The Australian Council of Social Service says that the Federal Government has hit some good targets, such as targeting the wasteful Living Away from Home Allowance and deferring the 50% interest discount on bank deposits, but badly misjudged others, especially cuts to the Baby Bonus, which will hit low income families hardest, and the rolling back of the co-contribution superannuation arrangements for lower income earners, in today’s Mid-Year Economic and Financial Outlook (MYEFO).
“Whilst we are pleased that the government has not taken a slash and burn approach to essential community services and has made a provision of funding for the Equal Pay case, we don’t support a further indiscriminate efficiency dividend across our vital public services,” said ACOSS CEO Dr Cassandra Goldie.
“Perhaps the most disappointing aspect is that the Government appears to have missed an opportunity to tackle wasteful tax breaks and poorly targeted spending that could have avoided unnecessary pain in its quest to balance the Budget.
“ACOSS has long argued that the area of most potential saving is at the top end where sharp avoidance practises are the norm. Unfortunately many of these have been left untouched.
“The Living Away from Home Allowance is a classic example of a wasteful tax break, and we are pleased this has been tightened. However it’s only the tip of the iceberg.
“For instance, the use of private trusts to avoid individual income tax and profit shifting within international companies to avoid corporate income tax; the privileged tax treatment of private trusts; and the concessional tax treatment of termination payments.
“In our submission to the recent National Tax Forum, ACOSS estimated that these most common loopholes and tax concessions equates to at least $20 billion foregone every year.
“This is crucial revenue that could be used to lower overall tax rates and improve the services we need, whilst making our tax system fairer, based on ability to pay.
“Instead the government has opted to slash the Baby Bonus, which will not only hurt all families, but especially those at the bottom, low income earners and the most disadvantaged in our community.
“The $86 million dollars allocated over the next decade to extend the SEAM program that withdraws income support payments from parents whose children aren’t attending school in the Northern Territory, is not only punitive, unproven and unnecessary, but also a waste of money.
“There was also a missed opportunity to address the inequities in the tax concessions on super contributions, with an annual capped rebate as recommended by the Henry Tax Review. ACOSS is concerned that the benefits of the proposed increase in the superannuation guarantee from 9-12 % will not be fairly shared.
“We have argued that if this increase is to occur, we must ensure that low and middle income earners are guaranteed an equitable share of the estimated $500 billion boost to super savings by 2035 from this reform. This won’t happen if things stay as they are because currently tax breaks for superannuation contributions mainly benefit those in the top two tax brackets as employer contributions are taxed at the flat tax rate of 15% regardless of how much you earn.
“ACOSS estimates that of the $15 billion in tax breaks on superannuation contributions in 2008, almost 20% went to the top 2% of income earners (those over $150,000) and almost 50% went to the top 12%. This is wasteful as well as unfair since higher income earners are likely to save for retirement without tax breaks, and are unlikely to rely on the age pension in any event.
“We must fix the glaring inequities in superannuation and target the high level tax breaks in the tax system to allow room for essential spending such as the long overdue increase in the unemployment Newstart Allowance and more investment in social and affordable housing. It would also free up much needed funds than the $10 million that has been allocated for the crucial National Disability Scheme, which is simply not enough,” Dr Goldie said.
Media Contact: Fernando de Freitas 0419 626 155
ACOSS National Tax Forum Submission Paper: A fairer, more efficient tax and social security system
See ACOSS Budget Priority Statement 2011-12