Friday, 23 May 2014

A hard choice for low income families and welfare recipients?

So which would you rather see happen – the Abbott Government continue with policies dismantling Australia’s ‘safety net’ welfare system (including Medicare) budget cut by budget cut or this federal government reduce superannuation tax concessions for the wealthy and very comfortably well-off?

I suspect Australians on Aged and Veterans Affairs pensions, the sick, those with disabilities, the unemployed and low income households generally would not find this choice a hard one to make.

A tax expenditure arises where a provision of the tax law causes a deviation from the standard tax treatment that would apply to an activity or class of taxpayer: that is, from the benchmark tax treatment [Australian Government, 2014-14 Budget Papers, STATEMENT 5: REVENUE]

According to an Australian Council of Social Service (ACOSS) paper presented at the National Tax Forum 2011:

* low income earner are penalised by the tax system for employer superannuation contributions, with zero tax support for these contributions, compared with a tax 
break of 32 cents per dollar contributed on behalf of a high income earner;
* almost 20% of superannuation tax concessions go to the top 2% of income earners (those over $150,000) almost 50% go to the top 12% of income earners;
* income over $180,000 per year attracts a flat tax rate of 15% (or 30 cents per dollar less than the marginal tax rate) on employer superannuation contributions;
* income attracting the top marginal tax rate of 45% results in tax concessions on superannuation of up to 30%; and
* Treasury research estimates that on average, high income earners receive a public subsidy for their retirement incomes (through tax breaks) over their lifetimes that exceeds the cost of paying them the age pension.

By the time the full raft of Abbott Government budget measures have come into effect, total superannuation tax concessions over the next four financial years will be in excess of $171 billion.

The next time someone tries to publicly argue that the Abbott Government, from Prime Minister through to lowly backbenchers, is not conducting class warfare I am going to (metaphorically speaking) spit in their eye if I see them in the street.

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