Federal Politics


With the GST out of the way the government could fix what's broken

What's left to reform if Scott Morison's push for a GST hike goes south?

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Lots. The really big money is in superannuation. A switch to taxing contributions at marginal rates rather than the present flat rate of 15 per cent would raise an extra $15.6 billion per year, about as much as would be left over from an increase in the GST after compensation. It's enough to buy substantial income tax cuts or properly fund hospitals and schools in line with the wishes of the premiers and leave money over for company tax cuts.

If the government didn't want to remove the concession altogether, it could tax contributions at marginal rates minus 15 per cent, raising $6 billion per year. It could rightly claim to be going after high earners harder than Labor, which had the best part of a decade to fix the unfair super tax system it introduced and came up with something more mild.

Do Scott Morrison and Malcolm Turnbull have a cunning plan up their sleeves?
Do Scott Morrison and Malcolm Turnbull have a cunning plan up their sleeves?  Photo: Andrew Meares

The biggest economic boost would come not from a switch from income tax to GST but from a switch from stamp duty to land tax. To get it the Commonwealth would have to knock together the heads of a few state premiers, but according to the the discussion paper that kicked off the tax reform process, it's where the big gains lie.

Capital gains are taxed at only half the rate of income earned from interest in bank accounts. The discussion paper asks whether that's appropriate and talks about taxing all income from saving at the same (discounted) rate.

Fringe benefits tax, employee deductions, business deductions, dividend imputation and the role of the family home all come under the microscope in the discussion paper. Getting the GST off the table would allow the government to focus on fixing what's really broken.

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