30 March 2015
Joe Hockey opens doors on tax reform debate
The Abbott government has thrown open the doors to a broad-ranging debate on tax reform – from changing the rate and base of the goods and services tax to increasing capital gains tax, reducing superannuation concessions, removing dividend imputation, and dealing with bracket creep by indexing income tax thresholds.
A day after the Baird government won a resounding victory despite advocating a politically unpopular electricity privatisation policy, Treasurer Joe Hockey opened the tax debate that will run until the 2016 election and includes issues the government has ruled out in its current term, including no adverse changes to superannuation.
The tax discussion paper – designed to provoke debate which will inform a green paper later this year and a white paper next year that will outline the tax policy options the government takes to the election – says Australia has a much heavier reliance on income tax, particularly company income tax, than other developed countries, as well as our Asian competitors.
It also argues bracket creep – the move into higher tax brackets as incomes rise – and higher personal income taxes "could potentially reduce workforce participation and the opportunities afforded to the community by higher participation rates".
About 300,000 Australians are expected to move into the second-highest tax bracket in the next two years because of bracket creep.
Instead of canvassing future income tax rate cuts to address bracket creep, the discussion paper repeatedly argues that bracket creep happens because tax thresholds are not indexed.
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