As the popular saying goes, the only 2 certainties in life are death and… taxes (except if you live in Greece or run business out of the Caymans). Throughout the annuls of history, tax and government have walked hand-in-hand and been the platform for many a coup and election defeat. And at this time of growing economic and political unrest, it is only natural that tax should start to take the spotlight.
Austerity - which means only spending what you bring in on taxes - has had a valiant stand over the past year or so. The over-indebted Europeans have trying to balance the concerns of sovereign bond holders with a growing unrest amongst their citizens. The US has also promised to rein in spending, but an election year isn't the time for bipartisan common sense austerity measures. Even in the relatively un-indebted place we call home, the Government is hell bent on delivering a surplus, despite calls from many that this is neither the time nor the place. The flip side to cutting spending is of course raising taxes.
It seems at the moment that austerity through cutting spending has ran its course. With the risk of the European recession spreading globally, the preference has shifted towards increasing in flows, and that means higher taxes. Whether its Warren Buffett campaigning for a higher tax on the 1%, or the resource rich countries of the world introducing higher royalties or super profit taxes, the mandate for Governments in the near future will be to balance public service offerings with the drain on growth taxes can bring.
With tax time fast approaching and the recent Federal budget tax changes still in mind, let us take a quick look at the major tax reform history in Australia:
- 1901 - At the dawn of Federation mainly indirect taxes (levies, duties) were received (mainly by the states)
- 1915 - Income tax introduced to help with war effort (marginal from 3% - 25%), which was levied at both the federal and state level. Also included company tax of 7.4%
- 1941 - Payroll tax introduced by federal government
- 1942 - State income tax consolidated into the federal system
- 1950 - Top marginal income tax rate hits a high of 75%
- 1952 - Land taxes become sole domain of the states
- 1971 - Payroll taxes handed over to the states
- 1984 - Estate taxes removed
- 1985 - Capital gains tax introduced
- 1986 - Company tax rate hits 49%
- 1986 - Fringe benefits tax introduced
- 1986 - Medicare levy introduced
- 1987 - Imputation credit system introduced
- 1999 - Discounted capital gains tax system introduced
- 2000 - GST introduced
- 2007 - Superannuation income streams and withdrawals become tax free for those aged above 60
- 2010 - Henry Tax Review completed with 180+ tax change recommendations - to date only a handful of the recommendations have been signalled as going ahead
- 2011 - Carbon tax becomes law, to start in July 2012
- 2012 - Mining tax introduced
So maybe let me rephrase. The only certainty in life is… change.
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