Appendix A: Business Tax Working Group - Terms of Reference

Date

Objectives

  1. The Working Group will make recommendations on how the Australian business tax system can be improved to make the most of the challenges and opportunities arising from transformations in the broader economic environment, including the patchwork economy.
  2. The revenue neutral reforms to the business tax system will aim to increase productivity, while delivering tax relief to struggling businesses.

Scope

  1. The Working Group will focus on reform options that relieve the taxation of new investment:
    1. in the near term, by reforming the tax treatment of business losses; and
    2. in the longer term, by reducing the corporate tax rate further or moving to a business expenditure tax system, particularly an allowance for corporate equity.
  2. For its final reports, the Working Group will provide specific analysis of these business tax reform options, including:
    1. description of how these reforms options operate overseas and evidence on their effectiveness;
    2. potential priorities for reform, including transitional paths;
    3. worked examples of how these options would affect business taxpayers, including their financial and tax accounts;
    4. revenue integrity provisions, such as measures necessary to limit: the inappropriate claiming of tax losses; the equity allowance to new equity; and small and closely held businesses converting labour into business income;
    5. how the reform options integrate with the rest of the tax system now and in the future;
    6. impacts on national income and macroeconomic risks; and
    7. costings.
  3. The working group will also identify a range of off-setting budget savings from existing Commonwealth business taxation (or spending) measures. Changes to the GST should not be considered.
    1. The savings to be generated by the particular options will be costed by the Treasury in accordance with the budget rules.
  4. In developing its recommendations, the Working Group should have regard to the report of the Australia's Future Tax System Review and relevant international experience and expertise.

Timing

  1. The Working Group is required to provide the Treasurer with:
    1. an initial report on the proposed directions for improving the tax treatment of losses and offsetting savings in mid-November 2011;
    2. a final report on the treatment of losses and the offsetting savings in March 2012; and
    3. a further report on longer-term business tax reform options and offsetting savings by the end of 2012.

Consultation

  1. For its final reports, the Working Group should consult widely with industry and the broader community.
  2. The Working Group may establish technical sub-groups to consider specific issues or seek input from other sources of expert advice.

Support

  1. The Working Group will be supported by a Secretariat within Treasury.