Here’s how Govt can raise the pension and have plenty of money to spare
TAX breaks are wonderful things if you can get them.
CPSA News is listing a few of the main, most well-known tax breaks, added up how much they are worth a year and then compared the total with the cost of the pension and unemployment benefits. Just under a quarter of a million Australians over-55 are unemployed.
Making the family home exempt from Capital Gains Tax costs the Commonwealth $34.5 billion a year in forfeited revenue.
Incidentally, we note here that in the media, who generally would own the home they live in, there is always a lot more attention given to including the family home in the pension assets test than making people pay Capital Gains Tax when they sell the family home.
The 50 per cent capital gains discount for individual investors and trusts costs the Commonwealth another $11.8 billion a year, including for investment properties and shares.
Removing the Capital Gains Tax Exemption for the family home combined with the discount on the Capital Gains Tax exemption would yield a total of $80.8 billion.
We’re not saying that these tax breaks should be removed, but as you can see, they cost a lot in forfeited tax revenue. People who benefit generally don’t want those breaks removed.
But say those breaks were removed, the kitty for a pension rise would stand at $80.8 billion a year!
Superannuation tax breaks cost the budget more than $45 billion a year, for before-tax earnings ($22.6 billion), before-tax contributions ($20.5 billion) and capital gains ($2.6 billion).
While superannuation can only work with tax breaks, so removing them would disadvantage everyone, the independent federal Parliamentary Budget Office (PBO) calculated, changing the concessional superannuation contribution tax rate from 15 per cent to 32 per cent for people earning more than an eye-watering $180,000 a year would raise $4.2 billion a year.
Now, the kitty for a pension raise stands at $85 billion a year!
In GST, $30 billion a year is forfeited in tax revenue due to exemptions on fresh food, health, education, water, sewerage and drainage.
GST is very unpopular, but remember, we are calculating how much each tax break costs. We are trying to find money for a decent pension. So, let’s go with extending the GST, and all of a sudden, the kitty for a pension raise stands at $115 billion a year.
Accelerated depreciation tax breaks for businesses cost $9.3 billion.
Income tax concessions on the private health insurance rebate add up to $1.5 billion a year. Great if you afford private health insurance. But it is of no use at all to those at the mercy of a stingy Medicare system and medical specialists who can charge what they feel like.
Now, removing all those tax breaks would bring the total kitty for a pension raise totals $116 billion a year!
We have left out a whole heap of other tax breaks, but we’ve got enough in the kitty to make our comparison with the cost of the pension and the JobSeeker Payment.
So, $116 billion in the kitty, while the combined annual cost of the Age Pension, the Disability Support Pension, the Carer Payment and the JobSeeker Payment is $111 billion.
Easy-peasy, the Government could double the pension and unemployment benefits and still have $5 billion in change!
Because hands up everyone who wouldn’t lose if the tax breaks discussed here were removed!
Still, it is clear that with the value of the most common tax-breaks exceeding the spending on pensions and unemployment benefits, something could be done for the most disadvantaged.
The most disadvantaged don’t own a family home. They don’t own an investment property. They don’t have a business and have nothing on which to fast-track depreciation. They don’t have private health insurance. Their only tax-break is paying no GST on the bare essentials they can barely afford.
With 23 per cent of older Australians living in poverty according to the OECD, something must be done.