Capital gains tax concessions for small business along with a clampdown on the taxation of private trusts and lump sum termination payments will help return the budget to surplus and improve the fairness of the tax system, according to a key welfare lobby.
The Australian Council of Social Service also says that Australia has squandered much of benefits of decades of economic growth, and there are signs we’re heading into rocky economic waters.
“Over most of the past decade, much of the fiscal proceeds of the mining boom have been squandered on poorly-targeted direct spending and tax expenditures instead of essential services,” it says.
It also warns that “progress in reducing unemployment further has stalled, Australia’s economic growth prospects are uncertain in the short term, and structural changes in the economy pose social challenges as well as economic ones.”
In its submission for the upcoming Federal Budget, ACOSS calls for:
• The removal of capital gains tax concessions for small business.
• Reform of the tax treatment of private trusts and lump sum termination payments.
• The abolition of the private health insurance rebate.
• A restructure of tax concessions for super contributions, capping tax breaks for the “top 20% of taxpayers who currently receive half the benefits of $16 billion in annual tax concessions for super contributions”.
• The integration of the child care rebate within the child care benefit.
• The abolition of the Senior Australians Tax Offset, the Mature Age Worker Tax Offset, the deduction of self-education expenses, recreational boating concessions, and the Medical Expenses Tax Offset.
• A tightening of thin capitalisation rules to reduce opportunities for international companies to shift profits offshore.
“If the above measures were introduced, this could save the revenue approximately $4 billion in 2012-13 rising to approximately $6 billion in 2013-14. This would assist the Government to restore the budget to surplus without the need for harsh cuts in expenditure on important social programs,” it says.
The national peak council of the community sector says these savings should be spent on:
• Increased payment levels for Newstart Allowance, Youth Allowance and other Allowance payments for single adults and young people living independently of their parents.
• Doubling the number of places in the new wage subsidy scheme for long-term unemployed people and boosting the resources of Job Service Australia providers.
• Developing a national population-based oral health program, in place of the Medicare Chronic Disease Dental Scheme and the Teen Dental Program.
• Introducing a national comprehensive community based primary health care program.
• Establishing an affordable growth fund to expand the stock of affordable housing.
• Properly indexing community service funding.
But Paul Drum, CPA Australia business and strategy head, says wholesale changes to the tax system risk dampening incentives for entrepreneurial activity and therefore economic growth.
“It’s a balancing act. They can see people getting what think are large concessions, but the concessions are there for a purpose: to encourage economic activity,” Drum says.
“If they weren’t there, people wouldn’t be encouraged to take a risk and have a go.
“And if you destroy that, you actually start to cut your own throat in the context of tax revenue.”
Drum descibes the call to scrap small business concessions as “out of the question.”
“There’s not a lot of capital gains being made, so you’d be remiss to take away that light at the end of the tunnel.”
Smart Company is a sister publication to The Mandarin, catering to Australia’s entrepreneurs, small and medium business owners and business managers.
