Bernard Pulle, Economics Section
Potential reform as a result of the Henry Taxation Review
The Australia’s Future Tax System Review (the Review) was
established by the Rudd Government in 2008. The Review handed down
its report (the Report) in December 2009, and it was made public on
2 May 2010. This article deals generally with how recommendations
in this Report may be implemented by the Labor minority Government
in the 43rd Parliament, having regard to the reactions of the
Australian Labor Party (ALP), the Coalition, the Greens and the
Independent members to the recommendations.
As stated in the Report’s preface, the Review took a
long-term perspective and intended the Report to be a guide for
reform of the tax and transfer system in Australia to meet the
challenges from the economic, social and environmental changes
envisaged over the next 40 years. The 138 recommendations made in
the report are therefore intended to be viewed in the medium to
long-term perspective and not in the short-term context of a
An overview of the Australian Labor Party proposals for tax
The Rudd Government’s initial response was confined to
reform of resource, company and small business taxation as well as
superannuation. The response also indicated that a number of other
areas considered by the Review, especially making tax time simpler,
improving incentives to save and improving governance and
transparency of the tax system, would receive attention in the
The initial response was accompanied by a list of 19
recommendations from the Report which the Rudd Government stated
they would not implement. This list included removing the Medicare
levy, introducing a bequests tax, and abolishing the luxury car
tax. The Rudd Government indicated that the other recommendations
in the Report were not part of government policy and would be the
subject of mature debate in the coming years.
Subsequently, the Gillard Government after negotiations with the
mining industry announced that it would scale back the minerals
resource rent tax from 40 per cent recommended in the Report to 30
per cent. In consequence, the promised staggered reduction of the
company tax rate to 28 per cent for all companies was
scaled back to a reduced company tax rate of 29 per cent from
2013–14 with no further reduction under current fiscal
conditions. Small companies would benefit from this reduced company
tax rate from 2012–13.
Brief overview of the Coalition’s proposals for tax
The Coalition’s Real Action Plan for Lower, Fairer and
Simpler Taxes (Coalition Tax Policy) promised to release all
the costings, modelling and other data underlying the
Review’s recommendations. This information would be the basis
for a fully transparent and informed public discussion. The
Coalition also promised to cancel the Minerals Resource Rent Tax
and to reduce company tax to 28.5 per cent from 1 July 2013.
However, the Coalition’s revised Paid Parental Leave Policy
was to be funded by a levy of 1.5 per cent levy on companies with a
turnover exceeding $5 million.
The Coalition Tax Policy document included a list of 25
recommendations which the Coalition would not support from the
Review. Eighteen of these were the same as the ALP’s list.
However, the Coalition policy does not rule out indexing fuel tax
to the CPI. The additional recommendations ruled out by the
Coalition included new taxes on business activity, scrapping the
private health insurance rebate, means testing the Child Care
Rebate, and new taxes on Australians driving to work.
Significant aspects of the Greens’ tax policy
The tax policies put forward by the Australian Greens include
removing tax breaks for high income earners, increasing the top
marginal tax rate to 50 per cent for incomes of $1 million or over,
increasing the company tax rate to 33 per cent,
introducing an estate tax on families with assets of $5 million,
removing concessional arrangements for Capital Gains Tax, and
abolishing the Private Health Insurance Rebate.
Under the agreement between the Greens and the ALP, the Greens
have won the right to be part of the budget process in the minority
government, with the Greens Treasury spokesperson and Greens
Members of Parliament receiving economic and financial briefings
from the Treasurer and the Minister for Finance.
Significant positions on tax policy taken by the independent
Bob Katter MP–Member for Kennedy; (IND, QLD)
point wish list provides for ‘No mining tax’ and
the removal of the tax on Australian-produced bio-fuels and the
introduction of a statutory 10 per cent bio-fuel (ethanol) content
in all petrol rising to 22 per cent (as in Brazil).
Robert Oakeshott MP–Member for Lyne; (IND,
Oakeshott has indicated his support for the Review
recommendation for a 40 per cent resource super profits tax. He has
also requested the next government to seriously pursue tax reform,
including a 25 per cent corporate tax rate.
Andrew Wilkie MP–Member for Denison (IND,
Under the agreement between Mr Wilkie and the Prime Minister, Mr
Wilkie will be able to have input to the budget process as well as
the development of tax policy with direct access to the Prime
Minister on a regular basis as well as to the Treasurer, the
Minister for Finance, and the Secretaries of the Treasury and the
Department of Finance and Deregulation.
Tony Windsor MP–Member for New England (IND,
In a media release on 3 May 2010,
Mr. Windsor expressed the view that the Government’s response
to the Henry Tax Review, although slow, was welcome.
Following the agreement with the two independents, Mr Oakeshott
and Mr Windsor on 7 September 2010, the Prime Minister has
committed the Labor minority Government to convening a public forum
of experts on taxation before 30 June 2011 to discuss the
Henry Review and its economic and social effects, in order to
facilitate a debate on tax reform in the Australian Parliament.
Library publications and key documents
K Henry, J Harmer, J Piggott, H Ridout and G
Smith, Australia’s future tax system: report to the
Treasurer, Commonwealth of Australia, December 2009,
Liberal Party of Australia, The
Coalition’s real action plan for lower, fairer and simpler
taxes, 2010 election policy, 2010,
K Rudd (Prime Minister) and W Swan (Treasurer),
Stronger, fairer, simpler: a tax plan for our future,
media release, 2 May 2010,