Date posted: 23/08/2018 5 min read

Australia should steal New Zealand's tax policy playbook

Rugby union isn’t the only area where the Kiwis are kicking more goals than Australia.

In brief

  • In many ways New Zealand’s tax system is so much simpler than Australia’s
  • New Zealand took out top spot in the World Bank Doing Business 2018 report
  • A range of initiatives could be adopted to streamline trans-Tasman business activities

The start of the Bledisloe Cup series invariably generates a gentle ribbing from my Kiwi colleagues. Any retort about Australia's dominance in nearly every other sport is totally ignored – such is the All Black's standing in the New Zealand psyche.

One thing New Zealanders don't crow about is their tax system. No tax system is perfect, but they have bragging rights on this too.

Here are just some tax policies where, in my opinion, Australia comes off second best:

  • Fringe Benefits Tax – the NZ model is simpler and easier to comply with.
  • Work-related deductions – few entitlements mean few New Zealand lodge income tax returns, enabling Inland Revenue to soon trial automatic tax refunds.
  • Accounting Income Method – allows New Zealand businesses to calculate their equivalent of PAYG instalments by reference to real time accounting profits.
  • Aged unpaid tax debts – the New Zealand Parliament has enacted legislation enabling Inland Revenue to report to credit reporting agencies those taxpayers who don't engage, and this measure seems to be working (similar plans here appear to have been put on the back-burner).
  • GST – a broad base makes the New Zealand indirect tax system one of the world's most efficient.

No wonder New Zealand has claimed top spot (for the second year in a row) in the World Bank Doing Business 2018 report for ease of doing business, ahead of 190 other economies (Australia ranked 14th).

It's all about having the right game plan

Australia's tax system is complex due to constant tinkering. Our approach to tax policy making isn't clear. By contrast, in 1995 New Zealand published guiding principles enshrined in their Generic Tax Policy Setting Process.

The Ardern Labour Government didn't rush to implement tax policy, convening the Tax Working Group. With the Australian Labor Party currently leading in the polls, the Shadow Treasurer might consider copying this model – not for tax reform ideas, but for designing and implementing well the various tax reforms Labor has committed to take to the next Federal Election.

By all accounts, the relationship between the two regulators – the Australia's ATO and New Zealand's Inland Revenue – is first class, and it is here perhaps that some really productive work can be done.

For example, for businesses that operate solely in a trans-Tasman context, the two administrations have opportunities to alleviate red tape in areas such as:

  • E-invoicing – this has already been identified as an area of mutual interest and co-investment.
  • Business registration – learnings from the modernised New Zealand Business Number are highly relevant to Australia's ABN project, now underway.
  • Cross-border Country-by-Country and other reporting obligations.
  • Domestic compliance reporting.
  • Uncertainty about the application of company tax residency tests.

With all the kerfuffle going on with things like BREXIT and trade tariff wars, wouldn't it be good for two nations with close cultural and historical ties to demonstrate how to foster cross-border economic co-operation that will help to grow both economies?

Meantime, I'll keep faith with the Wallabies and pray for a rare win at Eden Park.

What can we learn from the Kiwis (beyond good rugby)?

Michael Croker looks more at why we should borrow New Zealand’s playbook

Read Michael’s full report

Search related topics