Raising the GST may have lost its appeal for Prime Minister Malcolm Turnbull.
Raising and expanding the scope of the GST has been the hot political topic in the last 12 months. However, Prime Minister Malcolm Turnbull has all but confirmed it will remain as is for the foreseeable future.
Mr Turnbull told the ABC’s Insiders program yesterday morning that increasing the GST would not deliver the increased economic growth the country needed. "At this stage I remain to be convinced or persuaded that a tax mix switch of that kind would actually give us the economic benefit you'd want in order to do such a big thing," he told Barrie Cassidy, host of Insiders.
Government ministers, who have said that ending any discussion on the increase or expansion of the GST as soon as possible would be sensible, reiterated the message. However, with the pressing need to increase government revenue, this year’s federal budget would still involve major tax reform.
While GST increases may be off the table, the Government could look to offer states a share of income tax revenue in return for a portion of GST earnings.
Nationals MP David Gillespie, who had asked the Parliamentary Budget Office to provide a model of the impact of a rise to 15 per cent GST as part of broader tax reform, said he welcomed the apparent change in sentiment and looked forward to hearing more from the Prime Minister. "If you are going to reform away from the dependence on high personal income tax, and company tax and all these counterproductive state stamp duties and payroll taxes, you have to have a broad reform, that's the point I was making,” Dr Gillespie said, adding, "It can't be tinkering round the edges, otherwise the more things you rule out the less you can actually do to reform."
The most likely area to be targeted is superannuation tax concessions, with an aim to deliver low and middle-income earners income tax relief, while ensuring a system that is seen to be fairer for all.
Dr Gillespie has warned that the Government will need to proceed with caution and protect the savings of those who have worked all their lives to save for retirement. "People who've saved all their life and built up their own superannuation funds, it's their money, it's not a little piggy bank that you go raiding," he said.
"If they want to change things prospectively, going forward, in a sensible measured way, of course I'll look at it, but you can't do anything retrospectively with what people have saved over their whole working career."
Read more at ABC.net.au
It appears that after deciding any changes to GST are likely to be a hard sell in the lead-up to the federal election, the Government has shifted its focus to superannuation.
Seen as a much easier win for the Government, the proposed changes are likely to centre around the rate at which tax concessions benefit those who make super contributions. Currently, those who pay more tax, save more tax when contributions are made and taxed at only 15 per cent. And for those who pay little or no tax, the 15 per cent tax on super contributions can actually cost them more.
The Government is rumoured to be considering switching the way tax concessions are applied, by ensuring that they are the same for everyone – 15 cents in every dollar. It is seen that this would deliver a fairer and simpler superannuation system, while also delivering savings of around $6 billion per year.
While this would mean that those on higher incomes no longer had a loophole to pay less tax, it doesn’t address the issue for many low-income earners who pay little or no tax and for whom superannuation actually costs them money. This disproportionate taxation, coupled with the cessation of the low income super contribution in July 2017, means that for those paying less than 15 per cent tax on every dollar paid into super, including the superannuation guarantee, saving for retirement holds little incentive.
Clearly our superannuation system needs to be fairer but simply taxing those who can afford to pay more isn’t the answer. The reality is that even after paying higher tax on superannuation contributions, those on higher incomes are better placed to fund their retirement. It’s those who don’t have the luxury of a high paying job who need a fairer go when planning and saving for retirement.
Do you think that making the tax rate on superannuation contributions the same for all is a step in the right direction? Does it go far enough? Is it more acceptable than a rise in and/or an extension of the GST?
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