The content provided is of a general nature only and is not personal, financial or investment advice. Should you have questions relating to your specific circumstances you should see a suitably qualified professional adviser. Full Disclaimer






Legal documents online

A simple way to create and manage legal documents.
Personalised to suit your needs and emailed straight to your desktop in minutes.

• No set-up or licence fee
• No subscription fee

See how Cleardocs can help your business here.

ACOSS report pinpoints $8b in potential Budget savings

Attention: open in a new window. E-mailPrintPrintPrint

womansavesinside

2 May 2012 – As the May 8 Federal Budget draws closer, a new report has identified around $8 billion that could be saved in the Budget if the federal government tackles poorly targeted subsidies and tax concessions and clamps down on tax loopholes such as 'golden handshakes'.

The Australian Council of Social Service (ACOSS) – a body of the community services and welfare sector – released the report entitled Waste not, want not: Making Room in the Budget for essential services.

According to the report, $8 billion per year in wasteful or poorly targeted rebates could be saved in the following areas where ACOSS has identified specific incentives which should be abolished:


Areas of concern

ACOSS Suggestions

Savings

Subsidies for 'gap fees' or other private expenditures for health and community services

Remove the private health insurance rebate from 'extras' cover

$1.1 billion

 

Abolish the extended Medicare safety net

$0.5 billion

 

Abolish the medical expenses tax offset

$0.5 billion

 

Abolish the education tax refund

$1 billion

 

Limit the tax deduction for self-education expenses

$0.3 billion

Tax concessions (tax breaks) that do not attract the same budgetary scrutiny as direct government spending

Tax the 'golden handshakes' for departing employees at their marginal tax rates instead of the flat tax rate of 15% or 30% that now apply

$0.3 billion

Do not implement the deferred 50% discount for income tax on interest income, unless this is linked with an increase in taxes on capital gains

$0.5 billion

Either remove the Senior Australians (SATO) and Mature Age Workers (MAWTO) Tax Offsets ($1.8 billion) or restrict them to pensioners

$1.8 billion

Remove the extra capital gains tax concessions for small businesses which apply in addition to the 50% discount of tax for capital gains available to individual taxpayers

$1 billion

Tax shelters that enable people on high incomes to avoid their income tax obligations

Tighten the tax treatment of private discretionary trusts to restrict tax avoidance opportunities

$1 biliion

Chief executive of ACOSS Cassandra Goldie said the trouble with rebates such as the Private Health Insurance Rebate from 'extras' cover, the Extended Medicare Safety Net, the Medical Expenses Tax Offset and the Education Tax refund is that they are disproportionately skewed towards the benefit of people on higher incomes.

'A major problem with these rebates is that they mainly benefit people on higher incomes who in relative terms can afford to pay more for these services (including health insurance) in the first place,' Goldie said.

'The time has come to pare back these programs beyond applying means tests to cap them at very high income levels,' Goldie added.

She said tax shelters like family trusts and superannuation tax breaks further reinforce the disparity between people on low incomes and high incomes.

'Super tax concessions, for instance, now cost over $30 billion in lost revenue. That's the highest in the [Organisation for Economic Co-operation and Development] OECD and about the same as our spend on the age pension,' Goldie said.

'Yet most of the concessions on compulsory contributions go to the top 20% of income earners, those who are already well placed to secure their retirement future,' she added.

By tackling the current 'waste and inefficient aspects' of the Budget, Goldie said the government would be able to afford essential supports and services – such as major social and physical infrastructure.

'As we know there are still gaping holes in our social safety net: disability services, dental and mental health, indigenous services and poverty-inducing social security payments. The Newstart allowance for example is just $35 a day – the lowest in the OECD and in families without a parent in paid work, two out of three children are in poverty.'

Goldie called on the government to put in place many of the Henry Review recommendations to 'make the current tax system more equitable, sustainable and fairer for everyone'.

To access Taxpayers Australia's news archive, click here