Basic building blocks of the Australian superannuation rort

Superannuation is generally taxed more concessionally than some other forms of saving, such as bank deposits, in recognition of the fact that superannuation saving cannot be accessed until retirement.

 * Pre-tax contributions of up to $30,000 pa ($35,000 for those aged 50 or over) into superannuation funds are taxed at a flat rate of 15 per cent in the fund.

 * It is also possible to make post-tax contributions of up to $180,000 per annum.

 * Superannuation fund earnings in the accumulation phase are taxed at 15 per cent, while superannuation fund assets that support a retirement income stream are tax exempt.

 * Most superannuation benefits to those aged over 60 are tax exempt. [Intergenerational Report 2015]

The quote above lays out the basic outline of concessional arrangements attached to the national mandatory superannuation scheme.

How does it work in real life?

In the 2012-13 financial year 9.3 million employers contributed $54 billion to their employees' superannuation funds and 1.7 million employees contributed $27.8 billion to their superannuation funds.

Of these 1.7 million employees, 571,575 individuals earn less than $37,001 a year. Currently the federal government contributes an annual lump sum payment (equal to 15 per cent of an individual's annual superannuation contributions) to a low income employee's super fund. However, from 1 July 2017 the lump sum payment will cease and the annual superannuation contributions of these same employees will be taxed at the rate of 15 per cent.

In 2012-13 there were also 183,975 non-employee individuals (or individuals receiving only a small proportion of income from work as an employee), with income derived from a personal business/self-employment, investments, government pensions/allowances, super, partnership/trust distributions, and/or a foreign source, who made personal superannuation contributions totalling $2.9 billion. These super contributions could be claimed as tax deductions.

Of these ‘non-employees’, 26,980 had annual taxable incomes of over $180,000 and made personal superannuation contributions totalling $603.07 million. Which equates to income of $22,352 per person per annum on which little or no tax is paid.

When will the Abbott Government address the imbalance in the national superannuation scheme, where the working poor are penalised and wealthy rewarded for their participation?

Some of Australia's richer citizens in 2012-13, not content with legally rorting the superannuation scheme, took their sense of entitlement to levels undreamed of by ordinary workers, as this observation in The Sydney Morning Herald on 30 April 2015 demonstrates:

Fifty-five of Australia's highest earners paid no income tax at all during 2012-13, not even the Medicare levy.

All earning at least $1 million, they managed to write their taxable incomes down to below the $18,200 tax-free threshold, although for most the exercise was expensive.

Tax statistics released Wednesday reveal that 40 of them claimed an extraordinary $42.5 million for the "cost of managing tax affairs" meaning they each paid an average of $1 million to an adviser prepared to help to bring down their taxable income, which is itself a tax deduction.

Between them they reported earning $129.5 million, an average of $2.3 million. By the time their accountants had finished with them they reported losing a combined $12.8 million.

The implausibility of someone earning $2.3 million and paying half of it to a tax adviser suggests some may be understating​ their earnings.

A tax office spokeswoman said there were "legitimate reasons why a wealthy taxpayer might not pay tax in a particular financial year".

These included tax losses through poor business performance, tax losses in previous years which could be carried forward indefinitely and dividend imputation credits.

She said the majority of wealthy Australians paid the right amount of tax.

Most of the 55 were either ungenerous or modest when it came to giving, claiming nothing for gifts. However 10 of the 55 gave between them $10.4 million, also suggesting their incomes were higher than reported. The gifts may not have all gone to charities. The Tax Office also allows deductions for gifts to political parties.

Fifteen were unsuccessful in business, losing $2.7 million between them. They carried over previous losses of $22.5 million.

They were more successful when it came to investing, receiving $8.8 million between them in so-called 'franked' dividends, and only $839,000 in unfranked dividends. Franked dividends allow the recipients to cut their taxable incomes to take account of company tax already paid.

They were also surprisingly successful landlords. Whereas 1.3 million Australian landlords claimed between them losses of $12 billion, the 15 of the 55 millionaires who rented out properties made a combined $1.6 million dollars……

Their master's voice has spoken. Where to now for tax reform under Abbott & Co?

On 30 March 2015 the Australian Treasurer Joe Hockey released a tax reform discussion paper titled Re:think, which is supposed to mark the start of a conversation about how we bring a tax system built before the 1950s into the new century.

Presumably this is to be a step towards the 'lower, simpler, fairer' revenue raising system Prime Minister Tony Abbott was banging on about during the 2013 election campaign.

The problem for the Abbott Government is that the propaganda power behind Abbott's 'throne', the ubiquitous far-right think tank pressure group the Institute of Public Affairs (IPA), is increasingly disenchanted with the federal government's approach to both taxation and superannuation.

So where to now for tax reform in the face of the slump in iron ore prices and company tax receipts that the prime minister and treasurer complain about.

Well, we know that Abbott has ruled out changes to company tax, intends to leave the superannuation loopholes in place for the rorting rich and will go ahead with tax cuts for small business in the face of that projected falling government revenue.

Capital gains tax breaks and negative gearing on investment properties also appear to be exempt from review.

Hockey is now promising no new taxes at all when he talks to the media, despite recently announcing the proposed 'Google' and 'Netflix' taxes.

He is also signalling no significant alteration of dividend imputation or any indexing of income tax thresholds to tackle bracket creep.

This is a mixed bag for the very rich and comfortably well-off.

They will not like the federal government abandoning its promises to cut the company tax rate and reduce 'bracket creep'.

However,  Abbott & Co are obviously not going to take tax perks away from those same very rich and comfortably well-off Australian citizens and would have a weather eye out for the irritable mood of its right-wing backers.

 So that leaves it with limited options for cost savings in the 2015-16 Budget.

All of which indicates more bad news may be coming for vulnerable sections of society, because those sections are where Abbott in particular likes to hunt.

BACKGROUND

IPA in The Drum, excerpt, 7 April 2014:

This Small Business Fetish Has Gone Too Far

As part of its back to basics campaign, the Abbott Government has telegraphed a small business tax package for the 2015 budget.

The plan, as far as we know, is that small business will get a tax cut of about 1.5 per cent. Big business will be left paying the standard rate of 30 per cent.

The Coalition has long had a romantic attachment to small business as a sort of moral heart of Australian private enterprise, but this policy is the worst sort of small business fetishism.

It threatens to further undermine an already complicated corporate tax system, confuses the sources of economic growth, and will distract policymakers from the much more fundamental task of opening protected areas of the economy up to competition.

Let's take these one at a time.

It beggars belief that while the political class is banging on about the convoluted the tax code, "unfair" tax concessions, and clever corporate tax minimisation, the Government is planning to increase the complexity of the corporate tax system.

How long before we see the first exposé in Fairfax business pages about large corporates rearranging themselves to take advantage of the concessional small business rates?

The proposed small business tax cut would make the Australian corporate tax system explicitly progressive. Just as we pay a higher rate of income tax according to our wealth, firms would pay a higher rate of corporate tax depending on their size. The United States has a progressive corporate tax. Ours is flat - 30 per cent no matter what.

Now, in practice, firms don't pay the same 30 per cent rate. As my Institute of Public Affairs colleague Sinclair Davidson has documented, all those deductions, offsets and credits mean the effective tax rate - that is, the amount of tax paid - hovers about 25 per cent. On top of this, small businesses tend to have much more variable profitability, so they tend to pay less than big business already.

Even with this caveat in mind, progressive corporate taxes are a terrible idea.

IPA in the Australian Financial Review, excerpt, 13 April 2015:

Moral Panic Overlooks Real Company Tax Problem

The corporate tax profit shifting debate is a classic example of moral panic. First, it's incredibly complicated. How many Australians could explain how company tax is calculated, let alone what business practices a "double Irish Dutch sandwich" refers to?

Second, it's driven by hyperbolic and simplistic reports of companies paying little to no tax. These stories pivot on even more complicated scandals, such as "Lux Leaks", and the technicalities of foreign tax systems.

And third, it's wildly overstated. The best current estimates of how much corporate tax is shifted across borders is in the realm of 2 per cent to 4 per cent of total corporate tax.

It's true that earlier estimates in the 1990s were much more than that. It was those high estimates that got the Organisation for Economic Co-operation and Development interested in the issue. But the firm- and affiliate-level evidence is better now. It's pointless to scrutinise a moral panic for the clarity of its claims. But the corporate tax debate is missing the point.

As a society we don't value firms for the money the government extracts from them. We value firms because they produce goods and offer services that make us richer, our lives easier, more convenient and more enjoyable, and our standards of living higher.

We ought to design our tax system to encourage foreign firms operating and doing business on Australian shores, bringing investment and jobs. Any attempt to tackle profit shifting that raises uncertainty or lowers Australia's investment climate would be a disaster.

The corporate tax is not a good tax. As a recent Treasury paper pointed out, it is one of the most inefficient taxes levied by Australian governments. The burden of the corporate tax is scattered and obscure.

IPA, media release, April 2015:

'Google Tax' will damage Australia's investment reputation

"The government's proposed 'Google tax' is nothing more than a tax grab and will damage Australia's investment reputation," says Chris Berg, Senior Fellow with the Institute of Public Affairs.

Treasurer Joe Hockey announced yesterday that the government has drafted legislation to go after companies accused of "profit shifting" across international borders to reduce their taxes.

"Companies should pay tax for economic activity in the countries in which that activity occurs. However to follow the United Kingdom's lead and introduce a Diverted Profits Tax would be to damage the integrity of our corporate tax system for little revenue benefit," says Mr Berg.

Mr Berg and Professor Sinclair Davidson put a submission into the Senate Inquiry into Corporate Tax Avoidance in February 2015.

"Institute of Public Affairs research has found that the profit shifting problem has been vastly overstated," says Mr Berg.

"There is little evidence to suggest the existing system is broken. Large firms are responsible for the vast bulk of Australia's corporate tax revenue. And past inaccurate Treasury forecasts of future corporate tax revenue are due to changing commodity prices, not corporate tax avoidance."

"Joe Hockey has a spending problem, not a revenue problem. If the government wants to get the budget back into shape it needs to focus on the size of government, not penalise successful companies for investing in Australia," says Mr Berg.

Mr Berg and Professor Davidson's submission is available at http://ipa.org.au/portal/uploads/2-feb-15-Submission_to_the_Senate_Inquiry_into_Corporate_Avoidance.pdf

IPA, excerpt from media release, 30 March 2015:

Tax reform must deliver tax cuts: IPA

The government's Tax Discussion Paper released today fails to address the need to reduce the size of government in Australia, says the free market think tank the Institute of Public Affairs.

"Australia does not need new or higher taxes. The Abbott government should immediately rule out the idea of a bank deposits tax, and reverse its previous tax increases," says Dr Mikayla Novak, Senior Research Fellow at the Institute of Public Affairs.

"The Tax Discussion Paper rests upon the false assumption that Australia is a low taxing country."

"But superannuation contributions, health insurance premiums, and workers' compensation premiums effectively act as taxes, since non payment of these obligations carry tax penalties," says Dr Novak.

IPA research shows that if these payments are added to the OECD tax statistics, the Australian tax to GDP ratio increases from 27.3 per cent to 34.3 per cent in 2012, above the OECD average of 33.7 per cent.

"There's no doubt that Australia would benefit from tax reform. Urgent problems that need fixing include the threat of bracket creep which is exacerbated by a steeply progressive income tax system. The compliance costs borne by tax complexity also needs to be substantially reduced," says Dr Novak.

"Australia needs to radically reduce and simplify the overall burden of its taxation regime, to unleash entrepreneurship, innovation, and investment for growth and prosperity."

"The best way forward is to very substantially reduce government spending, helping to provide room for tax cuts right across the board," says Dr Novak.

Institute of Public Affairs in The Canberra Times, excerpt, 6 March 2015:

Tinkering with the tax treatment of superannuation when people are forced to invest in a compulsory super regime bodes ill

Since the Keating government, the Commonwealth has forced people to forgo higher salaries for the sake of contributing to super funds that cannot be accessed until later in life.

Given the inconveniences of this financial policy paternalism, not to mention endless superannuation policy tinkering, tax biases against long-run savings patterns, and the existence of welfare programs, there are disincentives for individuals to save even more for retirement, which would seem to justify at least some sort of concessional treatment for super.

The rates of tax applicable to super contributions and earnings serve as a role model for the lower, flatter general income tax regime that Australia should aspire to, but, in the final analysis, the concessions would not garner such political discord if we abandoned compulsory superannuation altogether.

To do so would likely increase take‑home pay for workers, ease financial repression experienced by lower income earners, reduce skewness in asset holdings such as housing, help deflate a boated financial sector, and treat Australians as adults who can confidently come to their own trade-offs between consumption and savings.

Ending compulsory superannuation would be a much more durable reform than a shameless revenue grab aimed at tax‑captive superannuants.

IPA, January 2015:

No to the GST attack

Following recent direct and indirect tax increases, there has been speculation that the Abbott government is considering extending the GST to low value imports of $1,000 or less.

Putting a GST on low value imports is unlikely to revive Australian retailing in the face of intense online shopping competition, given the significant price differentials for many popular consumer products.

There are several important drivers of high retail costs in Australia, including a highly regulated labour market, severe land use restrictions, and trading hour conditions, which are not being addressed by governments.

Available estimates suggest that the administrative costs of ending the GST exemption threshold would greatly exceed actual revenues collected, violating a basic principle of tax policy if implemented.

If the GST low value import exemption is abolished, there can be no assurances that governments will spend the additional revenue in ways that give good value to taxpayers.

The Abbott government should rule out the anti consumer and anti taxpayer proposal to extend the GST to low value imports.

IPA, excerpt from media release, December 2014:

Government should reject call for higher taxes on Australians: IPA

The Abbott government should publicly reject the OECD's recommendation to slug Australians with higher taxes, according to free market think tank the Institute of Public Affairs.

"The latest OECD economic survey of Australia explicitly calls for Australians to bear an even heavier tax load," says IPA Senior Research Fellow Dr Mikayla Novak.

"This call for higher taxes to bring Australia more in line with the OECD average is misleading. IPA analysis has clearly demonstrated that Australia is not a low taxing country."

"The IPA has shown our 2012 tax-to-GDP ratio of 33.5 per cent (including superannuation and health insurance contributions) is now virtually level with the OECD average of 33.7 per cent."

"The tax recommendations, such as raising the GST to 15 per cent, higher land taxes, road user charges, and withholding future income tax cuts through a stabilisation fund, are an invitation for economic disaster if implemented."

"OECD calls for higher Australian taxes are precisely the wrong policy prescription for our budget overspending problems, and must be rejected by government in favour of more vigorous expenditure savings."

"If the government is to change Australian taxes, they should make our overall tax burden lower," says Dr Novak.

Australian Treasurer Joe Hockey needs to come up with a better argument concerning the federal Goods and Services Tax

David Pope in the Canberra Times, 30 March 2015

Brisbane Times 30 March 2015:

Treasurer Joe Hockey says Australian consumers have changed their behaviour so much in recent years, through online shopping and choosing more GST-exempt goods, that they are putting pressure on the GST as a revenue-raiser.

Apparently Joe Hockey is upset that this consumption tax raised $47.4 billion in 2012-13, $50.7 billion in 2013-14 and, is expected to raise $53.7 billion this financial year, $57 billion in 2015-16, $60.4 billion in 2016-17 and another $63.8 in $2017-18.

That’s not good enough for our millionaire Liberal treasurer.

It appears he is rather perturbed that people are still buying GST-exempt basic fresh food, simple dairy products and unprocessed cooking ingredients in their local shops or purchasing online second-hand, handmade or other goods worth less than $1,000.

This is the rather weak excuse he is offering for encouraging the states to believe there should be more in the federal Goods & Services Tax kitty.

The GST is a regressive tax when applied to low income households and no amount of vague talk in the mainstream media about possible ‘compensation’ for pensioners will change that.

So you think you're hard done by because Abbott & Co told you so?

The top 20 per cent of people have five times more income than the bottom 20 per cent, and hold 71 times more wealth. Perhaps the gap between those with the most and those with the least is most starkly highlighted by the fact that the richest seven individuals in Australia hold more wealth than 1.73 million households in the bottom 20 per cent. [The Australia Institute, Income and wealth inequality in Australia, Policy Brief No. 64, July 2014]

This year sees tax rates and tax reform debated in the media once more, with Prime Minister Abbott reiterating that his is a government that believes in lowering taxes and Treasurer Hockey repeating that Australian workers pay almost half their earnings to government as tax.

So do Australians spend the first six months of the year working for the government with tax rates nearly 50 cents in the dollar as Joe Hockey asserts?

If the Australian Taxation Office Individual income tax rates for Australian residents is correct this would only come close to happening if your personal taxable income is many millions of dollars per year.

At half a million in taxable income annually, tax payable by an individual worker without family (including the Medicare and Temporary Budget Repair levies) would only reach an est. 42.05% and, in fact would be less than that once any Australian Tax Office (ATO) refund is deducted.

For many workers their personal income tax might look something like this.

Estimated individual tax payable in 2014-15

Income of $18,200 – pay no income tax as this amount is the upper limit of the tax free threshold applicable to all individual taxpayers before taxable income can be calculated

Taxable income of $37,000 – pay $3,610 income tax (before any ATO tax refund)

Taxable income $80,000 – pay $17,332 income tax (before any ATO tax refund)

Taxable income $180,000 – pay $54,547 income tax^ (before any ATO tax refund)

Taxable income $250,000* – pay $86,047 income tax^# (before any ATO tax refund)

Taxable income $500,000* – pay $198,547 income tax^#  (before any ATO tax refund)

* taxable income in highest individual tax rate after the first $180,000 of taxable income

^ does not include the 2% Medicare Levy surcharge applicable at this level of taxable income

# individual taxpayers with a taxable income of more than $180,000 per year will have additional tax withheld by their employer (2% Temporary Budget Repair Levy) from 1 July 2014 to 1 July 2017

+ the majority of all tax refunds range between $1 and $1,999, the second largest refund band is between $2,000 and $3,999, with the highest refund band being $10,000 dollars or more

NB. All figures based on Australian Tax Office Individual income tax rates for Australian residents 2014-15 and Taxation Statistics 2011-12 (refunds)

The Australian Parliament may be in recess by 5 December, but the Abbott Government will be coming after us all again in February 2015

There are only three more sitting days until the 44^th Australian Parliament goes into recess until February 2015.

While we all may breathe a sigh of relief that the horrible fascination that is parliamentary question time is no longer occurring and The Speaker has gone to that dank, dark place biased and confused speaker’s go in recess, now is not the time to be idle.

Because it is almost inevitable that the Abbott Government will return in the first quarter determined to force the states into 'voluntarily' requesting increases in the Goods & Services Tax (GST).

It is highly likely that a call will come from Liberal and National party sock puppets to both increase and widen this consumption tax.

The argument for a tax increase will probably be along the lines of; any increase can be kept down to a reasonable level if it is accompanied by a widening of the tax base.

There are no prizes for guessing that taxing goods under $1,000 purchased overseas via the Internet will be mentioned, as this has been a favourite with local business for some time.

However, using the Abbott Government’s past performance as a guide, perhaps we all should be preparing to hear these puppets raise the possibility that educational course material purchased as a prerequisite of participation, along with certain health services and off-the-shelf medications, should all now attract the GST.

By the same token it is highly likely that all cooked or processed meats and some fish will be on any new taxed food wish list; such as BBQ chickens, ham on the bone, whole salamis etc. and smoked fish.

As of 23 October 2014 food in the groups listed below currently attract the GST according to the latest legislative compilation:

Prepared Food

Quiches, sandwiches (using any type of bread or roll), pizzas, pizza subs, pizza pockets and similar, food marketed as a prepared meal, but not including soup, platters etc. of cheese, cold cuts, fruit or vegetables and other arrangements of food, hamburgers, chicken burgers and similar, hot dogs.

Confectionery

Confectionery, food marketed as confectionery, food marketed as ingredients for confectionery or food consisting principally of confectionery, popcorn, confectionery novelties, muesli bars or health food bars, and similar foodstuffs, crystallised fruit, glace fruit and drained fruit, crystallised ginger and preserved ginger, edible cake decorations.

Savoury snacks

Potato crisps, sticks or straws, corn crisps or chips, bacon or pork crackling or prawn chips, seeds or nuts that have been processed or treated by salting, spicing, smoking or roasting, or in any other similar way, caviar and similar fish roe, other snack foods.

Bakery products

Cakes, slices, cheesecakes, pancakes, waffles, crepes, muffins and puddings, pavlova and meringues, pies (meat, vegetable or fruit), pasties and sausage rolls, tarts and pastries, doughnuts and croissants, pastizzi, calzoni and brioche, scones and scrolls, bread (including buns) with a sweet filling or coating.

Ice-cream food

Ice-cream, ice-cream cakes, ice-creams and ice-cream substitutes, frozen confectionery, frozen yoghurt and frozen fruit products (but not frozen whole fruit), flavoured iceblocks (whether or not marketed in a frozen state), any similar food.

Biscuit goods

Food that is, or consists principally of, biscuits, cookies, crackers, pretzels, cones or wafers.

How will Abbott fund his costly war?

This quote from an article in The Sydney Morning Herald on 3 May 2014 is well worth remembering as the Abbott Government’s penchant for living beyond its means sees government borrowings grow to over $355 billion last month:

Figures from the Australian Tax Office and federal government show the average Australian can expect to pay about $4600 in indirect taxes this financial year....

The Henry Tax Review, which reviewed Australia's taxation system after the global financial crisis, found Australians pay "at least" 125 taxes each year.

Of these, 99 are levied by the federal government, 25 by the states and one by local government (council rates).

If readers are wondering where from among all these taxes Treasurer Joe Hockey and Finance Minister Mathias Cormann will find the billions required to also sustain Tony Abbott’s desire to strut the world stage as ‘war’ leader, then this article in The Australian on 10 October 2014 may offer a clue as to the direction in which some of his political troops might start looking to raise the money:

In a GST reform-shy political environment, the Wednesday evening meeting almost felt like the gathering of a secret society, according to one MP who was present.

One attendee told The Aus­tralian: “Please don’t write this, because if you do it will give the command-and-control structure more reason to clamp down on ­debate.”

Of course it was nothing of the sort: some MPs received written invitations; others were informed of the meeting by word of mouth. But the sentiment speaks to the difficulties Liberals interested in pursuing GST reform face. 

Fear of a scare campaign has made all sides of politics wary of opening a debate on the GST, with the ­former Labor government, for ­example, putting the consumption tax entirely off-limits from Ken Henry’s review of the tax system in 2009.

Former West Australian treasurer Christian Porter, now a federal MP, had used the party room weeks ago to announce that WA Liberals planned to submit their own recommendations to the government’s taxation white paper process, due to report next year, outlining their hopes that GST equalisation could be amended.

The Prime Minister said he thought that was unwise. Joe Hockey used the comments to attack Barnett’s fiscal competence, drawing a rebuke from deputy leader Julie Bishop, the most senior West Australian MP, who was not at Wednesday’s meeting.

“The message in the party room to Christian was pretty clear, but I think everyone decided they were interested enough in getting informed”, said an MP who was in attendance.

A senator said: “Most people were very surprised by the ­turnout.”

Among the Liberals in attendance were: Smith, Porter, Simon Birmingham, Steve Ciobo, David Coleman, Sean Edwards, Ian Goodenough, Peter Hendy, Steve Irons, Nola Marino, Don Randall, Luke Simpkins, Rick Wilson, Zed Seselja, Ken Wyatt, Scott Ryan, Mitch Fifield, Kelly O’Dwyer, David Fawcett, Rohan Ramsey and Melissa Price.

John Howard’s long-time chief-of-staff Arthur Sinodinos was there too, although absent were Hockey and his Finance Minister, the West Australian senator Mathias Cormann.

It wasn’t just Liberals in attendance; Nationals senator Bridget McKenzie and lower-house MP Kevin Hogan attended, as did crossbenchers David Leyonhjelm, Bob Day and West Australian Palmer United Party senator Zhenya Wang. “Their attendance was very interesting,” another MP who was present said.

Leyonhjelm said the meeting struck him as a growing sign of interest in reforming the GST among federal Liberals.

The sense of purpose that something needed to change when it comes to the GST was “in the air”, as one senator put it……

More interesting than the well-worn complaints in Nahan’s speech was the question-and-­answer session that followed.

Liberals appeared to recognise that the only way to equalise the GST, which meant getting other states to agree to lose surplus receipts they were currently enjoying, was by making wider changes to the tax, indeed to the Federation, which could mean broadening the base and increasing the rate.

In a sure sign that Liberals are concerned about “retribution” from Abbott’s office, as one MP put it, no one contacted by The Australian was prepared to name those who asked questions of Nahan about how best to reform the GST in a way that might bring most premiers along for the ride.

Adjusting the GST is a sensitive topic. Abbott has been permanently scarred by his experience as John Hewson’s press secretary before the “unlosable” 1993 election, in which the then Liberal opposition argued the case for a broadly applied 15 per cent GST.

The discussions around the room on Wednesday evening broached a range of reasons that reforming the GST might be necessary: to lift government revenues; to tax currently untaxed parts of the cash economy; to pay for ballooning spending in areas such as health and ageing, not to mention costly initiatives just over the fiscal horizon such as the ­national disability insurance scheme; to lower inefficient taxes that stifle international competitiveness; to restore the structural soundness of the budget, and in turn return it to surplus; to bring consumption taxes in this country into line with other developed ­nations; and, of course, to ensure a fairer distribution of the GST, along the lines West Australian MPs have long been complaining about.

Just as well for Hockey that Ciobo, his parliamentary secretary, was present to take notes. [my red bolding]

The Prime Minister has been careful in recent days to state that he won’t be introducing “new” taxes to fund this second war in Iraq. Of course raising the Good and Services Tax (GST) would not be introducing a new tax.

This was Abbott in The Coffs Coast Advocate in May 2014 on the subject of raising the GST:

Mr Abbott told the ABC this morning that it was up to 'grown up governments' to find ways to fund their own areas of responsibilities.

He would not be drawn on whether he would support a GST increase, saying that was a matter for the states, even though the Commonwealth collects it.

Mr Abbott said that would be discussed as part of white papers on taxation and federation.

According to The Guardian, the subject of the GST was raised again at the Council of Australian Governments (COAG) meeting on 10 October 2014:

The West Australian premier, Colin Barnett, agitated over the “broken” system for carving up revenue from the goods and services tax (GST) – a perennial topic of frustration – by emphasising that the current system was bad for the stability of state budgets.

In an attempt to broaden the argument rather than simply complain about WA being a net provider of funding to smaller states, Barnett argued Queensland and New South Wales would be “next in the firing line” to lose funding under the existing formulas and this could lead to ongoing “chaos” in state budgeting.

Abbott pointed to a forthcoming tax white paper as the vehicle to address these concerns and achieve a “transparent and fair system”. He noted that the present GST system may well be fair “but it is certainly not transparent”.

The Real Age of Entitlement: State governments spent $17.6 billion supporting mineral & fossil fuel industries between 2008-2014 and Australian Government intends spending more than $40 billion over three years supporting fossil fuel industry

Excerpts from The Australia Institute’s, Mining the age of entitlement: State government assistance to the minerals and fossil fuel sector, Technical Brief No. 31 June 2014:

Supporters of the minerals and fossil fuel industries, like Queensland Premier Campbell Newman and the New South Wales Minerals Council, regularly emphasise the money that these industries pay to state governments. Much less is said about the money that state governments pay to assist these industries.

State government assistance to the minerals and fossil fuel industries is considerable.

Based on an analysis of state government budget papers, we estimate that a total of almost $18 billion has been contributed by the taxpayer over the last six budgets.

This assistance takes many forms. Sometimes it is a direct cash payment. For example, the New South Wales government gave multinational coal companies $10 million in 2009 as an ‘assistance package’. Other times it comes in the form of discounted access to services provided by the state and its businesses – Queensland has provided the coal industry with ‘concessions’ on access to rail services worth over $1 billion between 2012-13 and 2013-14.

Often assistance comes in the form of infrastructure or projects that wholly or partly benefit the minerals and fossil fuel industries. Sometimes this expenditure brings a financial return, as in the case of Western Australia’s hundreds of millions of dollars spent on developing port infrastructure. Sometimes it doesn’t – the New South Wales government is unlikely to see any return on its $76 million expenditure on the Cobbora Coal project…..

At the federal level, The Australia Institute publishes an annual study on subsidies of the mining industry, which totalled $4.5 billion in 2013, up from $4.0 billion in 2012.

Other organisations publish estimates of subsidies provided to fossil fuel use and production, which also focus largely on assistance at a federal level….

...the loss to the New South Wales government relating to the treatment of the Coal Research Levy.

This levy for $0.05 per tonne of coal mined is fully deductable from royalties that coal miners pay to the New South Wales government for the rights to mine the state’s coal. This deduction is effectively a subsidy of millions of dollars per year from the New South Wales government to the Australian Coal Association Research Program….

Environment Victoria, Ending the fossil fuel industry’s age of entitlement: 

An analysis of Australian Government tax measures that encourage fossil fuel use and more pollution, 2013:

The assessment concludes that the Australian Government is set to spend over 

$40 billion (see Table on page 4) in the form of tax rebates and concessions,
foregone revenue and expedited write downs of assets per year from 2013/14 to 
2016/17. 

This assessment only includes tax measures, and does not include direct grants or 

State Government measures, which could add billions more to the annual totals.

UPDATE

Australian Productivity Commission, Trade & Assistance Review 2012-13:

Murdoch media cheerfully delivers Tony Abbott's 'deficit tax' message

Apparently Australian Prime Minister Tony Abbott waxed lyrical about his plans to reduce his budget deficit when he attended a Sydney Institute dinner on 28 April 2014.

Amongst other measures it seems he is to introduce a deficit tax until the federal deficit disappears.

This is what News Corp's The Australian had to say on 29 April 2014:

The new debt tax will only apply to workers on incomes of $80,000 and above and the rates will increase in line with tax brackets.

Taxpayers in the 37c tax bracket — on incomes of $80,000 to $180,000 — are likely to pay an extra 1 per cent.

Those earning above $180,000 are likely to pay an extra 2 per cent. Like the Gillard government's flood levy, the debt tax will also be temporary, applying only while the budget is in deficit.

Under the new levy, a taxpayer on:

$80,000 will pay an extra $800 a year ($15 a week).

$150,000 will pay an extra $1500 a year ($29 a week).

$200,000 will be slugged an extra $4000 a year ($77 a week).

$400,000 will pay a huge $8000 extra tax ($154 more a week).

Bearing in mind that on 14 April 2014 Treasury apparently already expected average full-time employees to be paying tax of 39¢ in the dollar by 2015-16 and, even taking into consideration the introduction of this deficit tax reportedly worth an estimated $3.6 billion in total, the Abbott Government's Mid-year Economic and Fiscal Outlook 2013‑14 indicates that the federal deficit is still likely to last until 2023-24.

 As by that financial year total federal government payments are projected to be 26.50% of Gross Domestic Product (GDP), federal government total receipts are projected at 26% of GDP, public net debt is projected to rise to 14.3% of GDP and, given the billions in additional borrowings still being undertaken by the Abbott Government and the fact that in April 2014 an additional $14 billion has been committed to the Australian air force in addition to the non-budgeted est. $20 million plus spent by Defence over the last 41 days on the search for a missing commercial aircraft, the annual budget will possibly still be in deficit then.

One has to wonder how the 5.8 million Australians, who despite the warning signs voted for Coalition candidates at the 2013 federal election, felt when they woke this morning to find so many of them liable for a new tax.