Small investors can breathe easy. As the Henry Tax Review enters its final stages, Treasury boss Ken Henry has revealed it won't be doing away with dividend imputation.
The announcement, in a speech delivered to the Australia New Zealand Leadership Forum in Sydney brings to an end months of speculation ignited by Dr Henry himself when he thought out loud in February about abolishing the concession on the ground that it provided a benefit to Australian-based shareholders not available to foreign-based shareholders.
Over 20 years it has ensured that investors in Australian firms such as Telstra, BHP, and Coles Myer paid no or little income tax on their dividends in those in years in which the companies paid the full rate of company tax.
Lateral Economics has told the Henry Review axing dividend imputation would free up $20 billion per year, enough to fund a cut in Australia's corporate tax rate from 30 per cent to 19 per cent, attracting far more foreign direct investment.
Yesterday Dr Henry told the Forum he did "not think, however, the time has yet come for dividend imputation to be abandoned"...
But in the "medium to longer term" there was a case for assessing its benefits in a way "better attuned to the needs of a global economy".
New Zealand and Australia were the last two countries to retain dividend imputation and in the meantime might consider mutual recognition of each others' imputation credits.
The Treasury Secretary said that down the track there might be a case for abandoning taxing company profits and instead taxing business spending.
After the close of business Friday Treasurer Wayne Swan announced the removal of the interest witholding tax on Commonwealth government bonds, brining them into line with corporate and state government bonds which had not been subject to withholding tax since 1999 and 2008.
Published in today's Age
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