Saturday, May 01, 2010

Henry Review Predictions

Based on all the leaks some things seem clear about what the Henry Review to be released Sunday will contain.

I do expect that we'll move one step closer to the Roth IRA model where super contributions are fully taxed but earnings are not. One guess would be that super contributions will be taxed at 15% below your marginal rate. So 0% for those in the 15% bracket, 15% (the current rate for everyone) for those in the 30% bracket, and up to 30% for those in the 45% tax bracket. Maybe with that they can relax the $A25,000 a year contribution cap. I'm likely to be exceeding the cap myself next year, will be interested to learn how that is dealt with by my employer.

The Henry review will if anything reduce overall taxation on capital from all the sounds it has been making. First, they may reduce the corporation tax in return for the resource rent tax. They might fiddle with capital gains tax discounts but doubt they will eliminate them. The aim overall is to lessen the gap in tax treatment between different forms of savings and to increase the tax burden on immobile land and reduce it on more mobile capital.

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