Coalition compromises on deficit tax

ScreenHunter_1957 Apr. 04 14.57

By Leith van Onselen

Reports have emerged that the Coalition has wound back its proposed deficit levy, raising the income threshold from $80,000 to $150,000. From The AFR:

It is now understood the threshold could be restricted to those on incomes above $150,000 paying an extra 1 per cent. This would ensure that the tax hits the highest earners, and spares the middle class – who are likely to face cuts to their welfare benefits in the May 13 budget – from being hit twice…

A 1 per cent debt tax on people with taxable incomes above $150,000 would affect 7 per cent of taxpayers or about 650,000 people and would raise $700 million a year, researchers said.

Politically, this is a good move by the Coalition. Going ahead with the lower $80,000 threshold would likely have incurred the electorate’s wrath and diminished its chances of securing passage through the Senate. Similarly, abandoning the measure altogether would have been viewed as a humiliating back down. Under this compromise, the Coalition at least gets to save face.

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Comments

  1. Diogenes the CynicMEMBER

    Spent a lot of political capital for a short term measure that does not address structural issues. Weak effort.

      • Ronin8317MEMBER

        I wouldn’t say this is the ‘best’ course of action.

        They need a bit of imagination : they should still charge the levy, but make an exemption if you donate the same amount to a registered charity. Then the conversation changes from a ‘money grab’ to ‘making Australians more charitable’, and anyone arguing against it is just greedy.

      • Ronin, is that sydney club where you donate money to talk to the treasurer a suitable charity for your idea? 🙂

      • 1 per cent debt tax on people with taxable incomes above $150,000 would affect 7 per cent of taxpayers or about 650,000 people and would raise $700 million a year, researchers said.

        The numbers cannot be right….Median incomes for this cohort should be around $260,000 pa, based on the last taxpayer stats published by the ATO for 2010. 650,000 x $2,600 (1% of income) = $1.69 billion.

        Even if all 650,000 persons had the same taxable income – $150,000 pa – 1% would be $.975 billion.

      • Briefly, that would be net of tax shelter treatments. A donation to the North Sydney Forum should get you the right advice.

      • melbourneguy

        Briefly it must be a 1% increase in the marginal tax rates, not average tax rates.

    • melbourneguy

      Nah….. it’s a token gesture. A tiny impost on high income earners to show that they are contributing to the cause. It will amount to next to nothing. It will be tiny in comparison to cuts to the poor and lower income earners.

  2. The Patrician

    All that grief for a measely $700m return?

    It’s freaking amateur hour.

    NG for new-builds only. No lies. Less grief. More return.

      • Now that it’s targeted $150k and above will be of little import to the masses. Mistake not to have targeted appropriately from outset. Ensuring all shared the burden obviously won out over other concerns.

  3. $700m? Yeah right. Most of them will reduce their taxable income to compensate.

    • migtronixMEMBER

      Or just charge more but I’ll be honest it sounds a lot better than the 2% I was coping before… not that I think it was to appease me so much as their base… 3d will enjoy this backpeddle, rightfully so really.

  4. Any good links for tax minimisation schemes? I’d like to reduce my taxable income by a few thousand… negative gearing doesn’t count!

    • Strange Economics

      Geez – This govts begging you – Its your upper income duty to pay less tax than those undeserving low income earners. No rorts are touched.

      Have you tried salary sacrifice super 30k,
      FBT rort a $100K Mercedes and save 8k/year off your tax –

      put the kids in private schools (subsidized by the govt by $8K a kid).
      Put money in the wifes accounts.

      Buy a bigger house tax free profit.,
      Put 400k into super just before you retire and tax free income.

      Tax deduct a conference at a ski resort.

      Then collect the pension and the seniors card

      The govenrnment goal is 1st 80k earned – 30 % tax.
      Next 100 K – 0%.

      That should cover avoiding the token 1%.. Meanwhile we can withdraw all benefits from those below the poverty line.

      The level should be at least 2% , and up to 5% extra over $300k per year.

    • This isn’t financial advice, but I would consider maximising my concessional super contributions.

      • I would fathom to guess anyone who is earning $150k or more is already doing that.

      • drsmithyMEMBER

        This isn’t financial advice, but I would consider maximising my concessional super contributions.

        Risky move, especially if you’re under 40. Chances are better than average you’ll never see all of it.

    • wasabinatorMEMBER

      There’s a tax minimisation scheme that appears to be growing in popularity lately. I think they call it Unemployment.

  5. So will it be an additional 1% on all income or just on that over the threshold?

    If it’s on all income then it’s time to change my planned trust distributions…

      • You would hope so, but who knows given that we clearly have policy-making on the run…

      • “We should be used to policy on the run after the marathon last six years.”

        We certainly are, but we were promised that things would change once the adults were back in charge.

      • Just giving the Twittesphere something to go apoplectic about. Now it’s almost a non issue.

      • flyingfoxMEMBER

        I would think it is over the whole amount. The medicare levy is over the whole amount. But doing the number, you might be right mig.

      • melbourneguy

        Yes numbers suggest marginal tax rates so it is really just …….. more tax rather than a “deficit levy”

  6. flyingfoxMEMBER

    HFP – High Frequency Politics. Throw some feelers out, reduce impact if adverse reaction, repeat until the populace is placated.

  7. And will superannuation accounts earning >$150k pay a deficit levy? Didn’t think so…..

  8. With reference to the logo at the top of of the page, I would like to remind MB’ers of the GROSS Tax Inequalities re State Public Servants, who by law are EXEMPT from Federal Law. I live in Campelltown QLD and the last time I looked at this issue was that a pollie/public servant could pump/dump up ALL of their salary into the YOU OWE ME Superannuation Bollox.

    WTF, if you have massive cohorts pulling these stunts, and most if not all the suffering public are ignorant of these rentier priveleges (thanks all for the erudite replies to rumples yesterday).

    So while persons crow and caw about the Federal bloodsucking a-holes the States sanction bloodsucking a-holes are flying under the radar.