A Platform for Consultation
Discussion Paper 2: Building on a strong foundation
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Overview

Consultative processes

Release of a second discussion paper
Scope of this discussion paper
Consultations and submissions
Coordination with related processes
Importance of a system-wide perspective

Benchmarks for reform

Role of national objectives and principles
Benchmarks as principles in operation
Investment taxation benchmark

Retention of an income tax base
The principle of a comprehensive income tax base
Intentional departure from a comprehensive income tax base

Entity taxation benchmark

The principle of integration
Conduit entities
Approximate integration for conduit entities
Distributions of tax-preferred income
Income retained in entities
Financing and distribution policies

International taxation benchmark

The principle of global neutrality
Intentional departure from global neutrality
Investment in Australia by non-residents
Conduit income
Foreign source income of residents

Tax incentive benchmark

Reforming the taxation of investments

Measuring income from assets and liabilities

Two components of income
Benefits of comprehensive income
Constraints on using comprehensive income
Calculating asset values
Calculating the components of asset income
Four approaches to tax values of assets and liabilities

Modifying risk

Comprehensive income provides risk neutrality
Portfolio risk and financial arrangements
Debt forgiveness

Recognising expenses

Need for reform
Generalised treatment of expenditure
Generalised treatment of interest

Rationalising tax, legal and accounting treatments

Economic and legal concepts
Accounting and tax treatments

Reforming the taxation of entities

Entities and distributions

Need for reform
Achieving a consistent regime
Determining the timing of refunds of imputation credits

Entity groups

Need for reform
Benefits of consolidated taxation

Tax avoidance and evasion
Non-commercial activities
Fringe benefits taxation

Reforming international taxation

Investment in Australia by non-residents
Conduit investment
Foreign source income of residents

Improving parity by relieving double tax on foreign source income
Improving parity by restoring double tax on domestic income
Anti-tax-deferral rules

The split of worldwide taxable income by residence and source

Assessing the scope for trade-offs between base and rates

Applying the revenue neutrality constraint
The trade-off between a lower company rate and a broader base

Broadening the investment base
Revenue effects of entity-related options

Alternative capital gains taxation
Inviting consultation on the trade-offs

Meeting the national objectives

Optimising growth and ensuring equity
Facilitating simplification

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