ACOSS Report identifies $8b in Budget savings

A new ACOSS report identifies around $8 billion dollars 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 and other shelters.

“This will have the effect of moving the Budget towards a surplus, as the Government intends, but will also make our tax system fairer and put us in a much better position to fund essential social services and infrastructure into the future,” according to Dr Cassandra Goldie, CEO, Australian Council of Social Service.

“Our report ‘Waste not, want not: Making room in the Budget for essential services’ calls for the Government to target the new layer of rebates which have grown unsustainably in the past decade and are poorly targeted.

“These include subsidies for ‘gap fees’ or other private expenditures for health and community services, such as the Private Health Insurance Rebate from ancillary or ‘extras’ cover; the Extended Medicare Safety Net; the Medical Expenses Tax Offset; the Education Tax Refund; and tax deduction for self-education expenses.

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

“ACOSS would also like to see the Government curb poorly targeted tax breaks that haven’t attracted the same scrutiny as direct spending programs. These include:

• Taxing ‘golden handshakes’ for departing employees at their marginal tax rates instead of the flat tax rates of 15% or 30% that now apply;
• Removing the Senior Australians (SATO) and Mature Age Workers (MAWTO) Tax Offsets or restricting them to pensioners;
• Removing 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 generally;
• The tax treatment of private discretionary trusts be tightened to restrict these tax avoidance opportunities.

“These ‘tax concessions’ are a kind of shadow budget. Super tax concessions, for instance, now cost over $30 billion in lost revenue. That’s the highest in the OECD and about the same as our spend on the age pension. 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.

“There will be no room in the Budget for more investment in major social and physical infrastructure, unless Governments crack down on tax shelters like family trusts and superannuation tax breaks for people on higher incomes.

“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.

“By tackling the current waste and inefficient aspects of our Budget we will be able to afford these essential supports and services we all want and expect in the coming decades – including a $50 a week increase to Newstart and other low paying income support payments.

“This can be achieved while still keeping our spending and public debt way below the levels that are creating concerns in Europe and the United States. Now is the ideal time to put in place many of the Henry Review recommendations that would address the current inadequacies and make our tax system more equitable, sustainable and fairer for everyone,” Dr Goldie said.

Media Contact: Fernando de Freitas 0419 626 155

See new ACOSS Report: Waste not, want not: Making room in the Budget for essential services