Taxing times

The government’s changes to the tax system as a result of the Henry review will damage restaurants.

This month saw the release of the government’s response to the Henry Review (the so-called root-and-branch review of the tax system). The response looked more like a light pruning than root-and-branch! Two and a half years and hundreds of submissions lead to a report from Treasury Secretary Ken Henry that made 138 recommendations. Of these, the government chose to accept and implement four. One initiative was a three per cent increase in the level of compulsory superannuation (to 12 per cent). Whilst these levels of super will not fully come into play until 2020, they will have an average 1.3 per cent negative impact on restaurants’ bottom line.

The extreme result was not on the basis of the Henry recommendation, but in contrast to it. The well thought-out review recommended changes to the administration of super. The government ignored this and instead introduced a measure that will see a 36 per cent reduction in the average restaurant’s net profit. The sweetener for business was supposed to be a reduction in the company tax rate from 30 per cent to 28 per cent. This will be of benefit, however, the benefit will nowhere near offset the decrease in profits.

The resource sector is not they only loser from Henry—we will all lose out in the restaurant industry eventually as well.

Peter Doyle
President, Restaurant & Catering  

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