Proposed cashflow tax could raise complexity, warns CPA Australia 

CPA Australia has voiced concerns regarding the Productivity Commission’s recommendation to introduce a cashflow tax (CFT) in the country. 

The professional body cautioned that the move would lead to increased complexity, higher compliance costs, undermine the country’s productivity agenda as well as increase cost for consumers. 

Productivity Commission recommended replacing the present company income tax with revenue-neutral  corporate cash flow tax.  

Under the proposed framework, companies would be taxed on their net cash flow rather than on profits. All outlays, including those for investment, would be fully deductible under the CFT structure. 

CPA Australia Tax Lead Jenny Wong stated that the proposed tax is a complex hybrid model conflicting with the government’s objective of simplifying regulations.  

She said: “The cashflow tax is not simplification – it’s a radical, untested experiment that introduces multiple layers of complexity. This additional tax will create uncertainty and confusion for taxpayers and advisers alike. 

“This complexity will drive up compliance costs, increase administrative burdens and make Australia’s tax system harder to navigate for businesses already struggling with red tape.” 

The proposal would introduce an additional tax structure alongside the current structure, which would raise the overall tax burden for some of Australia’s most productive businesses, CPA Australia believes.  

Wong stated that higher tax rates for large corporations may attract positive attention in the short term, but there is a risk that this could lead to increased costs for everyone  over time. 

According to Wong, Australia’s corporate tax rate stands at 30%, among the highest in developed economies.  

The new proposal seeks to raise this further to an effective rate of 33% and reduce dividend imputation credits.  

“Adding another layer of complexity – and higher taxes – sends entirely the wrong message to investors and risks driving capital offshore. 

“By attacking the strongest businesses today with higher taxes, we weaken the entire economy. Small businesses and consumers will ultimately pay the price in the form of higher costs and reduced growth.” 

While CPA Australia supports recommendations aimed at reducing regulatory barriers and improving policy formulation, it is against adopting the cashflow tax proposal due to potential negative impacts on business efficiency and economic competitiveness. 

Wong added: “The Productivity Commission’s proposal misses the big picture of comprehensive tax reform, which the GST should be at the heart of. This proposal is a tax grab with serious consequences for the whole economy.” 

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