ga('send', 'pageview');
John Passant

Site menu:

November 2013
M T W T F S S
 123
45678910
11121314151617
18192021222324
252627282930  

Tags

Archives

RSS Oz House

Share

Authors

Subscribe to us

Get new blog posts delivered to your inbox.


RSS Blog RSS

Site search

Miniposts

My interview Razor Sharp 18 February
Me interviewed by Sharon Firebrace on Razor Sharp on Tuesday 18 February. http://sharonfirebrace.files.wordpress.com/2014/02/18-2-14-john-passant-aust-national-university-g20-meeting-age-of-enttilement-engineers-attack-of-austerity-hardship-on-civilians.mp3 (0)

My interview Razor Sharp 11 February 2014
Me interviewed by Sharon Firebrace on Razor Sharp this morning. The Royal Commission, car industry and age of entitlement get a lot of the coverage. http://sharonfirebrace.com/2014/02/11/john-passant-aust-national-university-canberra-2/ (0)

Razor Sharp 4 February 2014
Me on 4 February 2014 on Razor Sharp with Sharon Firebrace. http://sharonfirebrace.files.wordpress.com/2014/02/4-2-14-john-passant-aust-national-university-canberra-end-of-the-age-of-entitlement-for-the-needy-but-pandering-to-the-lusts-of-the-greedy.mp3 (0)

Time for a House Un-Australian Activities Committee?
Tony Abbott thinks the Australian Broadcasting Corporation is Un-Australian. I am looking forward to his government setting up the House Un-Australian Activities Committee. (1)

Make Gina Rinehart work for her dole
(0)

Sick kids and paying upfront

(0)

Save Medicare

Demonstrate in defence of Medicare at Sydney Town Hall 1 pm Saturday 4 January (0)

Me on Razor Sharp this morning
Me interviewed by Sharon Firebrace this morning for Razor Sharp. It happens every Tuesday. http://sharonfirebrace.com/2013/12/03/john-passant-australian-national-university-8/ (0)

I am not surprised
I think we are being unfair to this Abbott ‘no surprises’ Government. I am not surprised. (0)

Send Barnaby to Indonesia
It is a pity that Barnaby Joyce, a man of tact, diplomacy, nuance and subtlety, isn’t going to Indonesia to fix things up. I know I am disappointed that Barnaby is missing out on this great opportunity, and I am sure the Indonesians feel the same way. [Sarcasm alert.] (0)

Advertisement

Links:

Tax and class war

Joe Hockey, Liberal Treasurer, announced some important tax changes today to help clear a backlog of measures announced but not yet legislated. Some date back to 2004 (and one to 2001) under the Howard and Costello government. Let’s look at a few of them to see who is conducting class war.

The most obvious one is superannuation. The Liberal government announced it would not proceed with Labor’s proposal to tax superannuation payments of more than $100,000 at 15%. Currently they are tax free. The mass media were screaming ‘Tax slug on super dumped!’ .

Yeah, that is true for those whose super payouts were going to be more than $100,000 a year. This is people with super fund balances of about $2 million (assuming a five percent rate of return). You know how many people that would have caught?  16000 super rich people.

According to Madeleine Heffernan in the Sydney Morning Herald the average super balance for women is $112,000; for men it is $198,000. In other words people whose balance is ten times the average for men will not pay tax on their superannuation payments.

An even better comparison is with people who are just about to retire. According to AMP for people aged 60-64 the average superannuation fund account balance is $75,000. So basically the government has decided to abandon a tax on a few very very rich people whose account balances are 25 times greater than those in comparable situations.

This largess for the super rich will cost the revenue over $300 million a year.

By the way men have higher super balances because they earn on average 17% more than women and because they don’t have interrupted work lives having children or by and large taking time off work to look after them.

This dumping of a small tax on super rich superannuants is part of a wider problem.

The pension and superannuation systems combined give much more government support to the rich than to workers and the poor.  Here is one of those ‘boring’ graphs, from Treasury’s 2012 Distributional Analysis of Superannuation Concessions, which shows, to use Treasury’s words, that ‘the top 1 per cent of income earners receive the most combined support.’

Combined superannuation and age pension support

Every year Treasury puts out a tax expenditure statement showing the revenue forgone by not taxing or concessionally taxing many types of income. Treasury estimates that in 2015/16 the revenue forgone though the superannuation tax concessions, at almost $45 bilion, will be a little greater than the amount we spend on the age pension.

About $15 billion, or one-third of that revenue forgone, will go to the top ten percent of income earners. The interaction of the tax and superannuation systems is effectively a huge government support system for the very rich.

The Government is also going to abolish the Minerals Resource Rent Tax and with it the spending measures Labor had attached to the revenue that was supposedly going to be raised by the tax.

The baby bonus of $410 a year for each primary school student and $820 per year for each high school student will go.  That’s a cut to the living standards of 1.3 m less well off Australians.

Labor also used the MRRT money (money which didn’t materialise so now comes out of general revenue) to pay those earning less than $37,000 up to $500 on the tax paid on superannuation guarantee contributions. Effectively the government paid the amount of tax each low income earner had had taken out of contributions back into the fund, up to $500.

The Liberal government is going to scrap this up to $500 superannuation contribution. For those 3.6 million workers earning less than $37000 a year their super tax will go up.

No tax for those 16000 multi-millionaires whose superannuation income is more than $100,000 a year and extra superannuation contributions tax on those 3.6 million whose wage and other income is less than $37000. Class war anyone?

Let me also deal briefly with thin cap, which is not a diet but a tax regime to supposedly prevent  debt loading to wipe out or reduce Australian tax liability for both foreign and Australian multinationals.  Without going into the detail here’s how the ATO describes it:

The thin capitalisation rules apply to Australian entities investing overseas, their associate entities, foreign controlled Australian entities and foreign entities investing directly into Australia. Under the rules, the amount of debt used to fund those Australian operations or investments is limited. The rules operate to disallow the debt deductions an entity can claim against Australian assessable income when the debt used by the entity to fund its Australian assets exceeds certain limits.

If you debt exceeds 75% of the net value of your Australian investments (this threshold is higher for certain financial entities), you may not be able to claim a portion of your debt deductions.

Labor was going to change the rules so that the current very generous debt to equity ratio would have been reduced a little. The Liberals will continue with that. What they are scrapping is the repeal of section 25-90 which, contrary to ordinary tax principles, allows deductions against certain untaxed foreign income repatriated to Australia. Not proceeding with scrapping section 25-90 will cost $600 million.

Priorities eh? Scrap the school kids bonus and increase the superannuation tax on those people earning less than $37000 while at the same time saving multi-millionaire superannuants about $20,000 on average in tax a year and multinational companies $600 million a year.  I repeat: Class war anyone?

Advertisement

Comments

Pingback from Tax and class war | OzHouse
Time November 6, 2013 at 8:02 pm

[…] Nov 06 2013 by admin […]

Comment from Sara dowse
Time November 7, 2013 at 6:06 am

They believe and openly state this belief that leniency in taxing the rich leads to growth in the economy, the so/called trickle down policy. Wholly discredited and leading to even greater inequality.

Comment from philip
Time November 7, 2013 at 2:45 pm

The rich get richer while the poor get poorer, thanks to Mr Abbott.

Comment from Lorikeet
Time November 7, 2013 at 4:46 pm

Yes, there are excellent reasons why I put the Coalition last on my ballot paper. Both Labor and Liberals support neoliberalism, but the latter is far more pro-rich.

However I think the superannuation tax that Wayne Swan wanted to levy would have affected people with around $666,000 in superannuation holdings rather than $2,000,000. At the moment it is possible to earn 20% with higher risk investments, so more people would be hit with the tax than expected.

I think most people would be wise to move their superannuation into cash, especially those who are only a few years away from retiring.

What sticks in my craw is the fact that if you have very little superannuation and you put your inheritance into super, it will be taxed as a non-concessional contribution, while the el richos pay no tax on their mega holdings.

Today I filled out a survey sent to me by the state Coalition MP. It asked for multiple choice answers to questions which contained 2 elements:

1. whether or not you agreed with a particular action.

2. whether or not you agreed with Premier Newman’s method of fixing it.

To me, this is 2 questions, not one!

When I had to tick the number of times I used public transport, a box was missing which would have been applicable to part-time workers and retired people, so I had to put a box in myself. This part of the survey only seemed to cater for full-time workers.

Comment from John
Time November 7, 2013 at 6:32 pm

Well I think Mr Rudd and Ms Gillard had a fair amount to do with it, and their predecessors Hawke and Keating set in train the neoliberal experiment in Australia.

Comment from John
Time November 7, 2013 at 6:36 pm

Yes, but the 15% return is a one off, and is really an argument for taxing that return in the fund at full rates. Even if it is correct long term this is still 3 times the level men who have been in the system for 20 years have accumulated, ie it is likely to be someone earning 3 times the average wage, which would give them incomes of about $225,000. This is less than one percent of the population. Tax the one percent, not just the 16000.

Comment from Lorikeet
Time November 8, 2013 at 10:11 am

Yes, I agree with you, John. I have had no faith in the superannuation system ever since Paul Keating made it compulsory for everyone in 1992.

It reduces the taxes being collected by government to pay pensions and other welfare payments, and limits its ability to run services such as public transport, hospitals and schools. This has set up the perfect opportunity for corporates to take over using both the people’s personal and public assets.

Superannuation is largely a misnomer which should be reclassified as an enormous tax break and windfall for the rich, which will increasingly land Centrelink clients on the streets.

I think most people would have been much better off if they had simply been allowed to spend the money put into superannuation on their homes, vehicles and perhaps a rental property at a later date. As it is, everyone’s holdings are constantly at the mercy of corporate criminals on the world stage.

I think neoliberalism had its birth with the signing of the General Agreement on Tariffs and Trade by Chifley (Labor) in 1947. This was later turned over to the UN in 1995 by Paul Keating.

Perhaps neoliberalism may date back even further.

Comment from Byon
Time November 9, 2013 at 10:09 am

David Harvey’s book *A brief history of neo-liberalism* is worth reading. Here’s the link to it on Fishpond:

https://tinyurl.com/mdd4pf8

Comment from John
Time November 9, 2013 at 10:16 am

Yes, I have read it. Do you think he is right to say neoliberalism is the ruling class’s attempt to reclaim political power?

Comment from John
Time November 11, 2013 at 10:46 am

Sorry Lorikeet. I accidentally removed 2 of your more recent comments as spam. I have got so in the habit of hitting the spam button because of the constant spam that I clicked on it instead of publish. My apologies.

Comment from Lorikeet
Time November 11, 2013 at 5:34 pm

That’s okay, John. I think it seems feasible that neoliberalism is the ruling class’s attempt to reclaim political power.

Eventually the ordinary people will rise up, but they’re too slow off the mark for my liking.

Comment from Lorikeet
Time November 11, 2013 at 7:14 pm

Wouldn’t the ruling class already have the political power?

Comment from John
Time November 11, 2013 at 7:51 pm

Yes, that is the argument Lorikeet.

Write a comment