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Tax breaks for wealthy under fire


Sydney Morning Herald columnist and reporter

View more articles from Adele Horin

Australians were not overtaxed but taxed unfairly and inefficiently.

Australians were not overtaxed but taxed unfairly and inefficiently.

A CRACKDOWN on federal government waste and unfair tax breaks is needed to help fund vital social and economic reforms without derailing the promised budget surplus, a new analysis says.

The Australian Council of Social Service has called for the abolition of some tax breaks for older Australians, which it says are based on age rather than ability to pay and discriminate against younger people. As well, it has called for reform of private trusts to stem their use for tax avoidance, a practice it says costs the budget $1 billion a year.

In its submission to the 2012 budget process released yesterday, the welfare lobby group says its proposed measures would help resolve the tension between the government's commitment to restore the budget to surplus from 2012-13 and the urgency of unmet social needs.

''The solution to the tension between resources and need is not to retreat from reform but to pursue it more comprehensively with a sustained attack on wasteful expenditure and tax breaks,'' says the acting chief executive of ACOSS, Tessa Boyd-Caine.

ACOSS says Australia is the eighth-lowest taxing country among the 30 developed nations in the Organisation for Economic Co-operation and Development. Australians were not overtaxed but taxed unfairly and inefficiently.

The main problem was an array of tax shelters and loopholes that enabled well-off people to avoid paying tax at the appropriate marginal rate.

ACOSS says individuals could reduce the marginal tax rates on their income by:

■Sheltering income in a private trust.

■Sacrificing salary for superannuation, which enabled taxpayers on the top marginal rate to reduce their tax rate from 46.5 per cent to 15 per cent.

■Taking advantage of the concessional treatment of ''golden handshakes'', which in many cases were taxed at 15 per cent.

In addition, small businesses could reduce their tax by taking advantage of capital gains tax concessions not available to other taxpayers, and international companies could shift profits from Australia to lower tax jurisdictions while maximising Australian debt levels.

ACOSS says the Senior Australians Tax Offset and the Mature Age Worker Tax Offset should be abolished. It urges the removal of the private health insurance rebate from ancillary health cover (in addition to the government's proposal to income test the rebate).

Dr Boyd-Caine says the measures would enable the government to give priority to those who were struggling.

ACOSS wants the $241 a week Newstart Allowance for singles and the $194 a week Youth Allowance for people living independently of parents increased by $50 a week. It says the real value of the allowances has not increased since the early 1990s.

It proposes a national oral health program in place of the Medicare Chronic Disease Dental Scheme and Teen Dental Program, which it says have not demonstrated effectiveness or arrested the growing gap in oral health between advantaged and disadvantaged Australians.

It urges the establishment of an ''affordable housing growth fund'' with a down-payment of $750 million in the first year to expand the stock of affordable housing.

The proposed measures would cost $3.6 billion in 2012-13, while the government would save an estimated $4.8 billion through the attack on ''unfair, inefficient tax waste and tax breaks''.


  • And yet ACOSS is silent on middle class family-based welfare, where people living on $150,000 a year can be paid a pallet-load of money for having children. How about means-testing THAT down to the poverty line, which is where it should be?

    Rural NSW
    Date and time
    January 12, 2012, 1:01PM
    • It is because a single income family on $150K pa pays $11K more primary tax pa than a dual income family earning $75K each. The so called "tax break" you refer to attempts to address the imbalance of the progressive tax rates. Other family related concessions are not available to this family so there is means testing. Hardly middle class welfare.

      Another Steve
      Date and time
      January 12, 2012, 1:55PM
    • While I agree with you in principle, there is another purpose for middle-class welfare, especially as it pertains to offspring:

      Australia is getting older, and we need more new people to support those older ones in the coming 3-4 decades.

      So while it is certainly unfair in many respects, think of it more as an incentive to procreate than a punishment not to.

      It may even benefit you in the long run, demand for aged care services is going to be high, the fewer around to provide it, the more you'll pay :-)

      Date and time
      January 12, 2012, 2:41PM
  • ACOSS represent homeless, mentally ill, handicapped, elderly and others who dont pay taxes. Call them freeloaders. Of course they want hard working higher income families to hand cash to their constituents. These social handouts have to stop. Agree Govt should end the private health rebate and also stop it being compulsory too. What a communist idea. Make something compulsory to prop up the public hospital system than tax the crap out of those who want to opt out.

    Low income people who are strugging ?? Who would have thought it! How about they consider hard working familiies who get the tax slugged out of them and get no support, no handouts, no rebates, no centrelink, nothing !! There is no incentive under this ranga leader to work hard - You just get taxed harder to prop up the lazy, old and dirty hippies who want to be "non-funded retirees"

    ACOSS view that trusts "shelter" income are just wrong - Very wrong (I'm an accountant who specialises in trust income). As for the idea that salary sacrifice shifts the tax rate from high marginal rates to 15% that is also wrong. Sal Sac has a limited capacity ($25K annually) or a tax of up to 93% results. Also it fails to consider the tax on the superannuation the taxpayer receives. Nieve and basic assessment with holes like swiss cheese.

    Date and time
    January 12, 2012, 2:28PM
    • Of course. When did ACOSS ever present a balanced picture? They're a lobby group...

      And the salary sacrifice is limited to less than $25K annually as that $25K allowance INCLUDES your Super Guarantee 9% contributions.

      Date and time
      January 12, 2012, 3:19PM
    • So Paul - your client's trust distributions go to the beneficiary with the highest non trust income. I bet not!

      Date and time
      January 12, 2012, 3:59PM
    • "ACOSS represent... mentally ill, handicapped... who dont pay taxes. Call them freeloaders."

      Yeah, that's right, Paul... how dare these people who are physically or mentally incapable of earning as much as you or I expect handouts!

      Clearly they chose to be handicapped purely so they could live like kings and never have to work! The nerve!

      Who do they think they are?!

      They should be used for medical experiments or sent down mine shafts to make sure there's enough oxygen for the good, fine, Liberal voting workers!

      Why should my taxes paid on my $100,000+ a year income be used to make their easy lives even more enjoyable?!

      Labor = Communism!

      Stop the Boats!


      Date and time
      January 12, 2012, 4:03PM
    • In a wealthy society, it is our duty to support those who aren't able to support themselves.

      How dare you call homeless, mentally ill, handicapped and elderly freeloaders - do you really think they enjoy the position they find themselves in? For the majority, it is not their fault, so why should they be punished? Because there are some who take advantage?

      I think the high-earners mentioned in the above article are the real freeloaders, the people who are taking advantage.

      And this is someone who earns enough to be taxed in the highest bracket. I am more than happy for my taxes to go towards social programs to help these people, for welfare for people in situations like this.

      If you don't like it Paul, you can always leave - I'm sure the American tax and welfare system suits your way of thinking much better.

      Date and time
      January 12, 2012, 4:46PM
  • Making Accountants actually accountable for their work on your behalf

    Date and time
    January 12, 2012, 2:33PM
    • Enough is enough!
      Stop the welfare for the rich!
      No wonder theirs no money for community services and the poor.
      Labor the other conservative white meat!
      How far too the right have they gone when J.W.Howards policies look left wing.

      Aiden Van Depreaux
      Date and time
      January 12, 2012, 2:34PM

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