Prescriptions for reform of Australia's superannuation tax concessions

The highly controversial and often politicised issue of Australia’s retirement savings regime featured prominently throughout the two day Federal Government’s October 2011 Tax Forum. Calls for reform of this regime are by no means new. Reform debate over the years has focused on each of the three separate pillars: the age pension, compulsory superannuation, and voluntary saving, as well as the interaction of those three elements. However, recently there has been a significant shift away from reliance on the age pension, with its associated risks falling to the government, to a defined contributions scheme where the associated risks fall to the individual taxpayer. Consequently, Australia’s superannuation regime is predominantly subject to current debate, and, as such, the subject of this article. This article considers the history of Australia’s retirement savings regime, along with a framework for evaluating the superannuation tax concessions. It then discusses the recommendations of the Australian Future Tax System (AFTS) Review Panel and ensuing debate at the Tax Forum. Finally, it suggests two proposals to achieve the objectives of the AFTS Review in relation to retirement, those objectives being a system which is broad and adequate, acceptable to individuals, robust, simple and approachable, and finally sustainable. The first, whilst potentially requiring some tinkering’, is relatively simple and a blue print has already been provided to the Federal Government – the adoption of Recommendations 18 and 19 of the AFTS Review. The second is one of management. Superannuation concessions are fundamentally categorised as tax expenditures and the management of these tax expenditures, not just the reporting, should be undertaken.

Rational avoidance of accountability

Anthony Downs public choice theory proposes that every rational person would try to meet their own desires in preference to those of others, and that such rational persons would attempt to obtain these desires in the most efficient manner possible. This paper will demonstrate that the application of this theory would mean that public servants and politicians would perform acts of corruption and maladministration in order to efficiently meet their desires. As such action is unavoidable, political parties must appear to meet the public demand for accountability systems, but must not make these systems viable lest they expose the corruption and maladministration that would threaten the government’s chance or re-election. It is therefore logical for governments to display a commitment for accountability whilst simultaneously ensuring the systems would not be able to interfere with government control or expose its flaws.

Advance pricing arrangements : an Australian Tax Office success or a legislative failure?

Australia’s domestic income tax legislation and double tax agreements contain transfer pricing rules which are designed to counter the underpayment of tax by businesses engaged in international dealings between related parties. The current legislation and agreements require that related party transactions take place at a value which reflects an arm’s length price, that is, a price which would be charged between unrelated parties. For a host of reasons, it is increasingly difficult for multinational entities to demonstrate that they are transferring goods and services at a price which is reflective of the behaviour of independent parties, thereby making it difficult to demonstrate compliance with the relevant legislation. Further, where an Australian business undertakes cross-border related party transactions there is the risk of an audit by the Australian Tax Office (ATO). If a business wishes to avoid the risk of an audit, and any ensuing penalties, there is one option: an advance pricing arrangement (APA). An APA is an agreement whereby the future transfer pricing methodology to be used to determine the arm’s length price is agreed to by the taxpayer and the relevant tax authority or authorities. The ATO views the APA process as an important part of its international tax strategy and believes that there are complementary benefits provided to both the taxpayer and the ATO. The ATO promotes the APA process on the basis of creating greater certainty for all parties while reducing compliance costs and the risk of audit and penalty. While the ATO regards the APA system as a success, it may be argued that the implementation of such a system is simply a practical solution to an ongoing problem of an inherent failure in both the legislation and ATO interpretation and application of this legislation to provide certainty to the taxpayer. This paper investigates the use of APAs as a solution to the problem of transfer pricing and considers whether they are the success the ATO claims. It is argued that there is no doubt that APAs provide a valuable practical tool for multinational entities facing the challenges of the taxation of global trading under the current transfer pricing regime. It does not, however, provide a long term solution. Rather, the long term solution may be in the form of legislative amendment.

An examination of tax-deductible donations made by individual taxpayers in Australia for 1997/98

This paper analyses the amount and type of tax-deductible donations made by Australian taxpayers to charities for the period 1 July 1997 to 30 June 1998. The information has been extracted from the Australian Taxation Office's publication Taxation Statistics 1997-98 which provides an overview and profile of the income and taxation status of Australian taxpayers using information extracted from their income tax returns for the period 1 July 1997 to 30 June 1998. This report is the latest publicly available summary. At the time of writing.

Tax concessions in support of charitable giving: an international comparison

The Australian taxation system encourages charitable giving through tax deductibility for donations made by individuals and companies, and via tax exemption for income distributed to charities through charitable trusts. Other means of giving, such as through bequests enjoy little tax concessions...

A spatial collision avoidance strategy for UAVs in a non-cooperative environment

This paper presents a feasible spatial collision avoidance approach for fixed-wing unmanned aerial vehicles (UAVs). The proposed strategy aims to achieve the desired relative bearing in the horizontal plane and relative elevation in the vertical plane so that the host aircraft is able to avoid collision with the intruder aircraft in 3D. The host aircraft will follow a desired trajectory in the collision avoidance course and resume the pre-arranged trajectory after collision is avoided. The approaching stopping condition is determined for the host aircraft to trigger an evasion maneuver to avoid collision in terms of measured heading. A switching controller is designed to achieve the spatial collision avoidance strategy. Simulation results demonstrate that the proposed approach can effectively avoid spatial collision, making it suitable for integration into flight control systems of UAVs.

A gust-attenuation controller for fixed-wing UAVs during collision avoidance course

This paper presents a nonlinear gust-attenuation controller to stabilize velocities, attitudes and angular rates of a fixed-wing unmanned aerial vehicle (UAV) in the presence of wind gusts. The proposed controller aims to achieve a steady-state flight condition such that the host UAV can avoid airspace collision with other UAVs during the cruise flight. Based on the typical UAV model capturing flight aerodynamics, a nonlinear Hinf controller is developed with rapid response property in consideration of actuator constraints. Simulations are conducted for the Shadow UAV to verify performance of the proposed controller. Comparative studies with the proportional-integral derivative (PID) controllers demonstrate that the proposed controller exhibits great performance improvement in a gusty environment, making it suitable for integration into the design of flight control systems for cruise flight with safety guarantees.

Design of flight avoidance manoeuvre alphabets for mixed centralised-decentralised separation management

This paper investigates a mixed centralised-decentralised air traffic separation management system, which combines the best features of the centralised and decentralised systems whilst ensuring the reliability of the air traffic management system during degraded conditions. To overcome communication band limits, we propose a mixed separation manager on the basis of a robust decision (or min-max) problem that is posed on a reduced set of admissible flight avoidance manoeuvres (or a FAM alphabet). We also present a design method for selecting an appropriate FAM alphabet for use in the mixed separation management system. Simulation studies are presented to illustrate the benefits of our proposed FAM alphabet based mixed separation manager.

Modeling collision avoidance decisions in navigation

Due to grave potential human, environmental and economical consequences of collisions at sea, collision avoidance has become an important safety concern in navigation. To reduce the risk of collisions at sea, appropriate collision avoidance actions need to be taken in accordance with the regulations, i.e., International Regulations for Preventing Collisions at Sea. However, the regulations only provide qualitative rules and guidelines, and therefore it requires navigators to decide on collision avoidance actions quantitatively by using their judgments which often leads to making errors in navigation. To better help navigators in collision avoidance, this paper develops a comprehensive collision avoidance decision making model for providing whether a collision avoidance action is required, when to take action and what action to be taken. The model is developed based on three types of collision avoidance actions, such as course change only, speed change only, and a combination of both. The model has potential to reduce the chance of making human error in navigation by assisting navigators in decision making on collision avoidance actions.

Small business entity tax concessions : through the eyes of the practitioner

The often competing imperatives of equity, simplicity and efficiency in the income tax regime, particularly the notion of simplicity, has been most evident within Australia’s small business sector over the last decade. In an attempt to provide tax simplification and reduce the tax compliance burden faced by Australian small businesses, provisions collectively referred to as the ‘simplified tax system’ or STS were introduced. The STS was designed to provide eligible small businesses with the option of adopting a range of ‘simplified’ tax measures designed to simplify their tax affairs whilst at the same time, reducing their tax compliance costs. Ultimately, a low take-up rate and accompanying criticisms led to a remodelled and rebadged concessionary regime known as the ‘Small Business Entity’ (SBE) regime which came into effect from 1 July 2007. This paper, through a pilot study, investigates the SBE regime though the eyes of the practitioner. In line the Australian Federal Government’s objective of simplification and reduced compliance costs, the purpose of the study was to (1) determine the extent to which the SBE concessions are being adopted by tax practitioners on behalf of their clients, (2) gain an understanding as to which individual SBE tax concessions are most favoured by practitioners, (3) determine the primary motivation as to why tax practitioners recommend particular SBE concessions to their clients, and (4) canvass the opinions of practitioners as to whether they believed that the introduction of the SBE concessions had met their stated objective of reducing tax compliance costs for small businesses. The findings of this research indicate that, while there is a perception that the SBE concessions are worth embracing, contrary to the policy intent, the reasons behind adopting the concessions was the opportunity to minimise a clients’ tax liability. It was revealed that adopting particular concessions had nothing to do with compliance costs savings and, in fact, the SBE concessions merely added another layer of complexity to an already cumbersome and complex tax code, which resulted in increased compliance costs for their small businesses clients. Further, the SBE concessions allowed tax practitioners the opportunity to engage in effective tax minimisation, thereby fulfilling the client advocacy role of the tax practitioner in maximising their clients’ tax preferences.

Charity tax exemptions : a stitch in time saves nine

The Industry Commission has recently released a wide ranging draft report on charitable organisations. Part of the Inquiry's terms of reference required the Commission to examine the appropriateness of the taxation treatment of charities. The findings of the draft report when combined with the recommendations of the Federal Parliament's Follow the Yellow Brick Road Report point to a systematic review by the Australian Tax Office (ATO) of its dealings with charitable organisations. Generally prevention rather than cure is the better strategy in taxation issues. This article raises a number of issues charitable organisations might consider as part of their prevention strategy. As the ATO administers all the taxes discussed in this article and as the tests for exemption are similar, charitable organisations should find that "getting it right" for one tax means that their affairs will be in order for most taxes.