Should over 65s pay income tax?

Ahead of next week’s National Reform Summit, the Australian Council for Social Services (ACOSS) and the Business Council of Australia (BCA), along with other welfare and business lobby groups are calling on Canberra to remain open-minded about all tax options.

Leading the charge for an equitable and more efficient tax system, other major players, including the Australian Chamber of Commerce and Industry (ACCI), the Australian Council of Trade Unions (ACTU), Australian Industry Group (AIG), National Seniors Australia and the Council on the Ageing (COTA) are also calling on the government not to rule out changes to capital gains tax, negative gearing and superannuation reform – even though some of these options may, according to the government, already be ‘off the table’.

According to ACOSS Chief Executive Cassandra Goldie, the nation won’t progress unless there is renewed debate about tax reform, including issues such as raising the GST, restoring the personal income tax system for people over the age of 65, and removing the sheltering of income from tax through superannuation.

“The reality is that, as the population ages – and our reasonable expectations of the healthcare system increase – governments will need more revenue to provide this and other essential services,” said Ms Goldie. “Less than one in five older people now pay any income tax, due to their higher tax-free threshold and the sheltering of income from tax through superannuation.”

She also stated that, if the GST were to be raised, there should be clarity in how the extra funds would be used. She believes that the argument for increasing the GST just to lower income tax is a weak one, and feels that better solutions may exist through closing tax shelters, dumping stamp duty for land taxes, and more consistent treatment of investment incomes.

“In this way, governments can raise more revenue, and do so more fairly and efficiently,” she said.

ACOSS and BCA may see eye to eye on some issues, but the think tanks hired to assist with the negotiation process seem to be at loggerheads over superannuation reform.

The Grattan Institute believes in winding back superannuation tax concessions, but the Menzies Institute released a paper which claims otherwise: “Far from being low, effective tax rates on long held superannuation are high, both in absolute terms and by international standards.”

The National Reform Summit will be held in Sydney next week with the focus on fiscal sustainability, taxation, productivity and retirement income.

Read more at Australian Financial Review

What do you think about these ideas regarding tax reform? If you are over 65, do you think you should be paying income tax? How do you feel about reform of the superannuation tax concessions? Now that it looks as if the family home may be included in the asset test, do you feel it right that superannuants and pensioners should be taxed on top of that? What are your suggestions for an efficient and equitable retirement system?

Written by Leon Della Bosca

Publisher of YourLifeChoices – Australia's most-trusted and longest-running retirement website. A trusted voice on Australia's retirement landscape, including retirement income and planning, government entitlements, lifestyle and news and information relevant to Australians over 50. Leon has worked in publishing for more than 25 years and is also a travel writer and editor, graphic designer and photographer.

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