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Australian Govt Urged To Close Tax Loopholes

Wednesday, March 13, 2013

The Australian Council of Social Service (ACOSS) has called on the Government to tackle what it says are AUD6bn (USD6.1bn) worth of tax loopholes at the next federal Budget.

According to ACOSS CEO Dr Cassandra Goldie, the time has come to implement long overdue tax reform changes. In a new "Waste" paper, ACOSS argues that a sustainable tax base is needed if the Government hopes to provide adequate health, education, housing and infrastructure services. It has identified AUD6bn dollars of budget "waste", which includes the revenue lost through tax shelters and ill-targeted government spending.

The paper sets out a number of programs to tackle tax avoidance, claiming that they could save AUD3.3bn in 2014-15. It urges the Government to tighten the tax treatment of capital gains and concessions associated with investments held in trusts, in order to prevent high-income individuals diverting their income in order to avoid tax. Further, a reduction in the annual contribution caps for superannuation accounts in cases where money is also being withdrawn from the fund, and the removal of additional capital gains tax breaks for small businesses, are suggested. Slashing the safe harbor debt limit in the thin capitalization rules for general entities from 3:1 to 1:5:1 is the final anti-avoidance measure recommended.

Turning to reform of poorly targeted tax breaks, the paper argues that AD2.5m could be saved a year through its proposals. Reform of the health insurance rebate and the medical expenses tax offset, along with the seniors tax offset are all suggested, as are changes to superannuation tax arrangements.

"Our expenditure saving and revenue proposals are in line with key Henry Tax Review recommendations and would make Australia's tax and social security system fairer, more efficient, and more sustainable as our ageing population increases the demands on Government to provide essential services," Goldie said.