Repair levy may lead to tax deferment

High income earners will look for “clever ways” to avoid being hit by the Federal Government’s new 'repair levy’, a tax expert believes. 

Under the levy - announced in last night’s Budget - people earning more than $180,000 a year will pay personal tax at a rate of 49 per cent for the next three years from 1 July 2014. 

Responding to the announcement of the new levy, tax director for William Buck, Greg Bonthorne, warned it could yield less than the $3.1 billion over four years forecast in the Budget. 

“We believe this levy will encourage high income earners to seek clever ways to decrease their tax bills by deferring dividend payments and seeking the use of more complex tax structures to reduce their tax liability,” he said. 

Bonthorne described the repair levy as “unworkable” given the differential between the increased rate for high income earners and the plan to cut the company tax rate for businesses that do not pay the parental leave levy to 28.5 per cent from 1 July 2015. 

“The differential is 20.5 per cent, up from the current 16.5 per cent,” he said.  

“In my opinion this is simply unworkable and will encourage tax avoidance.  

“Australia has one of the highest personal income tax rates in the world. This new levy encourages high income earners to focus on clever tax structuring and planning rather than business growth.”