EDITORIAL
The 2023 issue of the Journal of Australian Taxation is contained in Volume 25(1) and a
special edition focusing on New Zealand in Volume 25(2). The editors are very grateful for
the hard work and dedicated effort of the guest editor of the special edition, Associate
Professor Jonathan Barrett in attracting the excellent papers for the second volume in 2023.
The editors recommend that readers take particular note of the introduction to the special
edition written by Jonathan. He makes a very apt statement as to the role of tax academics in
the following comment:
In short, as tax researchers, we can and should be taking our research to the public to promote
general debate about taxation, and tax justice in particular. If we fail to stake a claim in that
space, others may take it.
The first volume, 25(1) consists of four articles covering a wide range of taxation topics. The
Editors are grateful for the contribution made by the authors in this edition of the journal,
especially Professor Brett Freudenberg for his ongoing support of this journal.
The first article by Melissa Belle Isle, Brett Freudenberg and Tapan Sarker explores whether
the internal resource of understanding business tax, financial statements and/or computer
accounting software (CAS) by small business owners is related to their business success in
the service sector. The results demonstrate that small businesses with a higher understanding
of business tax and CAS achieve a higher value of gross annual revenue, as well as net annual
income. These results are important in demonstrating the need for small business owners to
improve their understanding of business tax and CAS can aid the overall success of their
business. The authors examined the outcome of the data collected from 116 small business
owners to understand in more depth what aids or hinders an increase in small business
owners (SBO) literacy. The article provides a broad summary of the importance of the three
literacies for small businesses, namely the importance of cash flow management concerning
the SBO’s literacy of financial statements, computer accounting software (CAS), and
business tax. The authors clearly demonstrate through their research that these literacies are
important in the management of the cash flow of the business. The surveys explored what
may aid or hinder the development of these literacies for SBOs through the interview of small
business experts. From these interviews a number of key inhibitors were identified including
time, lack of business acumen, low training, cost, and the focus on producing business
records for tax compliance rather than management practices. From these findings, the
authors were able to provide recommendations that could assist SBOs to improve their
understanding of these three important areas.
The second article is written by James McMillan and examines the links between Indonesia’s
tax collection performance and the design and operation of its tax compliance system through
a study of the tax audit practices and procedures of Indonesia’s tax authority, the Directorate
General of Taxation. The article considers the distortionary effect of some features of
Indonesia’s tax compliance approach under which audits tend to be focused largely on
taxpayers who are already compliant and the fact that audit activities are narrowly focused
and not risk based. The article also considers ways in which the Indonesian tax authorities
could expand tax audit coverage and modify audit procedures and thereby increase the effectiveness of their compliance activities in the future leading to improved revenue
collection outcomes.
The third article is written by Dominic Breznik and an earlier version of this article was
awarded the 2023 Forsyth Pose Scholarship by the Law Council of Australia. The article
critically examines the legislation which applies Australia’s capital gains tax regime to
partnership assets and contends that the design is peculiar. Dominic contends that it diverges
from the general law by treating partners as holding fractional interests in partnership assets
while relying on the same general law to quantify these interests. The article argues that the
design of the CGT regime was influenced by an assumption that the general law recognises
partners as holding direct interests in partnership assets. Dominic demonstrates that
inconsistent elements in the regime’s design have produced confusion concerning the
meaning and application of its provisions. Finally, he proposes reforms to the legislation
which governs the regime and the primary Australian Taxation Office ruling that is relevant
to these issues.
The fourth and final article in this volume is written Lisa Marriott and Max Rashbrooke and
examines the different approaches to tax concessions for political donations in Australia and
Aotearoa New Zealand (NZ). In Australia, a tax deduction may be claimed for a moderate
donation to a political party. Conversely, in NZ no tax concessions are available for
donations to political parties. The study concludes that while there are several benefits of
using the tax system to facilitate political donations, the two different policies align with the
two countries general approaches to using the tax system to influence behaviour. An analysis
of tax expenditures is used to support this argument.
John McLaren and John Minas
Editors 2023