Tax breaks and benefits favour the wealthy

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A staggering $68 billion of taxpayers’ dollars is spent every year on keeping the wealthiest households wealthy, according to research commissioned by Anglicare Australia.

That equates to $37 per week from every worker in Australia and is greater than the cost of Newstart, disability support or any other benefit, according to Anglicare Executive Director Kasy Chambers.

The report, The Cost of Privilege, was commissioned by the peak body for a range of Anglican community services, and prepared by Per Capita. It was released yesterday.

The report analysed data from the Australian Bureau of Statistics (ABS), Treasury Budget Statements and the University of Melbourne’s annual Household Income and Labour Dynamics in Australia (HILDA) report. In the 2016-2017 financial year, the cost of income support in the following groups was put at:

  • Age Pension $44.468 billion ($35 a week per worker)
  • assistance to families with children $36.404 billion ($20 a week per worker)
  • assistance to people with disabilities $31.721 billion ($17 a week per worker)
  • Newstart (unemployment benefits) $10.994 billion ($6 a week per worker)

Ms Chambers said: “The Cost of Privilege report finds that tax exemptions on private healthcare and education for the wealthiest 20 per cent cost over $3 billion a year, superannuation concessions to them cost over $20 billion a year, and their Capital Gains Tax exemptions cost a staggering $40 billion a year.

“Compare that to the annual cost of Newstart, which costs just under $11 billion a year.

“Following the latest round of welfare cuts, these numbers tell us that something has gone badly wrong – we have become a country that cuts from the poorest to give to the richest,” she said.

The report says that political and economic debate too often paints Australians with the lowest household incomes as a drain on the public purse. However, the bottom 20 per cent of Australians by wealth collectively receive just $6.1 billion in such benefits, while the top 20 per cent receive 10 times as much, it says.

Ms Chambers said the report was not commissioned to highlight the cost of the wealthy relative to welfare benefits, nor to calculate exactly how much money could be raised or which tax concessions should go.

“We want to be having the conversation that that kind of money’s flowing that way whilst we consider the kind of cuts that we’re seeing being made to the kind of money that flows to people on Newstart, on disability support pension, to families with children and to Age Pensioners,” she told RN Breakfast.

The report says that in seeking budget savings, governments could close various loopholes and reduce tax concessions that are disproportionately used by wealthy Australians without causing hardship to the country’s most vulnerable citizens.

To illustrate how high-income families gained more from tax concessions and government benefits than low-income families, the report created several typical families comprising two parents with two school-aged children living in a city.

Kevin and Andrea, on Newstart, earned $42,103.13 after tax per year with no tax concessions.

Michael and Gillian, one working full-time and one part-time, earned $215,446 after tax, of which $71,705 was a tax break.

Tim and Michelle, small business owners with one parent working full-time and one not working, had an annual income of $208,421 per year, which included $99,708 in concessions.

The principal savings were from the lower tax rate on superannuation contributions and earnings, the capital gains tax exemption on the family home, negative gearing on investment properties and being able to deduct household as business costs.

Who do you think is the bigger drain on the public purse? Should some tax concessions be shut down?

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Written by Janelle Ward

63 Comments

Total Comments: 63
  1. 0
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    It’s a known fact that money makes money. It helps when our Government provides $68 Billion dollars to our 20% richest Australians in tax concessions. How does the rest of the nation benefit from this? It has never been explained.

    • 0
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      It ”trickles down” Jackie. Don’t you know that? ScoMo and Hockey and Turnbull have told us that many times over. What they don’t seem able to explain is how, when the rich are getting richer, the poor are getting poorer. If it ”trickles down”, surely the opposite should happen?

    • 0
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      That 20% of our richest taxpayers pay more than 80% of the tax. It’s easy to pluck a certain tax and make a call of unfairness based on envy. What we should be focussed on is the overall tax revenue.

      The rich get richer because they understand the one simple rule of wealth creation. Anyone can become rich.

    • 0
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      No, Adrianus. That’s not quite right. Anyone can become affluent – NOT rich. And trickle down actually DOES work if the government feeds the middle class – NOT the rich. And it’s NOT the rich who pay 80% of tax. It’s the middle class. The rich evade.

      The key to economic prosperity is to support the lower middle class and the upper working class well. Why? Because this is where innovation comes from, and where jobs are created. These classes understand hardship and hard work, and if work is rewarded, they build and grow. They are more likely to treat the disadvantaged with respect and want to help them because (a) they are less likely to have that sense of superiority and entitlement the rich have – having not inherited or been given wealth, but worked for it and earned it; and (b) they live in the real world, not the artificial fairy land of the rich, so they know the risk to society of not supporting the disadvantaged.

      Give a struggling small business $100,000 and they will hire a worker for 2 years, because they NEED more help but can’t afford it. Give a wealthy company $100,000 and they’ll give it to the CEO, senior execs and directors, because they are doing just fine without more workers and without paying workers more. Yes, they MIGHT invest it in technology to boost production and displace workers, but that won’t help the economy at all.

    • 0
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      Rainey, we’ve both been in business long enough to know that businesses are made of people making decisions on behalf of the businesses and it is these people who invariably seek out opportunity, measure it against risk/reward, ease of implementation etc.
      Payroll taxes and the like are only taken from the consumer. The higher the tax on business the greater the importance of the question.. How much can the market bear??
      Taxes and red tape make life difficult for a start up, particularly trading across states with anti business agendas.
      We once plucked down directly from the goose, but we got smarter and now gather it from the nest and gather much more and more quickly. We need to adopt a similar strategy with taxation. We need to maximise the revenue, not use taxation as a means to modify business behaviour. Our higher corporate taxes when compared with other economies tells foreign investors that our small market is not worth the trouble.
      I don’t think you can generalise what a business would do with the $100k based on its size? What I do know is that our government needs to create an environment and send a message that it is easy to open a business and flourish in Australia.

  2. 0
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    shock horror surprise that the polies would look after the rich …………….. not

  3. 0
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    Yep but child care payments for women earning more than I earnt in three years
    And family care days and maternity leave… I even had to resign when I got pregnant no desk job for a pregnant police officer.

    • 0
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      That’s because wimmin are one of this century’s sacred cows. Blame feminism for that.

    • 0
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      It’s twixt the devil and the deep blue sea, Virginia, and I sympathise with you.

      On the other hand, subsidising people’s personal choices via a de facto pay rise = higher hourly rate of payment by including payment for time not worked as a ‘right/entitlement’, is hardly equal dealing.

      That IS the reality of paying women to stay home – and before anyone starts down the old time-worn and thoroughly discredited ‘wage/income gap’ nonsense – census data has shown that women are paid the same percentage in dollars compared to men according to the same percentage of hours they work compared to men = income levels per hour are exactly the same.

      By giving freebies for dropping bundles – a pure personal choice – a government/employer is saying that a woman’s contribution to a job is worth more than a man’s.

      That is the hidden truth behind this never-ending and everlasting feminist nonsense that is aiding in destroying this nation, and one reason why I oppose feminist hegemony in the Labor Party and in the Union movement.

      Put simply, it installs unequal treatment = discrimination, as a ‘right’, and its recipients feel a ‘sense of entitlement’ for having been ‘oppressed’ for so long in the past. Let me remind you, on that score, that the majority of men were similarly ‘oppressed’ via very little real chance of upward mobility in a different time, so women are not Jackie Robinson (though they seem to desire to keep their Men Fridays)….

  4. 0
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    According to Centrelink, the rate for a couple on Newstart payments is $25298 pre-tax per year. So how the hell did the people who compiled “The Cost Of Priviledge” report figure that “Kevin and Andrea, on Newstart, earned $42,103.13 after tax per year with no tax concessions.”
    Sounds dodgy to me

    • 0
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      Current Newstart Rate is $538.80 per fortnight or $14008.80 per year or $28017.8 for two people. A long way short of $42,103.13

    • 0
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      They got the extra in family payments so I that is not a concession then what is?

    • 0
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      Why don’t you read the actual report via the link in the article?
      Besides family payments, there is also the Rent Assistance included – based on their definition of a couple on Newstart.

      In fact, the Report is dodgy where it includes GST exemptions for capital gain on principle place of residence, health Insurance and education – as if these are not essentials and only meant for the wealthy! That’s skewing the results excessively to prove their point – smacks of left-wing bias.

    • 0
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      Indeed, OG – surprisingly you are correct! There are various forms of ‘welfare’ not included in the social security discussion, which seeks to focus exclusively on pensions and unemployment benefits (part of the Social security Budget, BTW, aimed at providing well-being or ‘welfare’)..

      We don’t use derogative terms here to discuss our senior elder civic statespeople and their income strands.

      The good thing about this report is that it includes some of the more blatant WEALTHFARE that is handed around with gay abandon compared to the Social Security Budget.

      Why is someone of over a certain net value and income receiving massive government benefits to ensure their Welfare? why is business being propped up by governments at taxpayer expense when they continually rave about the ‘benefits’ of ‘private industry’? Why do they claim to be capitalist and act like robber barons when they are in reality semi-socialist ventures in concert with government?

      The business of government is not business – a mantra that functions two (or possibly more) ways, and BTW – how is the supply of power etc a ‘business’?

  5. 0
    0

    I read the actual report and what is not mentioned in this brief review is that the primary place of residence (aka Family home) is included and hence the wealth calculation is based on the aspect of shelter. The report advocates for capital gains to be assessed on all property including the family home.
    The report masquerades under the Anglicare banner, but was actually prepared by one of the so called conservative think tanks who favour the shift in taxing income to taxing assets. Consequently the antidote to inequality is to insert a land value tax into the taxation system to make things “fairer”. The analogy one could use is that it uses a sledgehammer to crack open a nut as the unintended consequences are far reaching. Consider for a moment the family home of pensioners or families who are struggling to pay current taxation to all levels of Government, so this would be an added layer on top of remaining taxes. The fop that’s being used is that adjustments will be made elsewhere in the system to counter these unintended consequences, but we heard that with the introduction of GST and quite frankly that has been an unmitigated disaster which was sold to us as being fair when it actually imposes inequality be affecting those on lower incomes proportionally more.

    Anglicare need a kick in the arse over allowing their name to be dragged into this fiasco. Just like the geniuses from another social services organisation who gave the LNP the moral authority to fiddle with the assets test it has turned to crap as many middle income pensioners are now worse off then they otherwise would have been.

    The real reason for inequality is that both major political parties favour the balanced budget meme which imposes austerity. It’s a political problem and the parties need to stand up.

    One can admire the concern of Anglicare, but proposing the sorts of remedies in the report are a race to the bottom where all middle income groups are caught and descend into the lower socio economic strata so that things can become “fairer”. Meanwhile the high income groups will divert their taxation planning efforts into other

  6. 0
    0

    Unfortunately this report does not tell us much and creates unnecessary confusion:
    Firstly, Newstart payments are welfare payments, not earnings. So we know that Kevin and Andrea get over $40,000 from Taxpayers and pay no income tax at all. We also know that Michael and Gillian as well as Tim and Michelle have very healthy incomes which include what appear to be very favourable tax concessions. The question is: How much tax do they pay? I am sure that their net contribution is positive, unfortunately this information has been conveniently omitted.
    I would generally agree that high income earners get a lot of tax concessions and advantages not available to low income earners and some of these concessions should be shut down. Pensioners and retirees have earned the right to their pension and superannuation payments through their super contributions, investments, etc. Disability pensioners should of course be looked after if we consider ours a modern, caring and progressive society. The bigger drain on the public purse are those who take but do not contribute and to suggest otherwise is ludicrous.

    • 0
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      Current Newstart Rate is $538.80 per fortnight or $14008.80 per year or $28017.8 for two people. A long way short of $42,103.13

    • 0
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      Difference is what they receive in family tax benefits for 2 kids. Families earning less $60,000 a year get more back form the taxpayer than they pay in tax.

    • 0
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      Well said Heathen.

    • 0
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      Unemployment Benefit payments are in lieu of wages in a time of inability to find wage paying work – not welfare. The outcome from social security is a kind of welfare in that it provides food etc, but that is its only connection with welfare.

      I make this distinction because the word ‘welfare’ has been imbued with a negative and ‘blaming the victim’ overtone or ten, and it is totally unrealistic in discussion of social security entitlements.

    • 0
      0

      All contribute – those on the lowest levels of income, as someone pointed out above in discussion of GST, PROPORTIONATELY contribute more of their income back into the economy, since they have little choice but to do so to survive.

      That means virtually their entire income, spent onshore in this nation, is absorbed immediately or nearly so back into the taxation cycle and thus is returned to government revenue in short time. This compares favourably with those who have discretionary income, and spend it on offshore holidays etc or in tax concession yielding investments, which are thus a direct cost to the economy/budget, since that excess is not returned into the tax cycle and thus into government revenue, whereas the net cost of social security is nil.

      For those who will argue that inflation cost is not included – return serve is that social security payments are deliberately caused to run behind inflation, not in front of it.

      If you believe that those with higher discretionary incomes actually benefit this nation more – I have a fine Harbour Bridge almost ready for the market….

  7. 0
    0

    …but is it moral?

  8. 0
    0

    “Kevin and Andrea, on Newstart, earned $42,103.13 after tax per year with no tax concessions” -Really? No, that is not correct.

    K&A, on average, get Newstart $21,051.57 pa each, they pay no income tax.
    The marginal income tax rate for individuals is $0 – $18,200 (yr 2017) = 0%,
    – $18,201 to $37,00 =19%
    So, if K&A earned that sort of money by way of a salary, their income tax would be $541.80 (each) which is a saving of 2.57% of the tax they don’t have to pay because they are on Newstart. So let’s call that, a tax concession.

    Take M&G with a combined tax break of 33.28% and compare it to T&M with a business tax break of 47.84% The difference in income is 3.37% higher for M&G with a lower tax break compared to T&M who has a higher tax break but lower annual income.

    2017-2018 Budget estimated Revenue = $456.98 billion

    Major Sectors contributions
    1) Individual Income Tax Revenue = 47.75%
    2) Other Revenue (combined) = 33.68%
    3) Company Tax Revenue. (Combined) =18.57%!

    If, the corporate sector receives additional tax concessions by way of a reduced company tax, which sector will suffer the most? Because, in the realm of the economic pie when you give one sector more, the more has to come from another sector. The Social Security and Welfare spend = $164.1 billion (35.91% of total revenue).

    The argument could be that, the Individual Tax and the Company Tax combined =65.57% of total revenue. Why combine the two? Because, without companies and small business generating operating profits the individual income tax revenue would sharply decline due to high unemployment. So, we should accept that the total Company Tax estimated contribution of 18.57% is, under the circumstances, reasonable because they generate the commerce business and employ individuals… That is, if they, in total ,pay the estimated company tax revenue as budgeted.

    And, here is our problem. Concessions attract creative accounting that minimises (if not to evade) company tax liability. The way the Australian government manages this is a laughing stock of every company financial controller in Australia and its overseas corporate associates.

    Does your research here: – http://www.budget.gov.au/2017-18/content/glossies/overview/download/Budget2017-18-Overview.pdf

    • 0
      0

      Good to see some separating the Social Security Budget from the Welfare Budget…. your education is proceeding…

      As above the net cost to revenue of the Social Security system is nil.

    • 0
      0

      .. the exceptions being those amounts that are subverted along their way through the tax cycle into the hands of those with discretionary incomes, who put it into non tax-paying areas or areas that gain tax concession.

      Social Security recipients don’t have the wherewithal to do that, in the main.

      Every movement of every dollar through the system of transferring cash for goods pays tax…. now keep thinking…

      (e-ducation – the drawing out of knowledge and understanding that is already inherent in the learner…. i.e you already know, somewhere in there, all the answers….. your duty as a student is to find them)….

  9. 0
    0

    What a deceitful article quoting deceitful lies
    Rich get richer for one simple reason
    They have a substantial amount of surplus income which is reinvested which in turn gives them even more income and capital growth

    • 0
      0

      Sure, that’s how the rich get richer…by being deceitful. When it’s Tax time…oh boy,..they are the masters of the tax game.

    • 0
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      I pay my fair share of tax
      Last year it was 0.5% of my income

    • 0
      0

      Wow! 1/2 a cent in a dollar? The lowest marginal rate for the low income earner over $18,291pa is 19% or 19 cents in a dollar, after work related and other allowed deductions but…oh, ok…the rich are privileged to huge concessions ,ey? Would you care to share your tax minimisation plan strategy?

    • 0
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      no can do, sorry

    • 0
      0

      Spot on, Rafe – and those investments incur welfare in the form of tax concessions, which, under a government regime that claims (both sides) to abhor government intervention in private business (private industry is more efficient, blah, blah, blah – yet needs government hand-outs to survive while charging you double or treble), is a total and complete lie.

      Governments should NOT be providing welfare for businesses that claim to stand on their own two feet.

    • 0
      0

      Rafe has revealed the truth for all to see…..

    • 0
      0

      You’re taking ahit
      You have no idea
      On some investments I pay 15%
      On some income I pay nothing
      On some I pay 30%
      I’m talking average here

    • 0
      0

      I get away with nothing and pay exactly what tax I should…nothing is hidden….even if you tried these days…everything is computerised …paying medicare levy and more as well. I do my bit for the economy.

    • 0
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      We all do Radish. The Labor Party need something to whinge about and stir the ignorant into a frenzy of hatred. But what exactly did they do about enabling the ATO to collect more taxes that they say people aren’t paying?? Absolutely nothing!! And here we are 10 years later and they’re still whinging about it and voting down at every opportunity.

    • 0
      0

      TREBOR the creators of jobs, goods and services and accomodation do not make income and so don’t pay income tax.

      Nothing wrong with that.

      A PAYG employee who earns income and then saves for income will pay income taxes at very high rates.

      No point being upset about it. It’s been that way since the 1970s at least.

      Good on Raphael for generating cashflow instead of income and using the rules.

  10. 0
    0

    Why is Newstart paying a family more than the minimum wage earner with a wife at home and two kids. No wonder so many people don’t want to put the 40 hours in.

    These figures are a joke surely.

    Perhaps all politicians and anyone doing this research and reporting needs to be paid the minimum wage for six months or so.

    The median wage after tax is less than $43 000.

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