust rules to reduce complexity and uncertainty,” he concluded. “We look forward to the federal budget, where we anticipate the government will signal measures to deliver a simple, elective, managed investment trust regime." The PCA notes that the exemption of trusts from controlled foreign companies and foreign investment fund rules, and from thin capitalization rules, is already underway.