Opportunity to cut wasteful tax breaks and poorly targeted spending to balance the Budget: ACOSS

28 November 2011

The Australian Council of Social Service is urging the Federal Government to focus on cutting wasteful and poorly targeted spending and tax breaks in the forthcoming Budget to strengthen the budget bottom line while at the same time making room for essential spending such as the long overdue increase in the unemployment Newstart Allowance and more investment in social and affordable housing.

“A balanced approach should be taken to removing waste from both the tax and expenditure sides of the Federal Budget, rather than any attempt to cut important community programs. Indeed, most of the waste lies hidden from view in tax concessions, which mainly benefit high income earners and are not scrutinised as carefully as direct expenditures.

“If this is done, the Government can achieve its twin goal of balancing the Budget, and meeting pressing social needs in the Budget,” said ACOSS CEO, Dr Cassandra Goldie.

“ACOSS has long argued for changes to ensure that tax is based on ability to pay rather than sharp avoidance practices, such as the use of private trusts to avoid individual income tax and profit shifting within international companies to avoid corporate income tax. We also consistently advocated removal of poorly targeted tax breaks and expenditures.

“The Living Away from Home Allowance is a classic example of a wasteful tax break: people can be paid an allowance by their employer’s tax free simply because they work away from their usual home. There is no limit on the amount that can be paid and we heard at the Tax Forum that some executives were paid tax free allowances worth over $100,000 a year, saving them over $40,000 a year in income tax. This allowance should be urgently reviewed and either pruned back or abolished.

“Other wasteful tax breaks include the privileged tax treatment of private trusts, the health insurance rebate, and the concessional tax treatment of termination payments. These and other tax breaks should be closely scrutinised in the Budget.

“It is unacceptable that some high income earners get a tax break of over $40,000 a year to live in subsidised housing while unemployed people on Newstart Allowance have to live on just $35 per day, often having to pay half of this in rent, leaving them with $17 a day for all other expenses,” Dr Goldie said.

Media Contact: Fernando de Freitas 0419 626 155

ACOSS Submission Paper: A fairer, more efficient tax and social security system 

Opinion piece by ACOSS CEO Dr Cassandra Goldie in the AFR titled: ‘Tax system needs a dose of equality’

See ACOSS Budget Priority Statement 2011-12