by Rob Hosking
Finance Minister Michael Cullen introduced a supplementary order paper to Parliament, but the proposal appears unchanged from the one that was circulated around the financial services industry three weeks ago.
The law change is broader than the tax gap, according to the Investment Savings and Insurance Association.
“It touches virtually all Australian unit trusts, not just the problem ones,” says ISI chief executive Vance Arkinstall.
“To the extent that they are moving beyond the original problem, that will be a disappointment to investors.”
The industry is also taking issue with the government’s description of the gap in the tax as a “loophole”.
“We see it as an anomaly. The industry actually spoke to the minister some years ago about it and alerted them to it, but neither officials nor the government did anything about it.”
However officials became alarmed about the level of investments being put into Australian Unit Trusts in the middle of last year, and warned the minister of potentially catastrophic losses to the revenue base if the practice were allowed to continue.
It is understood however that no numbers have ever been put on the possible tax loss. Repeated Official Information Act requests have not turned up any material with any hard figures – or, for that matter, any soft ones.
Arkinstall repeated the industry view that the issue of AUT taxation is something of a sideshow, and the real issue is putting together a coherent taxation regime for investments which does not discourage saving.
The supplementary order paper will now go to the finance and expenditure select committee and be tacked onto the Taxation (Annual Rates, Venture Capital and Miscellaneous Provisions) Bill.
The committee is expected to call for submissions on the new tax change, but there is unlikely to be much time for the industry to put those together.
As Good Returns reported a month ago, the original time frame set out was the proposed law change would be introduced May 5, with select committee submissions to close on May 20. With the introduction pushed back a week, to May 12, the committee may opt to move the deadline out to May 27.
Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.
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