Tax Forum a platform for long-term reform of Australia’s tax and social security system

21 March 2011

The Australian Council of Social Service has welcomed the Federal Government announcement that it will hold a tax forum in early October, stating that the forum will be an important stage in the ongoing effort to reform of Australia’s tax and transfer system.

“The hard policy work was done with the Henry review, now it’s time for the vital task of designing a next stage of key reforms to ensure a fairer, more equitable, and truly modern tax system,” said ACOSS CEO, Dr Cassandra Goldie.

“In this next stage of tax reform, we need to make sure we are asking the right questions – the questions that matter to the broader Australian community. As a country, how do we ensure that the tax and transfer system is designed to secure more equitable and sustainable retirement futures for us all.

“What needs to change to our personal income tax system so that those of us in lower paid jobs are adequately rewarded, and those on higher incomes pay their fair share? How do we use our tax system to improve the affordability of housing, perhaps one of our most pressing national concerns? And, importantly, how do we ensure a revenue base so that the most vulnerable people in our community have an adequate standard of living, and that adequate essential social services are in place?

“Our taxes aren’t high by rich-country standards but they are unfair and inefficient. Instead of taxing different kinds of income fairly and consistently, the current system provides for people who are earning higher incomes to not contribute their fair share to our tax base.

“Well known tax shelters such as salary sacrificing on superannuation contributions, negative gearing for property investments, and ‘golden handshakes’ are poorly targeted, providing the greatest benefit to those who are already earning higher incomes. We simply cannot afford these kinds of inequities in the system, especially at a time when we are looking for extra savings to fund important social services to strengthen the economy.

“For people living on income support, our top priority for reform must be to implement the Henry Review’s proposal to reduce the gap between pensions and unemployment payments, now $127 per week and growing every year. This is the biggest disincentive for people living on the disability pension to seek employment – the fear of being transferred to the lower Newstart Allowance. Newstart for a single adult is just $34p day which is simply inadequate to cover people’s minimum ‘decent’ living costs.

“From our point of view, we need to see positive measures for supporting people into paid work and see this payment gap as a bigger disincentive than income tests and tax rates, which have received much media attention in the past week.

“We will also be looking to realign tax concessions on superannuation so that those who will struggle to accumulate adequate savings get the help they need as first priority.

“ACOSS has been heartened by the Prime Minister’s assurance of targeted assistance for pensioners and low income households as part of compensation measures under a carbon pricing scheme. The first priority must be to protect the living standards of the poorest: pensioners, unemployed people and sole parents, through direct cash assistance. This cannot be achieved through tax cuts alone since one third of adults have incomes too low to pay tax.

“We look forward to a broad-ranging tax forum and the opportunity for direct involvement in this important process to help the community to shape Australia’s future tax and social security system,” Dr Goldie said.

Media Contact: Fernando de Freitas 0419 626 155

See ACOSS papers:

Out of the Maze: a better social security system for people of working age

Australia’s Future Tax System – ACOSS Evaluation