It seems astonishing that, in a country where one in eight adults and more than one in six children are living in poverty, and many of those are living in “deep poverty”, the Coalition’s election focus is on tax concessions and tax cuts for the wealthy – and they seem to be getting away with it.
In 2004-05, the top income tax rate kicked in at a taxable income of $70,000. Four years later, that had risen to $180,000. Meanwhile, the tax free threshold remained at $6000 from 2000-01 until Julia Gillard increased it to $18,200 to compensate for the introduction of carbon pricing in 2012-13.
When Tony Abbott got rid of the mining tax, he also repealed many payments to low income earners, including income support benefits to children of soldiers killed or seriously injured in service.
At the time, Abbott said “There are tens of thousands of people who will lose the income support bonus and I don’t suppose any of them will be very happy to lose it … but this idea that the children of veterans are somehow being singled out for mistreatment by government is simply false. It’s an outrageous smear. Veterans, like everyone else, understand that governments have got to keep their commitments and they also understand like everyone else that you cannot be generous with money that you just don’t have.”
The veterans affairs minister, Michael Ronaldson, said the payment, which cost about $260,000 per year and began in March 2013, would be scrapped “as a necessary consequence” of the changes.
“The government considers that it is not in the interests of the general welfare to continue such bonus payments in the absence of the resources necessary to do so,” and the cut “does not result in payments being reduced to below the minimum level necessary for recipients to meet their basic needs”.
They also delayed/abandoned the increase in the superannuation guarantee, canned the low income superannuation co-payment, reduced the instant asset write-off for small business from $6,500 to $1,000, abolished the schoolkids bonus, and reduced family tax benefit payments. They even tried to take away pensioners clean energy supplement whilst telling us that old people could not afford to turn on their power.
But try to wind back some of the unsustainable tax concessions for the wealthy introduced during the Howard years and they scream blue murder.
In 2007, the Howard government allowed people to transfer up to $1 million into their superannuation accounts. The effect of this change in the rules was enormous. In the June quarter of 2007, $22.4 billion was transferred to superannuation accounts by individuals. This compares with $7.4 billion in the June quarter of 2006. June 2007 was the first time in Australia that member contributions exceeded employer contributions. The new superannuation tax treatment led to the selling off of some assets, particularly rental housing, as people sought to take advantage of the opportunity to add funds to their superannuation accounts and claim them back later tax-free.
Prior to Howard’s changes to capital gains tax, overall, landlords had been positively geared. Within two years of slashing capital gains tax, the size of losses exploded with investors moving their cash into the property market to chase capital gains. Total rent collections turned negative in 2001-02. They have not been positive since, reaching a record $10.8 billion in 2008-09. In 2015-16, there were close to three million rental properties around the country. Of those, 1.8 million lost money.
With all the public furore around changes to excess franking credit refunds, as Tim Wilson’s cousin Geoff is advising his clients, “all you’ve got to do is change from a company structure to a trust structure” to avoid the impact of Labor’s policy.
Investors have the luxury of choosing how and where to invest to take advantage of current laws. They change their behaviour in response to legislation. It is no doubt inconvenient for them to have to think about how to maximise their income whilst minimising their tax liability.
But shouldn’t we be focusing on the people who have nowhere to live, on those who don’t have enough food to feed their kids, on those who truly cannot afford to pay their power bills, on those who cannot find a job, on those who are struggling with health issues, on the victims of domestic violence?
My sympathy for wealthy retirees has been sorely tested by their self-serving greed. They have options. Many do not.
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