CASSANDRA GOLDIE. The tax cut war and why everyone must pay for essential services, including wealthy shareholders

Labor’s policy on tax refunds for shareholders released on 13 March 2018 is a stark reminder that policies addressing the huge gaps in Australia’s revenue base are necessary.This is a media release by Cassandra Goldie

The governments’ continued provision of essential health, aged care, NDIS and other services is shaky as long as large gaps in Australia’s revenue base remain.

One of the gaps is the excessively generous tax breaks for wealthy retirees. Their super funds are not taxed on their income, including share dividends. Instead, in many cases, the Tax Office pays them thousands of dollars a year in tax credits on their share investments. Only 16% of people aged 64 years and over pay income tax, and many who don’t are actually very well off. This is not sustainable.

We have a choice. We close gaps like these in the tax system, or we charge people more for services like aged care and home care.

In the debate over winners and losers from Labor’s policy, some of the so-called ‘’evidence’’ will be misleading. We need proper data on who is affected.

Although we’re confident the proposal will mainly affect people with substantial private wealth and, among retirees, those in the top 20 per cent by total income, we need to see a breakdown of the total income and wealth of those affected (both direct investors and those investing through super), and not just their taxable income which is often zero due to over-generous retirement tax-breaks.

“But all of this is a distraction. We are increasingly concerned that we are entering into a pre-election  tax cut bidding war, when our priority should be to make sure we have the revenue we need to deliver essential services, including for older people.

This is not the time for personal tax cuts, company tax cuts, or more tax breaks for investment. We need to be certain the budget has moved into surplus before tax cuts are delivered. We need to prepare for all the expenditure challenges governments will face into the future.

We need to get the budget back on a firmer footing by making sure everyone is paying their fair share for essential services. That includes reducing over-generous tax breaks for super and shares, strengthening the Medicare Levy, and closing tax shelters in capital gains tax, negative gearing and trusts.

The parties need to focus on how to pay the future costs of health, aged care and the NDIS while meeting urgent needs such as affordable housing, public infrastructure, and reducing the worst poverty by increasing Newstart.

Today’s data showing a disturbing increase to 116,000 people who are homeless in Australia is a stark reminder of who is really doing it tough and the priorities that should be set by any government committed to tackling poverty and inequality.

Dr Cassandra Goldie is the CEO of Australian Council of Social Service

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6 Responses to CASSANDRA GOLDIE. The tax cut war and why everyone must pay for essential services, including wealthy shareholders

  1. Peter Mansour says:

    Pensioners who downsize – which can also help with housing availability/affordability – incur an inequity, and it concerns deeming of interest rates. We owned our home and received our appropriate pension, and had the usual homeowner costs like rates etc. We had to build to get a suitable home in the circumstances. So we now pay rent while awaiting the build. The money from the sale of our home is exempt from the assets test, but not from an income test; that might be fair in itself, if it is the actual income; however, it is deemed at 3.25% interest, when the best we can find is 2.55% and it has constraints on accessibility, so we have to have some invested at 1.5% for access to pay builders etc. The deeming led to a reduction in our pension, while at the same time we pay rent, which is more than the actual income from the invested money. In the process, we paid GST for the sale of the home, and will pay around $30,000 GST for the building. So we do contribute to tax revenue. I sympathise with the low-holdings pensioners who will miss their small refund on shares, but large holdings are different. Meanwhile, pensioners who wish to downsize need to be aware of the costs.

  2. Pensioners whose income is below the taxable threshold should get refunded that part of their dividend over which tax is paid by the company before the shareholder receives the dividend.
    Don’t all taxpayers claim deduction and refunds each year when they do their tax?
    If their are clever millionaire shareholders who avoid tax they should be dealt with, not the pensioner who might hold some shares.

  3. Andrew McRae says:

    Can we have an end to references to “tax refunds”? Leave that to the mainstream media, who will mindlessly – or deliberately – use that phrase ad nauseum. The Labor policy is not about cancelling “refunds”, but straight-out government CASH PAYMENTS to people who have not paid any tax which could possibly be “refunded”. Yet another ghastly legacy of the Howard-Costello years.

  4. J Deacon says:

    Good article except I disagree with the assertion that personal income tax cuts should no be given until budget is back in surplus. Giving workers a tax cut will actually have a stimulating effect on the economy. If people have a few more dollars to spend, that helps local small businesses.
    If we wait til the budget is back in surplus (which is a bit of an artifical constraint in itself) it would never happen.

  5. If a future Labor Government persist in not returning tax credits paid by people who earn less than a taxable income I will not vote for them. Many retirees, such as ourselves were recently kicked out of the pension scheme because the LNP decided to lower the asset threshold.
    We lost our pension but managed to eek out an income from putting some of our savings in bank accounts earning 2% interest and some into a modest share portfolio. The attractiveness in owning shares is the dividend which, also in our case, includes a return of the tax paid on the shares. We do not have a self funded scheme or are part of tax avoiding superannuation schemes.
    The government should consider a sugar tax or an increase in GST but leave people who don’t earn a taxable income alone. We are now digging into our savings but with ageing comes the frightening prospect of the horrors of the Australian Retirement homes. And what about the looming medical issues. That is what we saved for.

  6. Lets get the data on expenditure for wars Australia has participated in and is ready to support the US in, again!

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