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10 ways Australia could save money without hurting the poor 10 ways Australia could save money without hurting the poor
(7 months later)
We all have a wishlist of worthy causes where the government could spend more money. But treasurer Joe Hockey has warned it is the end of the age of entitlement and everyone has to do the heavy lifting.We all have a wishlist of worthy causes where the government could spend more money. But treasurer Joe Hockey has warned it is the end of the age of entitlement and everyone has to do the heavy lifting.
As Hockey considers budget cuts and the commission of audit takes a fine-tooth comb to government spending, the Australian Council of Social Service has offered a list of savings which could be implemented without hitting the poorest Australians.As Hockey considers budget cuts and the commission of audit takes a fine-tooth comb to government spending, the Australian Council of Social Service has offered a list of savings which could be implemented without hitting the poorest Australians.
Acoss says its list could save $4.4b in 2014-15 and $10.2b in the following year.Acoss says its list could save $4.4b in 2014-15 and $10.2b in the following year.
1. Quarantine “negative gearing” tax deductions for expenses relating to passive investments in housing, shares and collectables bought after 1 January, 2015, to offset income received from those assets. Earmark half the savings to an “affordable housing growth fund”. Acoss says the financial benefits of negative gearing essentially end up in the pockets of private investors rather than increasing affordable housing stock. A fund could direct money towards investing in social housing. Saving? $500m in 2015-16.1. Quarantine “negative gearing” tax deductions for expenses relating to passive investments in housing, shares and collectables bought after 1 January, 2015, to offset income received from those assets. Earmark half the savings to an “affordable housing growth fund”. Acoss says the financial benefits of negative gearing essentially end up in the pockets of private investors rather than increasing affordable housing stock. A fund could direct money towards investing in social housing. Saving? $500m in 2015-16.
2. Reform tax treatment of private trusts in which mostly wealthy individuals can redirect income to other members in the trust, often family members. Saving? $1000m in 2015-16.2. Reform tax treatment of private trusts in which mostly wealthy individuals can redirect income to other members in the trust, often family members. Saving? $1000m in 2015-16.
3. Restore the $25,000 annual cap on concessional superannuation contributions, which was relaxed to $35,000 for people over 59 from July 2013. Acoss reckons anyone who can afford to put in $35,000, more than a third of annual earnings, in one year does not need tax help. Saving? $500m.3. Restore the $25,000 annual cap on concessional superannuation contributions, which was relaxed to $35,000 for people over 59 from July 2013. Acoss reckons anyone who can afford to put in $35,000, more than a third of annual earnings, in one year does not need tax help. Saving? $500m.
4. Curb tax avoidance through “churning” wages through superannuation. Churning is the practice of over-55s putting super in at a tax rate of 15 per cent and then immediately withdrawing it, thereby avoiding their usual marginal tax rate. Saving? $500m in 2015-16.4. Curb tax avoidance through “churning” wages through superannuation. Churning is the practice of over-55s putting super in at a tax rate of 15 per cent and then immediately withdrawing it, thereby avoiding their usual marginal tax rate. Saving? $500m in 2015-16.
5. Progressively extend the 15% tax rate on super fund earnings to accounts in the “pension phase”. Saving? $300m in 2015-16.5. Progressively extend the 15% tax rate on super fund earnings to accounts in the “pension phase”. Saving? $300m in 2015-16.
6. Remove the 30% private health insurance rebate for ancillary cover. People with “extras” medical insurance receive the 30% rebate on the total cost of the cover, including things such as gym fees, dental, optical and chiropractors. Acoss argues that if the rebate is designed to take the stress off the public hospital system, extras cover – mostly taken up by the top end of the income bracket – does not need to be funded by the taxpayer. Saving? $1000m in 2015-16.6. Remove the 30% private health insurance rebate for ancillary cover. People with “extras” medical insurance receive the 30% rebate on the total cost of the cover, including things such as gym fees, dental, optical and chiropractors. Acoss argues that if the rebate is designed to take the stress off the public hospital system, extras cover – mostly taken up by the top end of the income bracket – does not need to be funded by the taxpayer. Saving? $1000m in 2015-16.
7. Reduce pharmaceutical benefit scheme subsidies for out-of-patent medicines. If there is a cheaper generic alternative, the original drug does not need to be subsidised when it has run out of patent, which is usually 20 years. Saving? $1300m.7. Reduce pharmaceutical benefit scheme subsidies for out-of-patent medicines. If there is a cheaper generic alternative, the original drug does not need to be subsidised when it has run out of patent, which is usually 20 years. Saving? $1300m.
8. Abolish the extended Medicare safety net. This is the “safety net on the safety net”, which subsidises medical spending out of hospital above a certain level of procedures in. Acoss argues that as long as the bulk-billing safety net is kept, larger out-of-pocket medical expenses are generally incurred by the top end of the income bracket at specialists and private clinics. Saving? $550m.8. Abolish the extended Medicare safety net. This is the “safety net on the safety net”, which subsidises medical spending out of hospital above a certain level of procedures in. Acoss argues that as long as the bulk-billing safety net is kept, larger out-of-pocket medical expenses are generally incurred by the top end of the income bracket at specialists and private clinics. Saving? $550m.
9. Couples with assets of more than $1m – apart from their homes – qualify for the pension. Acoss would like to tighten the pensions assets test and restrict the tax offset for seniors to people who qualify for a pension. Saving? $2200m in 2015-16. 9. Couples with assets of more than $1m – apart from their homes – qualify for the pension. Acoss would like to tighten the pensions assets test and restrict the tax offset for seniors to people who qualify for a pension. Saving? $2200m in 2015-16.
10. At the moment, people who are considered too wealthy for the pension qualify for a cash payment equivalent of $25 a week for couples or $16 a week for singles, paid as an annual lump sum. Acoss recommends restricting income support supplements for seniors to people who qualify for a pension. Saving? $250m.10. At the moment, people who are considered too wealthy for the pension qualify for a cash payment equivalent of $25 a week for couples or $16 a week for singles, paid as an annual lump sum. Acoss recommends restricting income support supplements for seniors to people who qualify for a pension. Saving? $250m.