Saturday, September 03, 2016

Tax cuts next month. Commissioner buckles

Taxpayers earning more than $80,000 are set to get their promised tax cuts from October, but only after a backdown by the bureaucracy.

After the $6 per week tax cut was announced in the May budget, Tax Commissioner Chris Jordan defied Prime Minister Malcolm Turnbull who said it would be implemented "administratively" because the Parliament wouldn't be able to sit before it was due to start on July 1.

Mr Jordan told the Treasury and Finance departments that he wanted "the relevant legislation to be passed before the change will be incorporated into the income tax withholding schedules".

This meant that although high earners might eventually get a refund of up to $6 per week, tax would be deducted from their pay packets at the old rate until the legislation had been approved by both houses of Parliament.

The Australian Tax Office backed up its stance in an email to journalists which said it amended deductions once each year in June and only in accordance with "enacted law".

"If the personal income tax cut measure is legislated by the incoming government, the ATO will at that time consider the administrative approaches available to implement the new individual income tax rates that apply," the email said.

That remained the ATO position until Friday, when newspaper reports warned that high earners might have to wait until the end of the financial year to get the tax cuts promised from July 1.

Within hours Treasurer Scott Morrison announced that they would get them from October 1. Although the legislation hadn't been passed, it been introduced into the lower house, and that was good enough for the ATO.

Asked why it had backed down, the ATO said though a spokeswoman it had made a political judgement. 

Public statements provided "confidence that it is likely Parliament will pass the amendments". The new deduction schedule would be registered on Friday.

Asked whether the ATO had ever previously changed an income tax deduction schedule ahead of a change in the law, the spokeswoman said she would check.

In 2013 the ATO told Fairfax Media it could "only take dollars from people and give dollars to people if there is legislation in place for us to do it". 

For other kinds of tax the ATO does have the authority to change schedules ahead of legislation, a latitude that has at times caused problems.

In 2008 the it boosted the rate of tax on luxury cars after an announcement by the treasurer. When the increase was voted down it faced the prospect of handing the tax back to buyers and had to negotiate a compromise.

In 2009 it boosted the rate of tax on so-called alcopops by 70 per cent only to see that legislation voted down, raising the prospect of a refund to distillers. Again, it negotiated a compromise.

In The Age and Sydney Morning Herald