Proposals to strengthen the Budget and fundessential services
Estimated savings: $500 million in 2014-15
Capital Gains Tax
Capital gains (income from sale of assets such as property and shares) are taxedat half the normal marginal rate and one quarter for sale of small business assets,a tax break that mainly benefits the well-off. Gains from sales of small businessassets may never be taxed in the owner’s lifetime. The Henry Report proposedincreasing tax rates on capital gains by 20%. As an interim measure we proposethat special additional tax breaks for small business assets be removed.
Estimated savings: $1,100 million in 2014-15
International companies reducing tax paid in Australia
The opportunities for international companies to reduce tax paid in Australia byincreasing the debt levels of their Australian entities should be reduced. The safeharbour debt limit in the ‘thin capitalisation’ rules for ‘general entities’ should behalved from 3:1 (3 parts debt per one part equity) to 1.5:1.
Estimated savings: $700 million in 2014-15
Reduce poorly targeted spending programs and tax breaks
Everyone is entitled to expect good quality community services but too much assistancethrough both spending programs and tax breaks linked to services goes to people whoneed it least. Tax breaks are an inequitable way to fund services because the bottom onethird of households (whose incomes are too low to pay tax), do not benefit.
Estimated saving: $2,450 million per year (detailed below)
Health insurance rebate
The rebate disproportionately benefits those who can afford health insurance andextends to ancillary or ‘extras’ cover not directly related to hospital care. The rebatefor ancillary cover subsidises services for high income earners that many low incomeearners still can’t afford (e.g. dental) and it would be fairer and most cost effective tofund those services directly.
Estimated savings: (removal of rebate for ‘extras’ cover): $1,250 million
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