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Henry Review Scorecard:

The Henry Review's 138 recommendations, and the Australian Government's new tax plan, have been handed down.

While there are many positives for the industry, the Property Council has called on the Government to clarify its plans for a second wave of tax reforms.

In a nutshell, here's what the Henry Review and the Government tax plan mean for property. 

Property Council recommendation	Henry Review recommendation	Government's new tax plan	Wins, losses for property
International
Deliver simple, elective MIT regime	Update and rewrite trust rules to reduce complexity and uncertainty	Highly likely to be included in Budget 2010
Exempt trusts from FIF and CFC rules	Improve taxation arrangements applying to Australian managed funds	Reform already underway
Allow trusts to apply thin capitalisation rules	Not specifically addressed	Reform already underway
Federal
Simplify GST rules	Consider greater use of GST free, business to business transactions	Not in tax plan – consultation is ongoing in several GST areas	Further work required to deliver improvements
Simplify capital allowances	Enhance and streamline capital allowances – rates that match effective life and reduce admin and compliance burden	Tax benefits and red tape reduced for small business
Retain negative gearing and capital gains tax regime	Provide a 40% savings income discount for net residential income, including related interest expense and capital gains	No reduction at any stage
Deliver green tax incentives	Consider replacing tax concessions with targeted spending programs	Not in tax plan
Commit to a new GST allocation system	State tax reforms should be coordinated through inter-governmental agreements	Not in tax plan – part of mature tax debate	GST reform must be a COAG priority
State, territory and local
Rationalise property tax framework Australia-wide	Remove stamp duty. Switch to efficient, broad based land tax	Government willing to debate reform
Replace developer levies with alternative funding	COAG should review developer charges, including their appropriateness, transparency and reduction in regulation	Government willing to debate reform
Replace car parking levies with better targeted incentives	Consider costs and benefits of introducing road congestion charges	Government willing to debate reform
Capitalise the cost of delivery of fire service levies	Abolish fire service levy and fund with a broad based consumption tax	Government willing to debate reform
Ensure non-residential utilities are charged on a user pays basis	Undertake a systematic review of user charges and minor taxes	Government willing to debate reform

Following is the good news and bad news from the Henry Review in more detail.

Henry Tax Review Brief 

GOVERNMENT RESPONSE TO HENRY - HIGHLIGHTS

• + Resource Super Profits Tax – 40% from F2013.
• + Company tax rate cut in two steps - 29% in F2014 and 28% in F2015.
• + Superannuation Guarantee Charge to increase to 12% by F2020.
• + An infrastructure investment fund to be established to deliver $700m in F2013 and $5.6bn over the next decade.
• + Small business capital allowance relief from F2013.

PROPERTY INDUSTRY - GOOD NEWS

• + The Government has ruled out any tinkering with negative gearing or the 50% CGT discount.
• + Henry has recommended a broad-based land tax to replace inefficient property taxes – the Government has indicated it will consider this proposal in a second wave of tax reforms.
• + The corporate tax rate reduced to 28% in two tranches means business has a greater capacity to pay for rental accommodation.
• + Increased superannuation savings (SGC rise to 12%), which will increase the overall savings cake available to funds managers.
• + The new infrastructure investment fund will increase investment in economic infrastructure.
• + Henry specifically acknowledges the need to improve housing supply by reducing developer charges and reforming the development assessment system. The Government has already announced a Productivity Commission inquiry into Australia’s development assessment and planning frameworks.
  

NEUTRAL TO BAD NEWS

• + There is no detailed commitment in relation to the process for reforming inefficient state property taxes. This will be a highly political process. However, we need to be ambitious as the alternative is higher (and new) property taxes in the future.
• + Henry has recommended against accelerated depreciation for buildings retrofitted to a higher environmental performance standard – he prefers a grants system. However, this debate is far from over.
• + The Productivity Commission inquiry into planning does not address developer charges.

FURTHER ACTION IMMINENT IN FEDERAL BUDGET

• + Henry recommends a major update and rewrite of Australia’s Managed Investment Trust rules to reduce complexity and uncertainty. Sources assure us of imminent action in next week’s Federal budget.