ATO won’t act on July 1 tax cuts unless they are already law

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The Australian Tax Office has warned the government it will not deliver planned $1080 tax cuts from July 1, unless they can be rushed through Parliament before the end of the financial year.

Less than 24 hours after Treasurer Josh Frydenberg insisted the timing of the election was “no impediment” to paying 10 million workers the tax refund from July 1, the ATO has told The New Daily that it will not act until the laws have royal assent.

The ATO ruled out preparing for a July 1 start date by delivering the tax cuts “administratively”, as it was asked to do in 2016, on the basis that tax cuts had bipartisan support.

“The measures announced as part of the 2019-20 budget are subject to receiving royal assent and are not yet law,” the ATO spokesman said.

“The ATO requires law in order to deliver the measure as announced, and, as such, it cannot be delivered administratively.”

It is still possible the laws could pass Parliament before July 1. But the ATO generally needs at least a few weeks to get systems up and running for a tax change so close to that date. With an election due on May 18 or 25 or June 1, that is a tight timeframe.

It is a matter of public record that Tax Commissioner Chris Jordan was reluctant to agree to the Turnbull government’s 2016 request to deliver tax cuts “administratively” – before laws had been passed – “believing that in normal circumstances pay-as-you-earn tax scales could only be adjusted after legislation, passed by both houses of Parliament”.

Another option would be to pay the already legislated $530 offset tax cut from July 1 and top it up after the laws passed.

Mr Frydenberg told The New Daily on Sunday there was “no impediment” to the changes being implemented.

“Should the government be re-elected, the timing of the election will not affect low- and middle-income earners receiving a benefit of up to $1080 – or up to $2160 for a dual-income family,” Mr Frydenberg said.

“Taxpayers will be able to access the offset after they lodge their end-of-year tax returns from 1 July, 2019, which is in just 13 weeks’ time.

“This is consistent with past practice.”

His reference to “past practice” hinted at the plan B option of instructing the ATO to implement the plan administratively, but he did not explicitly confirm this.

The ATO’s statement on Monday follows criticism of the government for failing to try to get the tax cuts through last week, in Parliament’s final days of sitting before the election.

Mr Frydenberg and Finance Minister Mathias Cormann defended the decision on the grounds the next election would be “a referendum” on who voters trust to deliver tax cuts.

Shadow treasurer Chris Bowen said the government should tell the ATO to also prepare for legislating Labor’s tax package from July 1.

“A later election date makes more difficult the passage of income tax cuts from 1 July,” Mr Bowen said.

“If the government supports Labor’s bigger, better and fairer income tax cuts, particularly for those earning below $40,000, then they should make that clear so the ATO can prepare for those to start from 1 July.”

The date of the return of Parliament after the election depends on how fast the Australian Electoral Commission can count the votes.

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