Wednesday, 4 May 2016

Scott Morrison rearranging the on-board leisure activities schedule on the cruise ship Ostentatious Wealth in 2016-17

The Turnbull Government has announced it was not giving tax cuts to those with taxable incomes under $80,000 because these individuals had benefited for carbon tax compensation and tax cuts in the past but was giving personal tax cuts to at least 500,000 people with taxable incomes of 80,000 per annum.

Now let me get this straight – this was the basic scenario, right?

In 2012 the then Gillard Government decreed that there would be a lump sum payment to compensate for the so-called carbon tax. These lump sum payments of $250 for singles and $380 for couples were to cover the first 9 months of the carbon tax for pensioners and others on income support and, the first 12 months for those households receiving  Family Tax Benefit A or B:

Family Tax Benefit Part A recipients will receive up to $110 for each child.
Family Tax Benefit Part B recipients will receive up to $69 per family.
Single pensioners will receive up to $250.
Pensioner couples will receive up to $190 per eligible member.
[Kirsten Andrews, 2 July 2012]

From 1 July 2013 the Labor Government awarded additional carbon tax compensation payments, including compensation payments for households with annual incomes of $160,000.

This compensation meant that:

*Households receiving Family Tax Benefit A received $87.60 "clean energy supplement" per year for each eligible child aged under 13. Those with eligible children aged between 13 and 19 gained $113.15 in carbon tax compensation.
*Those who qualify for Family Tax Benefit B received an extra $69.35 carbon tax compensation if their youngest child was aged under five, which includes $69.35 for the carbon tax. If the youngest child was aged between five and 18 their top up was a $51.10 clean energy supplement.
*About 281,000 self-funded retirees who receives the seniors supplement got about $350 a year for singles and $530 a year for couples with their next quarterly payment. 
*More than 360,000 students and young people with a disability looking for work or in training received a lump sum payment. The amount varied depending on individual payments but was worth up to $130.
*An est. 3.5 million pensioners received a further boost totaling $88 for singles and $130 for couples paid out through fortnightly installments. 

The Labor Government also planned compensatory tax cuts from 1 July 2015 which went ahead because the Senate refused to allow the Abbott Government to remove them.

These tax cuts were; worth about $83 a year for people earning $25,000 to $65,000 and about $13 a year for people earning over $80,000 [The Australian, 9 July 2014].

Since then the Abbott-Turnbull Government budgets have whittled away at the real value of pensions and associated benefits and allowances, kept unemployment payments below poverty levels and restricted eligibility for Family Tax Benefits by lowering the FTB B threshold from 150,000 to $100,000 and removing FTB B from children 6 years of age and over.

In this 2016-17 budget Turnbull & Co are rewarding those currently earning $98,200 pa and over (of which $80,000 is considered taxable income) with a tax cut worth an est. $314 a year, with the possibility of this rising to $324 on 2 July 2016. While those with a taxable income of more than $180,000 will no longer have to pay the 2% Deficit Levy which for a person on $250,000 a year means a tax deduction of $1,400 over two years [Financial Review, 4 May 2015].

At the same time the 2016-17 budget allows those individuals in these income ranges to keep contributing to their superannuation post-retirement because the work test for superannuation contribution has been removed, i.e. the provision that the person must have worked for at least 40 hours over 30 consecutive days in the financial year you wish to make a contribution.

Negative gearing and capital gains tax advantages remain for those who wish to minimise taxable incomes between 80,000pa and $180,000 and over, however there are some changes to superannuation  including the amount of tax-free income which can be salted away in their superannuation funds - with a $1.6 million cap on the total amount of superannuation that can be transferred into a tax-free retirement account.

All this budget last measure does is give those with more than $1.6 million in their retirement account the option to either transfer the excess back into an accumulation superannuation account taxed at a low 15% or withdraw the excess amount from their superannuation. Which of course leaves these individuals free to purchase negatively geared property and further reduce their taxable incomes, or salt the excess away in investments registered in low-taxing jurisdictions such as the Cayman Islands.

As the budget papers assure the electorate that less than 1 per cent of those with superannuation accounts will be affected by superannuation cap changes, in all likelihood they will have little impact on wealth accumulation by the top 25 per cent of Australian income earners.

This whole exercise has been a political pea and thimble trick in which Scott Morrison has been careful to disguise as much as possible that he has merely rearranged the on-board leisure activities schedule for those travelling on the cruise ship Ostentatious Wealth and left the rest of the Australian population stranded on the shore.

No comments: