Federal Budget
Dedicated funding, better consultation: keys to good tax policy in 2025–26
Published on: 19 Mar 2025
SYDNEY, 19 March 2025: The continuous maintenance and development of the taxation system is of the utmost importance and should be accounted for accordingly as a focus in next week’s Federal Budget 2025–26. Julie Abdalla, recently appointed to the position of Head of Tax & Legal at The Tax Institute, highlighted the value of consultation, and the crucial role that adequate government funding plays in good policy design.
Funding for government agencies crucial to good policy design
Abdalla said, ‘It is essential that the Treasury and the Australian Taxation Office (ATO) receive sufficient permanent funding to design and implement the systems necessary to efficiently develop and administer the law, and improve the experience for all taxpayers and practitioners dealing with the tax system.’
Adequate funding ensures the Treasury is equipped to address the extensive list of announced but unenacted measures (ABUMs), as well as future policy priorities that may arise. It also ensures the Treasury can provide the needed advice and analysis on various fiscal policy measures.
Additional permanent funding for the ATO, particularly for the business areas under the Law Design and Practice branch is needed. Rather than prioritising mainly taskforce-based funding to extend and boost the ATO’s review and audit programs, additional funding for the ATO’s technology teams and other support teams beyond Law Design and Practice should be considered.
Abdalla said, ‘An increase in permanent funding would provide the Treasury with the resources required to respond to evolving economic and stakeholder circumstances and would better enable the ATO to implement and provide more timely guidance on new measures.’
‘ABUMs that linger for years are bad for the system, creating uncertainty and fostering inefficiencies. As a matter of good system maintenance, the Government should commit to progressing or abandoning each ABUM in this Budget, as part of a holistic review of the tax and superannuation systems.’
Importance of public consultation
Abdalla said, ‘Public consultation should be undertaken for all significant changes to the law. Poor tax law design and a lack of consultation often leads to poor or unintended outcomes for everyone involved. Any amendments to the law must be considered holistically, and be based on sound and considered policy.’
A recent example of the implications of a failure to consult was on 8 November 2023, when Greens Senator Barbara Pocock proposed amendments to the Treasury Laws Amendment (2023 Measures No. 1) Bill 2023 to insert a series of new breach reporting rules for registered tax practitioners (the Bill was enacted on 27 November 2023), among other changes. The measures were not released in exposure draft form for public consultation. Moreover, the amendments were tabled and passed without an accompanying explanatory memorandum and the usual process of public consultation was foregone. This measure has caused enormous angst for tax professionals, the majority of whom seek to uphold the highest ethical standards. Unintended implications have resulted from the lack of engagement with affected stakeholders that could have been addressed through consultation.
Retrospective application of new law causes confusion
Abdalla said, ‘The Tax Institute’s view is that legislation with retrospective effect should apply in only very limited circumstances and not be used as commonly as it has been in recent years. Retrospective legislation, while warranted in certain cases, can create confusion and a considerable administrative burden for tax advisers and their clients. Good faith consultation can help to identify issues, and design policies that reach appropriate outcomes without creating undue burdens.’
Recent examples include Acts introducing Public Country-by-Country reporting (Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Act 2024), and Pillar Two rules (Taxation (Multinational—Global and Domestic Minimum Tax) Imposition Act 2024) which became law on 10 December 2024, both of which apply retrospectively from 1 January 2024. Recent changes to the thin capitalisation rules also largely apply retrospectively from 1 July 2023.
ENDS
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