John Storey:
Hello and welcome to TaxVibe, a podcast of The Tax Institute where we peel back the layers of the Australian tax world. I'm John Storey, your host for today's episode and Tax Council of The Tax Institute. I'm joined by Paul Banister, the vice president of The Tax Institute. Paul is a chartered accountant and a partner at Grant Thornton, leading their tax division in Brisbane. He has over 40 years experience working with clients to help them navigate through complex and potentially risky tax and commercial issues. We've invited Paul on the show today to get his perspective on some of the issues that frustrate the process of achieving meaningful tax reform in Australia, what challenges the profession faces and his wish list for 2026. Paul, welcome to the show.
Paul Banister:
Thanks, John. Thanks for inviting me.
John Storey:
No problem. Paul, I want to start today by talking about the federal budget, which I know sounds really strange because it's only February and budget night is months away. But there is a whole process that goes into the budget. Pre-budget submissions have only just closed and The Tax Institute published our media release contributing to that. But I think the process of the budget is contributing to the complexity of our tax system. The budget was meant to be about the financial position of the country, how much we are spending, what revenue are we bringing in and the treasurer's forecast for the year ahead. That may have been how it used to work, but certainly since the advent of television, ⁓ Budget Night has become more of a media circus. The treasurer is expected to perform, to make some dramatic announcements, some exciting changes to the tax system. And the media declares who are the winners and losers like it's some sort of game. This has resulted in an enormously complex tax system. There is this constant annual tinkering to our tax system. Worse, sometimes the announcements aren't even enacted. So it leaves taxpayers and their advisors in a sort of limbo. There is certainly no energy put in to holistic reform to the tax system. Would you agree with this? the budget process itself make our tax system worse?
Paul Banister:
I'm not sure whether the budget process itself is what makes it worse. I think it's just the overall political environment that we're currently in where, as you point out, it's a lot about getting that sort of three second grab and getting that sort of impactful sort of short statement, the three word slogan that people can recall. ⁓ Where are, I've come from over sort of the decades that I've been working ⁓ in tax. you know, there has been, you know, a large shift and certainly all of our time, by the way, John, television has been in this country. you know, it's been, been there, I think it's even all, all color TV during that, ⁓ in my working career as well. ⁓ but where, where it used to be is budget night and very much as pre-internet. So that always was going to be, there were always sort of big shifts on budget night. You know, it, it, it, that, that impacted on, on how people did things. So here we were pre internet. We would roll up a bit after seven o'clock at the Commonwealth government bookshop and we'd sit there in the queue, wait for seven 30. And then we would go and pay our money and then run back to our offices and, have a look at the budget papers. And it actually was a worthwhile thing to do because among other things, it took a while for the detail to sort of get to you otherwise if you didn't do that. But there was usually something sort of meaningful in it. These days with that focus, as you say, the, if I call it the show and not necessarily ⁓ the substance where we don't ⁓ see a lot of things that catch people by surprise on budget night. It's more likely to be a combination of, you know, there's been pre-budget leaks that have been well and truly tested through the media and social channels. So it isn't really a surprise on budget night. sometimes we just simply see a re-announcement of something that's previously been announced, know, people are already aware of it and maybe it might be just a little tweak here and there. you know, we might see some of that in 2026's budget. And I think You know, ⁓ over the years, the sorts of things that we've seen on budget night itself, I don't think we're going to see the likes of again. ⁓ like capital gains tax itself was a budget night announcement, although it had some years prior been ⁓ flagged in terms of some tax reform processes. you know, that was one. You know, can still vividly remember Mr. Costello in May 2006, making a massive change to the superannuation system, effectively moved overnight and, you know, with the transition period over the following 13 and a bit months. you know, those things, you know, are very impactful and I don't sense that that sort of thing happens these days.
John Storey:
Yeah, we in The Tax Institute’s media release for the, for the budget, we we've said that we would like the government to build on the momentum last year where for the first time in a while tax reform has made the news. The government announced its proposal to have these productivity commission reviews into the economy. A lot of that focused on tax and these economic round tables that have also had a tax focus. So our call to the government has been build on that momentum and let's have some genuine tax reform this year, rather than to use the word you use more tweaking. But that begs the question, what is tax reform? What makes a change to our system a genuine reform rather than just tinkering or tweaking?
Paul Banister:
Yeah. I, for my view, ⁓ if it's linked to the overall national objectives to, you know, achieve the, ⁓ yeah. And in tax, it's both been used for not only economic outcomes, but also social outcomes. So if it's linked to that, then it sort of is, has got, you know, that reform banner. And, ⁓ you know, from my perspective, what's real reform? Well, it's, you know, it needs to have those clear goals linked to objectives. It's got to be well understood. Ideally, it's going to be simple, but I think the, this sort of, you know, environment where you've got all sorts of, ⁓ pressures that are known and unknown, especially maybe from the, geopolitical standpoint, ⁓ you know, there's going to be complexity. we've got to expect some, but it should not increase complexity and You know, the other key feature and it's certainly in line with The Tax Institutes’ pre-budget press release is there needs to be a genuine collaboration with the community to challenge whether the measures are going to achieve what they desire to achieve. we have, as you point out, we have seen some momentum in that direction that's sort of been building over the last year or so. You know, one of the examples that you didn't mention is the proposed division 296, which, um, you know, was, it's coming up three years since that was announced, um, originally. And, um, you know, that aside from, you know, the, you know, the, the government sort of, uh, maybe rechanging, um, and, and, um, you know, changing or slot or recasting the objectives of it. Um, there's been, um, a lot of, uh, you know, strong input from the community and given that we've seen things change there seems to be a government that at least in some part has been listening.
John Storey:
Yeah, I remember, I think it was John Howard who said that when, when people hear tax reform, mean tax cuts. And although that was an unfortunate way to label tax reform, cause to me, tax reform, the government and the electorate decide how much they want to tax and how much services they want to fund. It's the best way to do it. That's where tax reform comes in, when you can actually make a change to the system that ⁓ improves productivity or reduces the tax burden because you're collecting it more efficiently. Whereas I think a lot of people just think of it as well with this tax reform, how do I get to pay less? Is that a fair comment?
Paul Banister:
I think it's absolutely a fair comment. ⁓ you know, mentioned Mr. Howard well with, you know, ⁓ his treasurer, ⁓ Mr. Costello, ⁓ which sort of, you know, from the, ⁓ the, great tax adventure that they took us on from, ⁓ I think it was 13th of August, 1998 was when it was announced, ⁓ implemented mostly, but not all on, one July, 2000. yeah, Mr. Costello has been famously quoted as saying, For great tax reform, need winners and winners. Pull stock. ⁓ so, and, and, know, that's where, like it's certainly, you know, ⁓ has been a truism in the ⁓ political sense. ⁓ you know, perhaps there's, many people that sort of exposed to say the corporate, ⁓ sector, over the years that could say that, that isn't necessarily the case, but, ⁓ you know, perhaps corporates don't vote, might be the, ⁓ the three words slogan that you'd attached to that. But, you know, it, think it's, you know, generally, ⁓ there'll be some, ⁓ from, ⁓ to, to achieve, ⁓ some significant progress on reform. The, ⁓ from a political stance, they'll be looking at, you know, that winners and winners and making sure that everyone has the opportunity, ⁓ to go ahead. But even if there is something that normally is winners and winners, they're There is going to be a change and any change means people are impacted in some way. So they need to, you know, sell it well.
John Storey:
I think not just winners and winners, sometimes ⁓ lots and lots of people can win a little bit, but a few people lose perceived to lose a lot. that's it's pretty easy, therefore, to to argue that it's reform is bad when when we get it wrong. When our when reform starts to lag and our tax system grows in complexity, We add provisions upon provisions. We occasionally tweak with older ones, but they never quite go away. Our system becomes really complex and the burden that falls on tax advisors and of course our clients. What are some of the big challenges ⁓ facing the Australian tax profession in the coming year?
Paul Banister:
I, from the way that I see it is there's been a, only a substantial movement in terms of, if I call it the rules and the laws and the like, but there's also been movement in the way that things are interpreted and maybe a new sort of lens has been put on old law or old interpretations and, know, call it updating or revisionism or whatever you would like, but there's been some movement there and that shift and coping with that shift highlights that, you know, there's a lot to learn, a lot to know, and it isn't just picking things up from the rule book. It's ⁓ living it and applying it in a practical sense. So it takes years to develop and hone your skills and You know, you're building knowledge and experience and staying ahead of things. It's, it's a constant challenge. yeah, that's probably been a thing for the whole of my career, but it seems to be more so these days. following from that, you know, I mean, we've got a, you know, a regulatory environment with new sort of, you know, relatively new, compliance matters in relation to, you know, tax agent services act and the like, ⁓ you know, we, to achieve our, a particular outcome, say to help a client through a transaction or to come up with a position and they're ⁓ approaching how something's disclosed in the tax returns or, or advising them on some change in their circumstances. It just takes more time to get to the answer these days and clients aren't necessarily willing to, you know, to pay for that because they don't see what we see. They don't see that, oh, well, look, there's extra risk management processes that I need to go through now to make sure that my advice is right. So, you know, that includes, you know, second opinions, whether that's one of your colleagues, if you're in an office like mine, or you go to, you know, a tax expert that you regularly deal with, barrister of the like, you know, that costs and... You know, that, ultimately increases the cost of compliance. So with us as tax advisors, as tax agents, being the custodians of the system, if you like, ⁓ that means that we're sort of in some way. Increase increasing the compliance costs just because we need to tick more boxes in our own approaches. And, and that then leads to, I think the third sort of more significant challenge is. How do we build the future in, you know, as a tax profession, you know, is the effort, you know, the risk, the rewards involved in everything that we do. Is that something that makes a career in tax genuinely worth pursuing? I think the answer, and maybe I'm biased, but the answer is obviously yes, you know, in my view. ⁓ but there's a volume element to that as well. As in, we going to nurture enough people that are interested in taxes, a career, ⁓ yeah, versus other options that they have to ensure that we have the capacity as a, as a tax profession to respond to all the mega trends, all the complexity that, that might, ⁓ be impacting, you know, our clients and the tax system and governments and regulators who want to influence how the tax system changes. that, think, is in particular a difficult issue that we're dealing with. organizations like The Tax Institute, we're doing our best to respond to that in terms of education, in terms of creating an environment where people can interact so that, you know, we can, you know, collaborate and solve some of these problems together. um, there's a, you know, related to this point. And I said about creating, uh, a tax career as a, uh, a place to be. The profession generally is also like our overall society, aging population. people are getting closer to retirement. So, you know, there's probably something that we need to do, you know, in particular over the next 10, 15 years to really ⁓ address this challenge. you know, part of the goal of, you know, perhaps tax reform is, is got to be addressing that.
John Storey:
There's a lot of, a lot of insights in there, Paul. If I just unpick a couple of the things you said, just to return to the issue of changed interpretation, I guess section 100, I would be an example of that. was a provision that had been on the books for decades and other trust related measures had been introduced that people largely thought dealt with the taxation of trusts. Um, but the old rule never went away and As far as I'm aware, it wasn't a government mandate, but it was the ATO deciding that, this provision still operates and perhaps has application to some pretty common tax planning ⁓ strategies. We've also seen Bindle, the Bindle litigation is largely to resolve whether the ATO is interpretation of legislation ⁓ is, is the right one. I guess this is an example of problem of building new rules upon old rules. We've had a round this, current government has introduced a raft of what you might call targeted anti-avoidance measures, but the old ones didn't go away. So we've now compounding it. ⁓ and, it does leave it free for, as you said, you think you can understand the rules and suddenly some obscure rule, the ATL, the courts say that has some application. It makes it a challenge.
Paul Banister:
It does indeed. I think the ⁓ particular measures, I won't call them reforms, measures that we've had to deal with, and it's not just current government, it goes back decades. ⁓ usual approach is to try and plug holes. It's not to say, well, we have a problem with the current rules. How should those rules be designed to ensure that that problem doesn't exist and they also do the job that they were intended to do in the first place. Instead of that, there's ⁓ measures that ⁓ have been introduced to say, well, let's ⁓ fix a particular problem. we'll put some new rules in place that... You know, and like division seven, I might be one example there. Uh, and everyone focuses a lot of effort and energy around understanding what the new rules are, but there might be some other rules that are in place that people sort of ignore. then down the track, then say, Oh, well, what about this real? We've let there been, they've been asleep for decades, but they actually might have application here. And you know, the, the, um, you know, statements, um, by the commissioner in relation to, ⁓ Bendel, you know, post the full federal court decision in particular about, you know, don't forget section 100 a, you know, that's an example of, of what we're talking about. So, ⁓ you know, how, what does it mean in terms of addressing those sort of broad challenges that, you know, that I mentioned? Well, you know, if you've got a, an approach or a particular set of circumstances, and it gave a particular outcome yesterday, then it should continue to have that outcome tomorrow. Unless there's some change in, you know, change in interpretation or change in rules, whether a new sort of ruling or new legislation, ⁓ you know, unless it's flagged to apply prospectively, you know, otherwise it, you know, It just, ⁓ you know, it makes ultimately the system less productive because advisors are, ⁓ keep second, third guessing whether or not their advice is correct because they're, yeah, rather than providing advice in a situation where there's a stable footing, they've now learned that, there's all these old issues there. Are there other old issues that I don't ⁓ understand or I've never got?
some experience with that that might come up, come back and bite me because I've overlooked that. So they're the sorts of things that really make, you know, productivity and growth, which was sort of, you know, the current government's sort of, you know, or one of their key economic objectives, it makes achieving that in our profession, at least very difficult.
John Storey:
Yeah. And I think I want to just come back to what you said earlier. The regulation of the profession and the increase in regulation and regulation of tax more generally with we've had a raft of new tax reporting regimes and anti avoidance regimes that have been introduced. And to tie this back to where we started with the budget, I guarantee you will probably hear these words on the future, the coming budget night and future ones that is making sure business pays its fair share or words to that effect. And the implication behind that is that they're not. And of course then that butters the public up for, you know, increasing taxes or, or, or doing something like that. But it also, it also creates this atmosphere that business and their advisors are doing the wrong thing. And as you've said, it's, I think it's a little bit counterproductive because as the tax system gets more complex, ⁓ as you want to try to impose on business stricter rules, if that's what you want to do, you need an engaged profession that you can trust to give honest and fearless advice. ⁓In other words, the government really needs us. But often I think the rhetoric around tax at the sort of public level is that taxpayers and their advisors are doing the wrong thing and aren't paying their real fair share of tax, which I don't think the evidence stacks up to support that.
Paul Banister:
Yeah, well, I think there's a lot of commentators that have spoken, you know, around that issue, both favorably and unfavorably. you know, overall, I think the, you know, the particular ⁓ angle ⁓ is not that helpful because ⁓ it, by trying to identify a section of the community is not doing the right thing, it takes away from, I think the, you know, what we should be focused on is about all getting, you know, better. And if there are, ⁓ parts of, ⁓ the economy that, ⁓ you know, not sort of paying their fair share. Well, ⁓ there's two main reasons for that. One is the, ⁓ the system doesn't operate in a way that, ⁓ requires them to pay a fair share. that element needs to be assessed and reformed. Or there are, you know, participants in the system that aren't doing the right thing. And, you know, one of the things around this broad issue that, you know, and the Australian tax office is not the only regulator doing this, you know, focusing on ⁓ the, you know, the broader economic outcomes that they're getting from you particular parts of our economy. doing what so-called tax gap analysis and do to see whether or not the amount that they're, they're, raising is a reasonably accurate share or fair share of economic activity in those sections of, the environment or of the economy. So, and yeah, that's certainly not a perfect way of trying to identify where whether or not things are right or wrong, but it, think it, it, it has sort of, ⁓ delivered results from, the way that, you know, the commissioner is reporting it. And, yeah, certainly no reason to, you know, to question that and, you know, that, that, ⁓ to try and, ⁓ respond with the facts once a particular perspective, has caught fire. ⁓ People aren't interested in that because it just sort of brings ⁓ things back to equilibrium and means that, you know, someone else can't be blamed for the, for a broader problem that they've all got to share in.
John Storey:
Yeah, yeah, it's a great insight. We've identified a lot of issues and made some complaints about our current system. ⁓ If you were treasurer for a day, what would you do to fix it?
Paul Banister:
Well, if I was treasurer for the day, I think I have a fairly long list of things to consider. So, ⁓ I don't think I'd go anywhere near, ⁓ achieving what I'd like to achieve, but the absolute first priority would need to be making sure that the, system that, impacts the private business owners, private entity owners and their entities is fixed. Now we're currently got a system where it's all way too complex. The commissioner, advisors, everyone's got a very difficult job to do at the moment because we're trying to work with old law that is absolutely not fit for purpose. The number one objective is going to be Schedule 2F. Who would have thought that we would have seen family trust distributions tax taking front page news, but it's getting front page news for very good reason that we've got some very unusual very unfair outcomes that are being achieved from straightforward situations that do nothing to adversely affect the affairs of taxpayers as a whole. So we need to fix that. We need to fix it urgently. Overall, we need to look at the other areas that where we've got companies and trusts and their owners and controllers dealing with each other and make that work, you a lot more simply. you know, in that regard, we've got the upcoming High Court decision in Bendal. I think it provides a fantastic opportunity for a rethink. A hasty response might be to just focus on reforming Division 7A. I would not encourage that. I think we need to take some time and think, well, is Division 7A working for us? And what about 100A, 99B, dead equity rules? that are in particular in the private business space, whether or not that those things are working effectively. And finally, I would say that ⁓ the definitions of residency for tax purposes in Australia need to be considered. And we actually roll out some of those ideas that have been flagged from a tax consultation perspective. So corporate tax residency and the individual tax residency and getting those, you know, finally ⁓ refined and implemented so that we can all get on with life. ⁓
John Storey:
Paul, a treasurer with so much focus on small business, I would definitely vote for you to be the treasurer for a day. ⁓ Thank you so much for your time.
Paul Banister:
Thank you very much, enjoyed it.
John Storey:
And thank you everyone for listening to this episode of TaxVibe. I've been chatting with Paul Banister, Vice President of The Tax Institute and partner at Grant Thornton. If you enjoyed today's discussion, subscribe, rate and review TaxVibe wherever you listen to keep up with us. If you're interested in being at the centre of the tax conversation, a membership with The Tax Institute could be just what you need. Stay current and connected with tangible real world benefits.
Learn more at taxinstitute.com.au Thanks again and we'll see you back here soon.
