Australia's New Tax System

It was Benjamin Franklin who first said: "In this world, nothing is certain but death and taxes."

So it is worthwhile learning a little about the tax system and exactly how it is going to change in light of the Australian Taxation Review.

Chaired by Dr Ken Henry - the secretary to the Treasury - this taxation review is the largest Australia will see in recent times. I have had the pleasure of meeting Dr Henry during a speech that he made at the University of Wollongong early in 2009 and noted that he is extremely educated, pragmatic and thoughtful leader who is well placed as the chair of the committee. He is likely to create an incredibly fair system that favours the working class population. Dr Henry's taxation review and any changes must abide by 5 key terms:

• Compelling - must have a strong reason to implement
• Clear - easily communicated to the public who will consume the tax
• Simple - easily understood by the public
• Fair - across all wealth classes
• Effective - basically meaning that the tax must effectively raise revenue without bringing great inefficiencies

From the reading and research that I have conducted there are three key outcomes that are most likely to occur.

Consumption Taxes will Increase

The most obvious consumption tax in Australia is the Goods and Services Tax (GST). With a consumption tax, the user/consumer pays. It is likely that the review will involve consumption taxes on multiple levels. For example, currently road users pay consumption taxes via tolls, however, those that drive a peak times are likely to be hit with a greater toll to minimise road congestion. Or perhaps the giant mining corporations that are extracting from the earth will be taxed on the mining profits from Australia to compensate for their 'consumption'. One thing is certain is that the taxes may appear to be less to begin with, but they will definitely be broader.

GST Remains

Although Prime Minister Kevin Rudd stated during the election campaign that the GST would be an area of scrutiny for the Labor Government - I think he and Treasurer Swan have realised that the GST is an avenue for Government revenue that the Labor government cannot afford to lose in light of its recent reckless spending.

Glossy Advertising

The tax review is likely to coincide with a Public Relations campaign of glossy brochures and television advertisements highlighting the areas where the consumer (you) may save money. Whilst any areas where the tax payer is worse off will be pounced upon by the opposition at every opportunity.

Taxes are an area that effect all of us - so do your research, figure out what is best for your own circumstances and take advantage accordingly.

I will be writing a follow up to this once the review is released.