ACOSS: Needs Not Wants - Call for Budget Fairness

Monday February 10, 2014

The Australian Council of Social Service today urged the Federal Government to deliver on its promise to put the nation’s Budget on a sustainable long-term footing in a fair way that doesn’t leave anyone behind, adding that future government entitlements and subsides should be based on needs, not wants.

Speaking at the release of the peak body’s Federal Budget submission, ACOSS CEO Dr Cassandra Goldie said, “We agree with the Treasurer that it’s our duty to help people who are most vulnerable in our community. People are entitled to expect Governments to provide income support and essential services such as age pensions, health services, and tax breaks for superannuation, but those entitlements can only be sustained and improved if they are based on need.”

Dr Goldie said, “Now is the right time for Government action to clamp down on wasteful and inefficient expenditure to allow us to close the worst gaps in our economic and social infrastructure.”

“The Coalition Government’s first Budget is a real opportunity to better direct spending and tax breaks to areas of greatest need, such as adequate income support and employment assistance for people who are unemployed. There’s also great need in the areas of affordable housing and child care for low and middle income families, and for maintaining the critical support provided by community services helping the most vulnerable members of our community.

“The budget should take urgent action to meet the needs of those who are excluded from the benefits of a wealthy society - a job, affordable housing, a decent income, and basic community services such as disability services and dental and mental health care.

“These priorities are all the more important at a time when employment growth is stagnating. Already we see that more than 60% of people receiving the unemployment allowance Newstart are left to survive for a year or more on $36 a day without access to the training, work experience and job counselling they need to help them secure a job. More people are likely to face this experience in the coming year with the unemployment rate expected to rise to 6%.

“ACOSS supports a review of government entitlements, but it should take aim at wasteful and poorly targeted programs, not benefits and services for people who are already doing it tough such as homeless people, Aboriginal and Torres Strait Islander peoples, unemployed people and people living with disabilities and relying on income support.

“The Government cannot ignore the fact that much of the waste in the budget lies on the tax side of the ledger. For instance, super tax breaks cost around $40 billion each year, about the same as the Age Pension. Almost a third of the tax breaks for super contributions go to the top 10% of workers.

“The current set of retirement and age-based tax concessions are both unfair and inefficient. As the population ages, governments will face increasing and legitimate demands on health and aged care services, yet less than 20% of individuals over the age of 64 pay any income tax.

“Clearly, this is not sustainable. To begin the process of reigning in these subsidies, ACOSS proposes restoring the $25,000 annual cap on concessionally-taxed super contributions. We also want to see the curbing of income tax avoidance by the ‘churning’ of wages through superannuation accounts that pay an equivalent pension; and progressively extending the 15% tax on super fund earnings to accounts in the ‘pensions phase’.

“Another key area of reform is housing tax concessions, and in particular negative gearing which encourages excessive borrowing to invest in existing rental properties with a view to making capital gains rather than rental returns. This contributes to house price inflation and excessive levels of household debt during investment booms.

“Our proposal is to quarantine deductions for expenses relating to passive investment in housing, shares, collectables and similar assets purchased after 1 January 2015 to offset income received from those assets, including capital gains realised on their subsequent sale.

“We propose that half the revenue savings from this measure be earmarked to help alleviate Australia’s worsening housing affordability crisis through an Affordable Housing Growth Fund and future expansion of the National Rental Affordability Scheme (NRAS).

“On the spending side, there is scope to redirect health and child care programs towards those in most need and to stem inflation in costs to consumers and Governments at the same time. The health insurance rebate for ‘extras’ cover and Extended Medicare Safety Net should be removed and child care assistance restructured to absorb the Child Care Rebate into a simpler, better targeted Child Care Benefit.

“The Age Pension is a vital safety net for retirees and ACOSS supported the recent pension increases for singles. To put the pension on a more sustainable footing, it should be better targeted. As a result of a poorly conceived easing of the assets test in 2007, a couple over 65 with assets apart from their home worth a million dollars can now claim a part pension.

“Retirees whose income and assets are too high to qualify for a pension under these rules receive a Seniors Supplement. These public supports are clearly not well targeted to people who need them.

“Our Budget proposals would improve the bottom line by $1 billion in 2014-15, $5 billion the following year, and much more in future years, making room to fund the services that will be needed by an ageing population.

“This gradual tightening of the Budget, paid for by curbing wasteful and poorly target programs, is the fair and responsible path to budget reform,” Dr Goldie said.