The Henry Tax Review - As The Australian Government Have Used It

There have been a lot of mixed reactions to the Henry Tax Review

, but overall, it seems as though Australian workers should be better off by the time they reach retirement age.

Prime Minister Kevin Rudd states that core changes are about "...keeping our government finance strong, protecting the future of the Australian economy, ensuring working families and small business get their fair share..." But what does it all really mean for the average Australian?

While there's been a lot of press about the flagged changes on savings tax and making tax returns simpler, the Rudd Government decided not to release those items just yet. Instead, they're slated to be released later in 2010. How convenient that it's a federal election year this year.

Changes Announced So Far

The Government announced that it would be introducing an increase to the amount of super contributions made by employers into employee's superannuation accounts from 9% up to 12% by the year 2020. That all sounds great, but could it also herald an increase in costs to small and medium business owners that could halt growth in employment rates over the long term?

The cost of this is supposedly going to be offset by the introduction of new taxes on big miners' profits of 40%. While it seems as though the government is seeking new ways to fund budgetary spending by taxing the big guys, will this really be an incentive for these big companies to continue spending money and hiring Australians over the long term? Or will they move off-shore to avoid these high taxes, causing plenty of working Australians to lose jobs while the bigger mining companies seek cheaper labour costs?

Meanwhile, company taxes have been reduced from a flat rate of 30% to a flat rate of 28%. Even though many individual tax payers may believe this to be a little unfair, there is evidence that small and medium business owners can actually benefit from this kind of reduction in tax rate. It may even help to offset the other high costs of bringing on new employees for many small businesses.

The announcement that seemed to please many working Australians was the increase in the lower income brackets. Workers earning below $37,000 will receive a concession of up to $500 per year, which is designed to hopefully cancel out tax paid on any super contributions made. That's a little more than $9.61 per week.

Planned Changes Still to Come

The inequity of current investment taxes across differing investment classes has long been a source of debate. While some investors are eligible to receive a 50% rebate on capital gains tax for holding investments for longer than 12 months, those people holding savings in a long term bank account, aren't eligible for the same rebates on the tax paid on the interest they earn.

by: Danny Smithwood

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