Rudd to offer generous concessions to bank accounts for savers

MUM and dad investors will receive generous concessions to park their savings with banks and building societies as part of sweeping tax reforms.

The Rudd Government is preparing to unveil a new savings scheme offering tax breaks similar to superannuation’s discount rate of 15 per cent, The Daily Telegraph reports.

It will encourage investors to deposit savings with the four major banks and other respected financial institutions.

But investors will have to “lock up” their savings — perhaps for between five and 10 years — to qualify for the special rate.

The new savings deal will be announced as part of the Government’s much-anticipated response to the Henry tax review.

It will be part of a suite of measures aimed at building a new savings culture in Australia.

But it is also hoped it will generate billions of dollars in bank deposits, cutting the need for finance houses to borrow from overseas.

The Government expects it will be popular with voters who currently face punishing tax rates on savings. Some taxpayers can pay up to 50 per cent on interest earned from their bank deposits.

Australia is one of the few countries in the world to tax bank savings at the full rate.

Among key reforms, taxpayers will be able to lodge their annual tax returns with a few clicks of a mouse.

And Australia’s antiquated tax system — containing 125 different taxes — will be streamlined to simplify arrangements.

It is understood the Reserve Bank and other financial authorities have raised concerns about the steady decline in deposits.

Bank CEOs have been lobbying Canberra for changes to taxation on ordinary bank deposits, claiming the superannuation industry gets a huge advantage.

And they have a strong ally in Treasury boss Dr Ken Henry, who has also raised concerns over the punitive rates faced by those who save with banks.

Source  :  www.news.com.au

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Stamp duty on home loans under review

STAMP duty on housing loans could be abolished after the Henry tax review, which is likely to recommend states be given a share of income tax to make up the difference.

The most likely path to do this would be for the Commonwealth to give the states the ability to impose their own surcharge on income tax, which would be collected for them by the Australian Tax Office.

 The Henry review has been inundated with submissions calling for the end of stamp duty.

Tax economists argue that the tax on moving house, although easy to collect, leads to poor use of the housing stock and poor labour mobility, The Australian reports.Having to pay stamp duty not only discourages elderly people from moving to more appropriate accommodation, it also deters people from moving house to a better jobs market. 

At a conference conducted by the Henry tax review at the Melbourne Institute last week, both international and Australian tax economists said stamp duty should go, with Melbourne University professor John Freebairn describing the tax as “a piece of garbage”.

The review panel is being influenced by state submissions arguing that replacing stamp duty by extending other state taxes, such as payroll tax or land tax, would be too difficult to implement nationally.

Tasmanian Treasury secretary Don Challen, who is close to the inquiry’s head, federal Treasury secretary Ken Henry, told last week’s conference that reform of state taxes would succeed only with leadership from the national government.                                                                                                                                                     

“If you want to achieve a difficult reform, you’ve got to make it a national one,” Mr Challen said.

He said it would be too hard to win political consensus to extend land or payroll taxes.

“It requires eight lots of political commitment and eight lots of legislation and that path is doomed to failure,” he said.

However, he said he believed states would be willing to act on stamp duty if the commonwealth provided an avenue for alternative revenue.

The idea of giving states a cut of income tax was pressed two years ago by the OECD, which suggested the states “piggy-back” on income tax. The OECD also urged states to drop stamp duty.

One of the world’s leading experts on federal taxes, Canada’s Richard Bird, said the states were heading for a financial crisis because they did not have a sufficient tax base to support their burgeoning health and education costs, which were all rising much faster than the consumer price index.

One of the problems with stamp duty for the states is that it is vulnerable to the state of property markets.

Stamp duty usually raises about $14 billion a year for the states, but the recent state budgets showed big falls of more than $1bn each in NSW and Queensland, in 2008-09, for example.

“In Australia, it should certainly be feasible to permit states to impose a surcharge on the federal personal income tax base,” Professor Bird said.

He said that, ideally, Australia would follow the Scandinavian practice of allowing states to have a flat tax surcharge on income, rather than mirroring the commonwealth’s progressive taxation.

The states would be allowed to set their own level, making states more responsible for their own finances.

Source  :  www.news.com.au

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