This will be the biggest of all planning issues over the next 12 months. Despite its title, ANTS is not a new tax system at all — it’s the current system with a lot more legislation tacked on. The only firm proposal so far is to remove the wholesales sales tax (WST) system and replace it with a GST.
We doubt that the GST as currently proposed by the Government will survive the Opposition-controlled Senate. Unless it concedes to significant concessions that it cannot afford, it could be forced into a double dissolution over the issue.
If the GST survives, business re-planning must start as soon as the legislation becomes law. This means businesses must receive a new Australian Business Number (ABN) and move to quarterly tax payments, required for every business in 2000.
The Government has proposed that superannuation funds will be subject to GST on inputs only, which seems to mean super funds won’t require an ABN. However, we think every super fund, including self-managed funds, will need to apply for an ABN.
Tax breaks
With marginal tax rates remaining unacceptably high for middle- to high-income earners, providing tax relief for clients remains an important financial planning tool. But in late 1998, the ATO moved to retrospectively limit some aggressive tax planning strategies (see accompanying piece by Stephen Manassah).
We expect to see the removal of some other strategies – not necessarily retrospectively – during 1999. We think the forfeiture of super fund member benefits will come under attack, while the legislative drafting errors that gave us “controlling interest” super contributions may be rectified.
Salary packaging will lose popularity this year but we predict it will survive and prosper as a planning tool because it fosters better employer/employee relations. Moreover, some tax concessions remain.
Unless the superannuation surcharge is ruled unconstitutional by the High Court it will remain throughout 1999 and beyond. Logic and good policy have nothing to do with its retention.
Choice of fund
There is no logic in preventing employees from choosing their own superannuation vehicle. Despite this, the fate of the proposed superannuation choice of fund system is difficult to determine. The legislation will only pass after some sort of compromise between the various political parties is reached. Without it the parliamentary timetable doesn’t appear to permit enough time for the legislation to be debated in Parliament prior to its proposed July 1999 start-up date.
Regulation
At some stage we expect that the ASIC functions currently contained in various pieces of legislation will be placed together into a separate Act of Parliament. This will be done because it is difficult for different Government department to “manage” the same legislation.
Tony Negline is national technical manager, Mercantile Mutual
