Behind every great fortune there is a crime. —Balzac
Greens propose almost $500b in new taxes
The Greens are proposing almost half-a-trillion dollars in new taxes, with party leader Adam Bandt on Wednesday to unveil a major boost to levies on oil and gas companies.
On a campaign trip to Western Australia, Mr Bandt will announce a revamped petroleum resource rent tax, which will add to a 40 per cent super profits tax and a wealth tax on Australia’s 122 richest people.
Collectively, Greens policies to date will raise about $127 billion over the four years forward estimates and about $480 billion over a decade. There are more taxes yet to be announced, according to the party.
Mr Bandt indicated his proposed tax hikes on corporate Australia would be a key bargaining chip in any negotiations to form a “power-sharing” agreement if there were a hung parliament after the May 21 election.
Prime Minister Scott Morrison said he would not do deals with independents and slammed new taxes on the resource sector. “We won’t be putting any taxes on them and slowing them down,” Mr Morrison said.
The Greens want to impose a 40 per cent super profits tax on non-mining companies with turnover above $100 million, which would rake in $53 billion over four years and about $213 billion over 10 years to 2031-32.
Greens’ policy revenue ($b)
For the resource sector, the party’s plan is to introduce a broader petroleum resource rent tax and a mining super profit tax. The first is expected to raise $29 billion over four years and $92 billion over the decade, while the second is $27 billion over four years and about $124 billion over the decade.
Collectively the package has been dubbed the “tycoon tax”.
The Greens will also seek to impose an annual 6 per cent tax on the net wealth of Australia’s richest 122 people, which it said would raise $17 billion over four years and $48 billion over 10 years.
The revenue would be used to fund the party’s social policies including raising the pension and putting dental and mental health into Medicare.
But the Parliamentary Budget Office said there was a significant or high degree of uncertainty about the outlook.
It noted, for example, that the new taxes and levies on oil and gas could force projects to close sooner than expected as they would become unviable.
That could be a feature rather than a bug, however. Mr Bandt told the National Press Club last week that “burning coal and gas is killing people”.
The 40 per cent corporate super profits taxes also may not raise as much as Mr Bandt claimed in the short term.
Under the proposed tax, when Australia’s 10-year bond rate goes up, the amount of money raised goes down, and since the policy was proposed the bond rate has more than doubled from 1.2 per cent to about 3 per cent.
Based on 2020-21 results, the Greens estimated the Commonwealth Bank would have paid $1.2 billion more in tax, taking the total to $4.7 billion.
NAB would be up for an additional $840 million, taking its tax bill to $3.5 billion; Westpac’s tax bill would have increased by $770 million to $4 billion; and ANZ’s tax payable would have increased by $670 million to $2.3 billion.
But based on the Greens’ equation, with a higher 10-year bond rate the gap between how much tax would be raised from the big four banks alone would be about $1.5 billion.
The costings by the PBO also use the budget assumptions to determine the long-term bond rate over 10 years. The budget assumed the 10-year bond yield would remain at 2.3 per cent until 2026 – it is now already 3 per cent.
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Late last year a section of the Australian Taxation Office began planning one of the most vicious attacks on family businesses and tax accountants ever attempted in Australia and the world.
Investors waiting for clear tax guidance
Traders are still in the dark about the intricacies of how tax laws are applied to digital assets, almost a decade after the Australian Taxation Office introduced the first rulings related to bitcoin and its ilk.
“The tax treatment of cryptocurrencies was set in 2014 when the ATO released a number of determinations about bitcoin,” says KPMG Financial Services Tax Partner Julian Humphrey. “That guidance indicated bitcoin is not a currency for tax purposes. The tax treatment of cryptocurrencies and, more generally, digital assets, has flowed from that.”
The tax treatment of crypto assets is a developing story. Illustration: Tamara Voninski
The market’s and regulators’ understanding of cryptocurrencies has developed significantly since then. But the ATO has displayed no appetite to revisit the initial guidance. Other regulators such as the Reserve Bank of Australia (ATO) also appear reluctant to actively facilitate the use of cryptocurrencies and digital assets.
Gains and losses made through crypto are generally subject to capital gains tax, which should also give investors access to the 50 per cent capital gains tax discount that’s available when the asset has been held for more than 12 months. At the same time, losses are quarantined and only offset against other capital gains. But there’s a tension between giving taxpayers access to the capital gains tax discount and restricting relief for losses.
Recently in the Federal Court, the ATO argued it would take nine months to decide whether taxpayer gains from the disposal of cryptocurrency was on revenue account or capital account. This leaves traders and others in a very difficult position. Meanwhile, the Board of Tax is holding an inquiry this year into the appropriate framework for taxing these assets.
What’s missing in the regulatory framework is provision in law about the taxation of digital assets held by investment vehicles and the taxation of financial-type arrangements. Says Humphrey: “That creates problems for investment houses trying to set up a managed fund or exchange-traded fund that holds digital assets, which don’t fit neatly into existing concessions available for these entities.”
We need law reform and legislative change in this space.
— Julian Humphrey, KPMG
The ATO has not yet indicated how it may administer rules that relate to investment funds and their buying and selling of digital assets. “So we need law reform and legislative change in this space,” he adds.
Regulations aside, the ATO has done substantial educational footwork to ensure taxpayers are aware of the tax consequences of investing in crypto and digital assets.
Lachlan Feeney, founder and executive director at Labrys, explains how the ATO tracks crypto trades. His business makes products and services using block chain, which is the underlying technology that powers cryptocurrencies.
“When users interact with certain apps and exchanges, it triggers a ‘know your customer’ process to verify individual’s identity. They then deposit and withdraw from KYC applications into non-KYC wallets and you can see where funds are going on the chain.”
What’s missing in the regulatory framework is provision in law about the taxation of digital assets held by investment vehicles and the taxation of financial-type arrangements. Says Humphrey: “That creates problems for investment houses trying to set up a managed fund or exchange-traded fund that holds digital assets, which don’t fit neatly into existing concessions available for these entities.”
We need law reform and legislative change in this space.
— Julian Humphrey, KPMG
The ATO has not yet indicated how it may administer rules that relate to investment funds and their buying and selling of digital assets. “So we need law reform and legislative change in this space,” he adds.
Regulations aside, the ATO has done substantial educational footwork to ensure taxpayers are aware of the tax consequences of investing in crypto and digital assets.
Lachlan Feeney, founder and executive director at Labrys, explains how the ATO tracks crypto trades. His business makes products and services using block chain, which is the underlying technology that powers cryptocurrencies.
“When users interact with certain apps and exchanges, it triggers a ‘know your customer’ process to verify individual’s identity. They then deposit and withdraw from KYC applications into non-KYC wallets and you can see where funds are going on the chain.”
There are tools that create a database of all wallets that can be attributed to a real and verified person. When there are enough data points, it’s possible to see who owns each wallet and what traders are doing with their crypto, even when the funds are moving between seemingly anonymous wallets. This is how the ATO can track crypto trading.
Reporting of crypto gains and losses
“Last year, the ATO indicated it would be writing to around 100,000 taxpayers with cryptocurrency assets explaining their tax obligations and urging them to review their previously lodged returns. The ATO also expected to prompt almost 300,000 taxpayers as they lodge their 2021 tax return to report their cryptocurrency capital gains or losses,” warns Greg Mawer, director of accounting and advice firm Accumulate.
Eventually, it’s understood the ATO wants the reporting of crypto gains and losses to form a part of the existing automatic reporting of investment income, dividend income and capital gains that exist in relation to bank accounts and shares. This means it can be part of prefilled tax returns, which helps people meet their compliance obligations.
Mawer believes the RBA is actively researching central bank digital currencies as a complement to existing forms of money. “Governments are slow-moving beasts and crypto is a fast-moving industry. Merging those two will be a challenge. If or when an Australian digital currency is launched is anyone’s guess.”
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