MALCOLM TURNBULL’S “PRECONDITIONS”
1. “We are not going to raise more tax overall.”
2. “Any changes are going to be rigorously fair.”
3. “They’ve got to drive jobs and growth.”
How will they rein in the budget deficit then? Expenditure is the other side of the equation – possibly starting with using the private sector to administer Medicare, Aged Care, and/or the Pharmaceutical Benefits Scheme.
None of us likes paying tax, that’s a given. On the other hand, anyone who has travelled in Asia or Africa has an appreciation for our public infrastructure – clean water, reliable waste removal, effective hospitals, adequate policing, safe roads… that sort of thing. So most of us knuckle down and pay our taxes without too much angst.
We get very nervous when the politicians start talking about making changes though, especially when the talk is of reducing the budget deficit.
But something has to give. Like it or not, our economy and government revenues are heavily affected by commodity prices and these are unlikely to bounce much. Not any time soon, anyway.
Clearly the government has been ‘testing the waters’ about the possibility of raising the GST from 10% to 15%. This would raise an extra $36 billion a year, although at least $8 billion would be returned to low income earners as compensation. It could solve the budget problem in one swoop, be easy to implement and hard to avoid, and even give them some money to play with – to offer us an income tax cut. Equally clearly, the Australian people have replied with a resounding “no!”
So now the government will have to resort to a raft of less radical changes, likely to include some or all of the following…
This system was supposed to encourage as many Australians as possible to save and fund their own retirement rather than rely on the Age Pension, but as everyone knows, the current rules benefit the wealthy far more than those who may need to rely on Centrelink later in life.
Accounting firm, Deloittes proposes giving everyone – low, middle and high income earners – the same tax break every time they shift a dollar from wages into super. This would revolutionise fairness in super, and possibly raise up to $6 billion a year.
The government may also adjust taxation of income in super funds and limit the cap on non-concessional contributions.
Capital gains tax
Capital gains from the sale of shares and investment properties are taxed at only half the rate of other income. A proposal from the Henry tax review would cut the discount to 40 per cent and extend it to all investment income including rents, dividends and bank interest.
Broadening the above capital gains tax approach to property income may also allow the government to make changes to negative gearing laws. There are calls to limit negative gearing to new dwellings, to promote the building of new homes rather than drive up the prices of existing homes.
The Commonwealth government may also pressure state governments to follow the lead of the Australian Capital Territory and swap real estate stamp duties for higher rates and land taxes.
Work related expenses claimed as tax deductions
Each year over $30 billion is claimed by taxpayers in deductions, so policymakers are looking at the British approach where tax deduction laws were tightened and simplified, offset (at least partially) by lower tax rates.
The other sweetener? Simplicity. Two thirds of British taxpayers elect not to file tax returns
What are your thoughts?
Do you think they should increase the GST? Or should they concentrate on these other tax areas? Or should they cut expenditure? Leave a comment below to let us know your thoughts.