Welfare Peak Body Slams Tax Cuts for Top 20%

A tax break for Australia’s top earners is “unconscionable” when the federal government can’t meet the “most basic needs” of the community, according to the Australian Council of Social Service.

In its submission to the Senate inquiry into the income tax relief bill, ACOSS called for proposed legislation to change personal income tax rates to be blocked.

In the 2016 budget the Turnbull government said it would raise the threshold for the 37 per cent personal income tax rate from $80,000 to $87,000.

It’s estimated that 3.1 million taxpayers earning more than $80,000 would receive a tax cut if the bill is passed. Those earning above $87,000 would save around $6 per week.

ACOSS policy director Jacqui Phillips told Pro Bono Australia News the Coalition’s priorities for budget repair were “back-to-front” and hurt vulnerable Australians.

“It is trying to pass legislation that would cut the incomes of young unemployed people by $47 per week while giving people earning $200,000 a year a $6 per week tax cut,” Phillips said.

“The income tax cut will cost the budget $4 billion [over four years], which is four times the savings delivered by denying income support to young unemployed people for four weeks and cutting their payment thereafter.

“These tax cuts are unfunded and benefit the top 20 per cent of income earners. Australia cannot afford tax cuts at this time, either to individuals or companies, while at the same time cutting payments to those in the bottom 20 per cent.”  

In its submission, ACOSS also slammed the bill and accused the government of being one-sided.

“The bill is being considered at the same time as legislation – mostly carried over from the 2014 budget – to cut $7 billion over the next four years from social security payments, mainly affecting people at risk of poverty,” it said.

“These spending cuts are a clear sign that the government lacks the revenue it needs to meet the most basic needs of the community, a fiscal challenge that will grow as the population ages.”

ACOSS recommended the Senate committee requests modelling to assess the impact of tax cuts on income distribution across households.

While the organisation said there could be a future case for reassessing tax brackets, and offsetting the “bracket creep”, to account for changing economic conditions, there was currently no argument to do so.

“Due to eight successive personal tax cuts from 2002 to 2010, most taxpayers are still paying a lower rate of tax overall than they would have paid on the same income in 2002, and will continue to pay less up until around 2020,” the submission said.

“Those unaffordable tax cuts were a major cause of the government’s present budget difficulties.”

ACOSS said the budget repair should focus on closing loopholes in the tax system.

“This would improve fairness because more people would actually pay tax at their legislated rate,” it said.

“Under the present system ‘the many’ have to pay more to offset the revenue losses from the tax avoidance activities of ‘the few’.

“We advocate tightening of the tax treatment of capital gains, negative gearing, superannuation, work related deductions and private trusts and companies to save approximately $12 billion per year.”