Federal Politics (Part 1)

[ryan79]

If you don't mind throwing away your money then by all means go do so. I prefer not to.

[Samuel77]

Originally Posted by Solopop

You act as if everything you earn is given to the government, it's people like you who are selfish not those who earn less. It's as if you think tax revenue goes to nothing when in reality it pays for the police, hospitals, schools and many other things. Just be happy you have a job you greedy cunt.

Well thats the beauty of democracy, if people always vote for their own best interest, the majority will always be served.

[AtD]

Originally Posted by ryan79

I'm not sure what your trying to explain here? As far as I know this scheme is only available to people up to a certain salary. Theres also government co-contributions up to a certain salary.

You can salary sacrifice into your super, and pay 15% contributions tax and no income tax on that amount. The limit for the salary sacrifice has changed several times, between $25k to $100k. I think it’s $50k now.

This is definitely a tax break for high income earners. You need to be sacrificing the old limit already (who has that much to sacrifice?) to take advantage of the new limit.

[Eureka!]

Originally Posted by Samuel77

Well thats the beauty of democracy, if people always vote for their own best interest, the majority will always be served.

Which works great for minorities and externalities - forests, climate change, reef health, river systems, refugees, rural residents, the disabled, gays and lesbians, migrant groups etc. Personally I think we must have concern extending beyond ourself. I, for one, would not like to see disabled people being denied the life-changing National Disability Insurance Scheme simply because people only took into account their own interests. Only considering one's own circumstances is short-sighted, ignorant and potentially abhorrent.

[theskier]

Originally Posted by AtD

You can salary sacrifice into your super, and pay 15% contributions tax and no income tax on that amount. The limit for the salary sacrifice has changed several times, between $25k to $100k. I think it’s $50k now.

This is definitely a tax break for high income earners. You need to be sacrificing the old limit already (who has that much to sacrifice?) to take advantage of the new limit.

Its 25k now, but it's meant to go up to 50k for people over 50. Rather than complain about the tax break, why don't you rationalise why it actually exists. Its to encourage Australian's approaching retirement to save for their own retirement (rather than rely on a government pension and continuing taxpayer funding until they die). The tax break has generally had bi-partison support (noting that all taxpayers get the benefit of this rate). As a consequence, this policy (together with the super guarantee) is ensuring Australia has one of the largest proportions of self-funded retiree's in the world, the 4th largest retirement funds under management and the wealthiest pensioners of any developed nation. There are a lot of baby boomers who have paid off their mortgage who have the spare cash to contribute to super (rather than waste on more direct property investment, etc). A better policy would be to lower the 15% tax rate to 5% for low income earners, rather than screw with a retirement policy that is evidently working

[AtD]

That's a very nice rant but I wasn't complaining, I was answering Ryan's question - a new tax break that benefits only the wealthy.

[ryan79]

Originally Posted by AtD

That's a very nice rant but I wasn't complaining, I was answering Ryan's question - a new tax break that benefits only the wealthy.

Its not though, there is no income based testing, anyone can do it.

[AtD]

Anyone who can afford to sacrifice more than $25,000 of their income - ie, not many people. Could you?

[ryan79]

Thats not the point, the point is anyone can, by law, can access that benefit. And i do know some people who are in a couple have one partner put the maximum into super.

[AndyGM]

But where is the benefit to society if the people who are utilising the tax break are the ones who would never take a pension anyway?

I don't disagree with the policy of lower tax rates, I just think it is abused by too many high income earners as a tax-avoidance tool.

[ryan79]

Thats why I've always believed in simplifying the tax system and reducing income tax rates across the board, significantly. That way there is no tax breaks for anyone, everyone pays their "fair share". The way it is atm people on high incomes pay a truckload of tax and have to look for tax avoidance just to make it more equitable. Maybe this is by design? You'd have a better idea of this.

I do blame state governments for some of shitty tax system we have. GST was to abolish all stamp duties (the worse tax of all IMO) but states wouldn't let them go. That should be revisited.

[Mornnb]

Originally Posted by ryan79

Thats why I've always believed in simplifying the tax system and reducing income tax rates across the board, significantly. That way there is no tax breaks for anyone, everyone pays their "fair share". The way it is atm people on high incomes pay a truckload of tax and have to look for tax avoidance just to make it more equitable.

It is a good idea to simplify the tax system and remove tax breaks. But the current distribution of rates in the tax brackets is equitable. A fair spread of the tax burden can only be on the basis of the ratio of income to average living costs.

This is why I support the negative income tax system. It has a flat rate and starts with the government owing everyone a figure, for example $10 000. Lets say the rate is 25%, you would only start to pay tax if you were earning above $40 000.
http://en.wikipedia.org/wiki/Negative_income_tax

A tax system that would great simplify taxation, and replace much of centrelink too.

[AndyGM]

Originally Posted by ryan79

Thats why I've always believed in simplifying the tax system and reducing income tax rates across the board, significantly. That way there is no tax breaks for anyone, everyone pays their "fair share". The way it is atm people on high incomes pay a truckload of tax and have to look for tax avoidance just to make it more equitable. Maybe this is by design? You'd have a better idea of this.

I do blame state governments for some of shitty tax system we have. GST was to abolish all stamp duties (the worse tax of all IMO) but states wouldn't let them go. That should be revisited.

Agree a flatter tax system with no concenssions is best, although there would be a lot of complaints about what the 'top' rate should be.

Tax concessions have usually been put in place to meet the needs of one lobby group or another, but really distort the market.

The ACT Government is the first in Australia to committ to removing stamp duties and replacing them with a much more efficient and fair land tax. It will take 20 years though.

[17 floors up]

I don't really understand how land tax can be fair? To be honest I'm not really sure how it works, but lets say for example, if someone had a lot of land without much improvement (e.g. a modest house), but had a low income, how would that work?

[AndyGM]

A land tax is levied in the same way as council rates, a percentage of the value of the land (not the building).

It is fair because it is broad based and encourages effecient use of valuable property. When people buy a house they don't have to pay stamp duty (which may be $25,000 for example) but they would be expected to pay land tax into the future (which may be $1500 per year).

The problem with implementing a land tax is that many oldies are land rich but income poor. Therefore you can't bring it in overnight otherwise people would be hit with a big land tax bill each year which is a cost which wasn't factored into the original purchase decision (or price). Instead you have to gradually reduce the stamp duty and start with a very low land tax. Over time (say 20 years) the land tax would gradually go up and stamp duties would be reduced to zero.

[17 floors up]

What if the land is used for primary production?

[ryan79]

Originally Posted by Mornnb

It is a good idea to simplify the tax system and remove tax breaks. But the current distribution of rates in the tax brackets is equitable. A fair spread of the tax burden can only be on the basis of the ratio of income to average living costs.

This is why I support the negative income tax system. It has a flat rate and starts with the government owing everyone a figure, for example $10 000. Lets say the rate is 25%, you would only start to pay tax if you were earning above $40 000.
http://en.wikipedia.org/wiki/Negative_income_tax

A tax system that would great simplify taxation, and replace much of centrelink too.

I really like the idea of this system, would save the government billions especially on centrelink staff. give everyone a basic wage and if they work and earn more they pay tax. However this minimum pay would have to be no more than current welfare benefits so as not to disincentivise people from working.

Originally Posted by AndyGM

Agree a flatter tax system with no concenssions is best, although there would be a lot of complaints about what the 'top' rate should be.

Tax concessions have usually been put in place to meet the needs of one lobby group or another, but really distort the market.

The ACT Government is the first in Australia to committ to removing stamp duties and replacing them with a much more efficient and fair land tax. It will take 20 years though.

I'd take a land tax over stamp duty any day. But what about who have already paid stamp duty on their property?

[AndyGM]

Ag land has a lower value than other land (per hectare) so would attract less land tax anyway. A 500 hectare farm that is worth $1m would attract the same land tax (say $5k per year) as a 500m2 block in Bondi also worth $1m. The actual quantity of land is not the reference, it is its value which is the reference.

A lot of jurisdictions already have land taxes for ag land.

[AndyGM]

Originally Posted by ryan79

I'd take a land tax over stamp duty any day. But what about who have already paid stamp duty on their property?

As I said above it needs to be bought in slowly over many years for fairness.

An alternative could be saying:

'every block sold after x date will have no stamp duty but will have to pay the land tax'

but that would massively hit state government revenue for a number of years until there were enough properties obliged to pay land tax to compensate for the loss of all of that stamp duty revenue.

[17 floors up]

And the value is based on the Auditor-General's assessment, rather than the market rate, is that correct? THe market rate would have some influence though surely?