21 August 2015
Media Release - #2015075, 2015

Statement: Council on Federal Financial Relations Tax Reform Workshop

Today the strength of Australia’s federal system of government was on show at a Council on Federal Financial Relations Tax Reform Workshop in Canberra.

Treasurers agreed to work together to improve the way Australia’s tax system supports a functional and efficient Federation.

Together we discussed the evolving economic and fiscal outlook, at the Commonwealth and state levels, and the implications of this for tax reform. 

We also had a wide-ranging discussion on reform options, addressing the benefits and challenges of various approaches.

As part of the Commonwealth Government’s approach to tax reform I outlined the following six principles for taxation reform:

  1. It must promote a stronger economy building jobs, growth and opportunity.
  2. Any reform must be fit for purpose in the modern economy.
  3. Tax changes must encourage workforce participation and ensure families control their own money.
  4. Generally, you should not be taxed until you have earned the income.
  5. Reform must encourage innovation and opportunity, and reward for effort.
  6. As best as possible, the revenue raising capacity of each tier of government should be aligned to responsibilities of funding and service delivery.

The Treasurers recognised that taxes impose costs on the community and that it is important to minimise those costs while still raising the revenue necessary for the delivery of government services.

The Treasurers agreed:

  • To pursue growth focussed reforms with efficient expenditure and more durable revenue arrangements for all Australian governments to deliver comparable levels of service to Australians regardless of where they live.
  • That any revenue arrangements need to be simple, efficient and sustainable.

With the support of the Commonwealth, the states and territories will continue to promote greater integrity in the tax system, with continued improvements to the application of the goods and services tax (“GST”) to ensure consistency and fairness.

At the last CFFR meeting in April, it was agreed that the Commonwealth would develop draft legislation to ensure greater consistency in the application of the GST to digital products and services.

On Budget night, the Commonwealth Government released for consultation an exposure draft Bill and associated explanatory material that would extend the application of the GST to cross border supplies of digital products and services imported by consumers from 1 July 2017.

The Treasurers acknowledged that this is a vital integrity measure to prevent GST base erosion but recognised that it would require work over time.

In line with these reforms, the Australian Leaders’ Retreat on 22 July 2015, agreed to broaden the GST to cover overseas online transactions (physical goods) under $1,000.

At the meeting the Commonwealth Treasurer put forward a proposal that relies on a vendor registration model as a method of collecting the GST for the states and territories. As goods would not be stopped at the border, administering a vendor registration model would have a relatively low cost.

The Commonwealth also recommended that the existing threshold for the GST liability be reduced to zero, in line with the GST collection for other products and services. The states and territories have unanimously agreed to this in principle.

Non-residents (overseas suppliers) will be the ones who charge, collect and remit the GST for digital and physical products. As is the case in Australia, only vendors with an Australian turnover of $75,000 will need to register and charge the GST.

The Commonwealth will draft legislation for the application of the new arrangements from 1 July 2017.

As is required by the Intergovernmental Agreement on Federal Financial Relations, the base and rate of the GST can only be changed by unanimous agreement.

The states and territories considered a proposal to remove the GST from feminine hygiene products. There was no unanimous agreement and therefore there will be no change to the existing GST arrangements for feminine hygiene products.

This was a productive meeting in relation to taxation reform generally. There was a unanimous commitment among Treasurers to keep all options on the table and to continue to work on plans for a better tax system.

In consultation with the states and territories, the Commonwealth will further develop the options discussed by the Treasurers, including packages involving changes to the Medicare levy or a change to the GST.

The Commonwealth will report back to the states and territories at the next scheduled CFFR meeting in October on the options for tax reform.

State and Territory Treasurers continued to highlight the need to address the issue of vertical fiscal imbalance.

There was agreement from all Treasurers that the taxation reform process presented a rare opportunity to address longstanding challenges to revenue and service delivery.

The states, territories and Commonwealth will continue to work towards a comprehensive solution following the principles outlined at the COAG Leaders’ retreat.

This was a productive meeting and I thank the Treasurers for keeping an open mind on how we can promote a better tax system.

As you would expect, there was some strong discussion on the issues and while we didn’t always agree on everything we have made good progress.

The Australian people are looking to us to lead the reform process and to show that together the governments of Australia can constructively work together.

Cleary there is still much work to be done and I will continue to consult with my state and territory colleagues and ensure that they are actively engaged in the Commonwealth’s Tax White Paper reform process.


CFFR Communiqué – Reform of Australia’s Tax System

Today the strength of Australia’s federal system of government was on show at a Council on Federal Financial Relations (“CFFR”) Tax Reform Workshop in Canberra; with Treasurers agreeing to work together to improve the way Australia’s tax system supports a functional and efficient Federation.

Treasurers discussed the evolving economic and fiscal outlook, at the Commonwealth and state levels, and the implications of this for tax reform.  Treasurers also had a wide-ranging discussion on reform options, addressing the benefits and challenges of various approaches.

The Commonwealth Treasurer outlined the following six principles for taxation reform:

  1. It must promote a stronger economy building jobs, growth and opportunity.
  2. Any reform must be fit for purpose in the modern economy.
  3. Tax changes must encourage workforce participation and ensure families control their own money.
  4. Generally, you should not be taxed until you have earned the income.
  5. Reform must encourage innovation and opportunity, and reward for effort.
  6. As best as possible, the revenue raising capacity of each tier of government should be aligned to responsibilities of funding and service delivery.

Treasurers recognised that taxes impose costs on the community and that it is important to minimise those costs while still raising the revenue necessary for the delivery of government services.

The Treasurers agreed:

  • To pursue growth focussed reforms with efficient expenditure and more durable revenue arrangements for all Australian governments to deliver comparable levels of service to Australians regardless of where they live.
  • That any revenue arrangements need to be simple, efficient and sustainable.

It was agreed that the states and territories would continue to promote greater integrity in the tax system, with continued improvements to the application of the goods and services tax (“GST”) to ensure consistency and fairness.

At the last CFFR meeting in April, it was agreed that the Commonwealth would develop draft legislation to ensure greater consistency in the application of the GST to digital products and services. On Budget night, the Commonwealth Government released for consultation an exposure draft Bill and associated explanatory material that would extend the application of the GST to cross border supplies of digital products and services imported by consumers from 1 July 2017.

The Treasurers acknowledged that this is a vital integrity measure to prevent GST base erosion but recognised that it would require work over time.

In line with these reforms, the Australian Leaders’ Retreat on 22 July 2015, agreed to broaden the GST to cover overseas online transactions (physical goods) under $1,000.

At the meeting the Commonwealth Treasurer put forward a proposal that relies on a vendor registration model as a method of collecting the GST for the states and territories. As goods would not be stopped at the border, administering a vendor registration model would have a relatively low cost.

The Commonwealth also recommended that the existing threshold for the GST liability be reduced to zero, in line with the GST collection for other products and services. The states and territories have unanimously agreed to this in principle.

Non-residents (overseas suppliers) will be the ones who charge, collect and remit the GST for digital and physical products. As is the case in Australia, only vendors with an Australian turnover of $75,000 will need to register and charge the GST.

The Commonwealth will draft legislation for the application of the new arrangements from 1 July 2017.

As is required by the Intergovernmental Agreement on Federal Financial Relations, the base and rate of the GST can only be changed by unanimous agreement.

The states and territories considered a proposal to remove the GST from feminine hygiene products. There was no unanimous agreement and therefore there will be no change to the existing GST arrangements for feminine hygiene products.

This was a productive meeting in relation to taxation reform generally. There was a unanimous commitment among Treasurers to keep all options on the table and to continue to work on plans for a better tax system.

In consultation with the states and territories, the Commonwealth will further develop the options discussed by the Treasurers, including packages involving changes to the Medicare levy or a change to the GST.

The Commonwealth will report back to the states and territories at the next scheduled CFFR meeting in October on the options for tax reform.

State and Territory Treasurers continued to highlight the need to address the issue of vertical fiscal imbalance.

There was agreement from all Treasurers that the taxation reform process presented a rare opportunity to address longstanding challenges to revenue and service delivery.

The states, territories and Commonwealth will continue to work towards a comprehensive solution following the principles outlined at the COAG Leaders’ retreat.