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Wealthy Tax Concessions Costing $68 Billion a Year

26 March 2018 at 2:38 pm
Luke Michael
Tax concessions for Australia’s wealthiest 20 per cent are costing more than $68 billion a year, while the bottom 20 per cent of Australians receive just $6.1 billion in concessions, according to new analysis from Anglicare.

Luke Michael | 26 March 2018 at 2:38 pm


Wealthy Tax Concessions Costing $68 Billion a Year
26 March 2018 at 2:38 pm

Tax concessions for Australia’s wealthiest 20 per cent are costing more than $68 billion a year, while the bottom 20 per cent of Australians receive just $6.1 billion in concessions, according to new analysis from Anglicare.

The Cost of Privilege report was released on Monday, commissioned by Anglicare Australia and prepared by Per Capita.

It found that the cost of foregone tax revenue from the richest 20 per cent of Australians was more than $68 billion a year, costing taxpayers $37 a week.

This compares to just $6.1 billion in concessions for the bottom 20 per cent.

“A staggering $68 billion in taxpayer dollars is spent keeping the wealthiest households wealthy. That is greater than the cost of Newstart, disability support, or any other benefit,” Anglicare Australia executive director Kasy Chambers said.

“The Cost of Privilege report finds that tax exemptions on private healthcare and education for the wealthiest 20 per cent cost over $3 billion a year, superannuation concessions to them cost over $20 billion a year, and their capital gains tax exemptions cost a staggering $40 billion a year.

“Compare that to the annual cost of Newstart, which costs just under $11 billion a year. Following the latest round of welfare cuts, these numbers tell us that something has gone badly wrong – we have become a country that cuts from the poorest to give to the richest.”             

The report said that rhetoric demonising welfare recipients as a burden on the economy was unfair.

“The modelling presented in this report clearly demonstrates that the benefits provided to high-income earners through tax concessions easily outweigh the benefits of direct income support payments to welfare recipients,” it said.

“Our report shows that characterisations of the poorest Australians as a burden on the economy are inaccurate and, if we are to worry about unnecessary imposts on the budget, there is a very strong case for reducing tax concessions and other direct benefits to our wealthiest citizens.”

Chambers told Pro Bono News that she hoped the report’s findings would open up the conversation about the cost of welfare.

“It seems disingenuous to have that conversation if we’re not also having a conversation about what benefits are flowing to other people,” Chambers said.

“One of the things that surprised me was that when we look at those taxation concessions and how they flow, the top 20 per cent gets $68 billion, which is more than the bottom 80 per cent put together.”

Examining the annual cost of tax concessions provided to the richest 20 per cent of Australians, the analysis revealed that capital gains tax concessions cost $40.2 billion, superannuation tax concessions cost $20.85 billion, discretionary trust benefits cost $2 billion and negative gearing benefits cost $2.26 billion.

Case studies from the report compared a couple living in outer Melbourne with two children and a total household income of $59,541.69 per year to an inner Sydney couple with two children and a combined family income after tax of $208,421 per year.

The Melbourne household – with a father on the Disability Support Payment and a mother working part-time as a retail assistant and full-time as a carer for her husband and children – would receive $36,824.32 in taxpayer funded income support a year.

The Sydney household meanwhile – with two negatively geared investment properties, a discretionary trust and GST tax exemptions on their private health and education costs – receive $99,708 from taxpayer funded concessions per year.

In light of these figures, Chambers said the government needed to consider where it wanted to direct its money towards.

“Often groups like us will talk with government ministers about the need for more money in out-of-home care for young people or the need for more packages for older people and we’ll be told that there’s no money and that it can’t be afforded,” she said.

“What we’re hoping that this report will do is [show] there is money, it just depends whether you would rather spend it on a superannuation tax concessions or whether you’d rather spend it on [welfare].

“Do you want to spend $100 million on 3,300 more high-level aged care packages or do you want to spend that $100 million on negative gearing concessions or on a GST exemption for private health. We’re hoping that this report will give the sector some evidence to have those conversations about where we choose to spend money as a country.”  

The release of the report comes after 12 major charity leaders signed a letter calling on Senate crossbenchers to reject the Turnbull government’s corporate tax cut plan.

“We believe that a company tax cut is a mistake while almost 3 million people live in poverty,” the letter said.

“It is unconscionable to pursue company tax cuts while refusing to raise the rate of Newstart and other allowances.”

Finance Minister Mathias Cormann said on Sunday that the tax cuts were necessary to keep Australian businesses competitive and would grow employment and wage growth.

“If the Senate were not to pass our business tax cuts in full, it would be a deliberate move to put our businesses here in Australia at a competitive disadvantage compared to businesses in other parts of the world,” Cormann said.

“That would mean less investment, fewer jobs, which would mean over time higher unemployment, which would mean less competition for workers here across Australia, which would mean a drop in wages over time.”

But Chambers said the government’s argument relied on the “disproved” theory of trickle-down economics.

“What we’re showing in this report is that it’s not so much trickle-down economics as trickle up or gushing up,” she said.

“And we just argue that trickle-down theory is disproved, it’s outdated and it’s unconscionable to think about why we would be cutting taxes to large corporations at a time when we are also trying to cut money to the poorest in our community.”

Shadow treasurer Chris Bowen and shadow assistant treasurer Andrew Leigh released a joint-statement which said Labor would introduce tax reforms to make the system fairer.

Labor [will limit] negative gearing to new housing and fully grandfathering arrangements for current homeowners. Labor will halve the capital gains tax discount and to restrict negative gearing to new homes only for future investors,” they said.

“Labor will even the playing field by introducing a standard minimum 30 per cent tax rate for discretionary trust distributions to adult beneficiaries.

“This policy will tackle the use of income splitting to minimise tax – making the tax system fairer and improving the budget bottom line.”

Luke Michael  |  Journalist  |  @luke_michael96

Luke Michael is a journalist at Pro Bono News covering the social sector.

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One comment

  • mick says:

    Capital Gains Tax?
    If you don’t factor in inflation then taxing a gross gain makes no sense. Because inflation decreases the value of assets in time an investor may potentially sell an asset and it be worth less than he bought it for because the purchasing power of the money has diminished.
    Investors used to have INFLATION factored into a capital gain and that was fair but greedy governments decided they would get more tax by changing the system. Now they are wanting to change it again to take even more.
    If this gets up then what is the point of making a long term investment other than one which pays out a large amount of cash? Who wants to actually lose on their investment and lose some more being taxed on a fairyland gain which was never made.

    Shorten may want to rethink this. It is bad policy based on greed. Bring back inflation adjusted indexation. This is fair.


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