Complex anti-avoidance measures likely
Treasurer Michael Cullen's promise to introduce a range of measures to minimise tax avoidance and to buttress the new 39 cent tax rate on incomes above $60,000 appear not to be hollow threats.
Wednesday, February 2nd 2000, 12:00AM
Good Returns understands the Inland Revenue Department is developing a set of measures, which although complex, are likely to discourage tax minimisation schemes.
"Our main focus is on preventing the inappropriate diversion of income through the use of companies and trusts," Dr Cullen says.
If the Government is successful in closing some of the loopholes it may be able to reduce the new tax rate's slippage which is estimated to be about $250 million.
The IRD expects the tax to raise $465 million in the next financial year [2000-01], $555 million in 2001-02 and $590 million in 2002-03.
On current tax laws, the IRD would expect $40 to $50 million to be lost in year one through tax minimisation arrangements rising to between $80 and $100 million in the following two years.
Meanwhile one of the overlooked impacts of the new 39c tax rate is that the Government may raise more revenue through the capital gains tax.
One of the three avenues being suggested to get around the extra tax impost is to arrange for an employer to pay any income above the $60,000 into a registered superannuation schemes.
The tactic is fine in theory, however in practice any capital gains made by the fund will be taxed and the transactions costs may eat away any tax savings.
An added disincentive for such a tactic is that the Government Actuary may crack down of super funds that are being used as cash management accounts.
Government Actuary Geoff Rashbrooke has indicated he may move to deregister super schemes that are being used by high income earners as parking places to dodge the extra tax.
Dr Cullen said taxpayers should see what the changes are before paying accountants for tax avoidance advice.
| « Managers controlling their appetite for risk | Get your tax questions answered online » |
Special Offers
Commenting is closed
|
|
Printable version |
|
Email to a friend |
