Time to Cut Fat and Target Federal Budget to Those in Need

As speculation grows that Australia will carry a deficit for multiple years, the Government has an opportunity in next week’s Budget to better target expenditure so it can afford to stimulate the economy and help people affected by the recession.

ACOSS has proposed cost savings measures of up to $3.5 billion for the next Budget to strengthen the economy for future years and to avoid cuts to basic services and payments needed by low and middle income people.

“This Budget should be about fairness and equality. As the slowing economy creates higher unemployment and more people face disadvantage, Government should target Budget expenditure to those who need it most,” said Clare Martin, CEO, Australian Council of Social Service.

“At a time when many people are losing their jobs and suffering the hardships of unemployment, it is time to cut back on unsustainable, poorly targeted assistance.”

“Tax breaks on superannuation contributions should be more equitable – currently low income earners benefit the least. For example, an employee on $120,000 gets a tax break on their super guarantee contributions of $3,500, but someone on $40,000 saves just $600 and there is no benefit for anyone on $20,000.”

ACOSS has also called for income support payments to focus on those who need it most including single age, disability and carer pensioners, and also sole parents and unemployed people who will be severely affected by the recession.

By tightening the pension income test from 40 cents to 50 cents in the dollar, the Government could reduce the cost of a $30-a-week pension increase by $1 billion a year. This would end the situation where a couple on over $60,000 (and singles on around $40,000) can still get a part pension.
ACOSS’ proposals to save up to $3.5 billion:
Replace the 15% flat tax rate for super contributions which favour people on over $100,000 with a more equitable rebate per dollar contributed to superannuation (saving: up to $2,000 million / year)
Remove private health insurance rebate from non-hospital care (saving: $1,000m)
Remove the special tax break for golden handshakes – treat the same as redundancy payments (saving: $150m)
Treat share schemes with benefits worth over $1,000 as Fringe Benefits and tax accordingly (Saving: $200m)
Remove the special import tax concession for 4 wheel drive vehicles (saving: $200m)

Media Contact:  Clare Cameron, ACOSS – 0419 626 155