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Concessions; exemptions

– see also Charities; Families; Fringe benefits; Land

Paying for Zero: Cost of managing tax affairs

Matt Grudnoff, The Australia Institute (June 2017). The Labor party has announced a policy to limit the deduction that can be claimed for managing your tax affairs to $3,000. The complexity of the tax system means that some people are spending large amounts of money on accounting advice to take advantage of tax loopholes to significantly reduce their taxable income. They can then reduce their disposable income further by deducting the cost of this advice. Extreme examples of this have emerged where people earning considerable amounts of money are claiming more than a million dollars for the management of their tax affairs.

This paper will look at who is likely to be impacted by this policy.

About 47% of those submitting a tax return claim a deduction for expenses incurred in managing their tax affairs. While the average (mean) amount that people deducted was $378 the median was much lower at just $165. A large difference between the average and median indicates that a small minority are claiming considerably larger amounts than the average. This minority are dragging up the average.

Those in Liberal Party electorates located in Australia’s largest cities claimed larger amounts for managing their tax affairs. Liberal electorates made up nine of the top 10 electorates for this deduction. These electorates also had a larger percentage of people claiming the deduction.

Capital Gains Tax main residence exemption

Matt Grudnoff, The Australia Institute (January 2016). The largest tax concession in Australia is the capital gains tax (CGT) exemption for the main residence. Last year it cost the budget $46 billion and is predicted to cost the budget $189 billion over the next four years. Each year the cost of the CGT exemption on for the main residence costs the federal budget more than Defence, Education or Medicare.

With the government looking for budget savings that do not disproportionately impact low income households, it is appropriate to look at this very large tax concession.

Powers of deduction: Tax deductions, environmental organisations and the mining industry

Rod Campbell, Matt Grudnoff, Dave Richardson, Tom Swann, Cam Amos and Molly Johnson, The Australia Institute (June 2015). Donations to environment organisations in Australia are tax deductible as long as the organisation in question is listed on the Commonwealth Register of Environmental Organisations. This listing gives an organisation Deductible Gift Recipient (DGR) status. A parliamentary inquiry is looking into the Register, largely at the behest of the mining industry.

Mining industry demands exclusive rights to tax deductions

Rod Campbell, The Australia Institute (June 2015). The mining industry has convinced the Federal Government to hold an inquiry into the tax deductible gift status of environmental organisations who oppose mining projects.

Who’s getting negative? The benefits of negative gearing by federal electorate

Matt Grudnoff, The Australia Institute (April 2015). While a large number of people take advantage of negative gearing for residential investment properties in Australia, the majority of the benefits are more narrowly focused. A previous paper by the Australia Institute looked at how the benefit of negative gearing was distributed by income and aged groups. It also looked at how negative gearing and the capital gains tax discount was distorting the property market. This paper will focus on the geographic distribution of negative gearing by federal electorates.
An analysis of the data shows that taxable income and the proportion of people undertaking negative gearing are correlated. As income increases so does the number of people undertaking negative gearing. Taxable income and net rental loss are also correlated. As income rises the amount deducted because of negative gearing also rises.

Super for some: Who wins and loses from 30 billion worth of tax concessions for superannuation

Richard Denniss, The Australia Institute (April 2015). Richard Denniss, Executive Director of The Australia Institute and long-time advocate of overhaul to the super tax concessions scheme, has welcomed moves on the issue by the Australian Labor Party but says it needs to be the start, not the end of the conversation.

Background briefing on franking credits

Matt Grudnoff, The Australia Institute (April 2015). Franking credits are worth about $30 billion per year in Australia. About $10 billion go to households and another $10 billion go to superannuation funds, trusts and charities. The remaining $10 billion go to other Australian companies.
The international evidence shows that Australia is extremely generous when it comes to franking credits. But which Australians is the government being generous to? NATSEM have modelled for The Australia Institute the amount and distribution of franking credits, revealing that they flow overwhelmingly to very high income earning households.

Reform the Research Tax Credit – Or Let It Die

Citizens for Tax Justice (December 2013).  Business lobbyists are pushing Congress to enact tax “extenders” — a bill to extend several temporary tax breaks for business that expire at the end of this year. A new report from Citizens for Tax Justice examines the largest of those provisions, the federal research and experimentation tax credit, a tax subsidy that is supposed to encourage businesses to perform research that benefits society. The report explains that the research credit is riddled with problems and should be either reformed dramatically or allowed to expire.

Reforming Australia’s Hidden Welfare State: Tax Expenditures as Welfare for the Rich
Dr Benjamin Spies-Butcher and Adam Stebbing, Centre for Policy Development, (February 2009).  Discusses problems with Commonwealth tax expenditures and outlines possible reforms to superannuation that could enhance fairness and transparency in government spending.

Jobs Australia’s Statement of Reform Priorities
David Thompson (September 2011).  Jobs Australia’s statement of taxation reform priorities in preparation to the Tax Forum 4-5 October 2011.

Reform to Deductions for Education Expenses – A submission in response to the discussion paper
Research Australia (July 2013)

In this paper Research Australia submits that imposing a cap of $2,000 on self education expenses will have a significant adverse effect on health and medical research in Australia.

State and Local Tax Deductions
Yuri Shadunsky, Tax Policy Center (July 2013)

US federal taxpayers choose between itemising deductions and claiming the standard deduction. Itemisers can claim deductions for state and local income and property taxes paid. (Through 2013, taxpayers may deduct state and local sales taxes paid in lieu of income taxes.) In 2011, 46.6 million taxpayers claimed the deduction for state and local taxes paid, deducting almost $470 billion from their tax returns.

Catholic Social Services Australia Statement of Reform Priorities
Bishop Pat Power (September 2011)

Catholic Social Services Australia’s statement of taxation reform priorities in preparation to the Tax Forum 4-5 October 2011.

Associate Professor Miranda Stewart Statement of Reform Priorities
Miranda Stewart (September 2011)

Miranda Stewart’s statement of taxation reform priorities in preparation to the Tax Forum 4-5 October 2011.

Community and Public Sector Union Statement of Reform Priorities
Nadine Flood (September 2011)

Community and Public Sector Union’s statement of taxation reform priorities in preparation to the Tax Forum 4-5 October 2011.

Equal Rights Alliance Statement of Reform Priorities
Marie Coleman and Ruth Medd (September 2011)

Equality Rights Alliance’s statement of taxation reform priorities in preparation to the Tax Forum 4-5 October 2011.

Anglicare Australia Statement of Reform Priorities
Kasy Chambers (September 2011)

Anglicare Australia’s statement of taxation reform priorities in preparation to the Tax Forum 4-5 October 2011.

Uniting Care Wesley Adelaide Statement of Reform Priorities
Simon Schrapel (September 2011)

Uniting Care Wesley Adelaide statement of taxation reform priorities in preparation to the Tax Forum 4-5 October 2011.

Australian Council of Trade Unions Statement of Reform Priorities
Jeff Lawrence (September 2011)

Australian Council of Trade Unions’ statement of taxation reform priorities in preparation to the Tax Forum 4-5 October 2011.

Australian Council of Social Services Statement of Reform Priorities
Dr Cassandra Goldie and Peter Davidson (September 2011)

Australian Council of Social Services statement of taxation reform priorities in preparation to the Tax Forum 4-5 October 2011.

Not-For-Profit Tax Reforms
Clubs Australia (Aug 2011)

Clubs Australia’s submission on possible approaches to implement the Government’s Budget announcement that it will reform the tax concessions provided to not-for-profit entities to ensure they are targeted only at those activities that directly further their altruistic purposes.

Spending in disguise
Donald Marron, Tax Policy Centre (28 June 2011)

A great deal of US Government spending is hidden in the federal tax code in the form of deductions, credits, and other preferences ‘€ preferences that seem like they let taxpayers keep their own money, but are actually spending in disguise.

Trade and Assistance Review 2009-10
Australian Government Productivity Commission (16 June 2011)

The review contains quantitative estimates of Australian Government assistance to industry in 2009-10, including budgetary outlays, tax concessions and import tariff. Overall $17.3 billion in assistance in gross terms was provided to Australian industry. After allowing for the cost impost of import tariffs on industries using goods as inputs, the net assistance received by industry was estimated at $9.3 billion.

Should we put the brakes on tax breaks?
Tax Policy Centre (6 Apr 2011)

Video footage of TPC’s Tax Day 2011 event, featuring a panel of experts debating controversial proposals to put the brakes on tax breaks.

Who Benefits from US Tax Expenditures?
Roberton Williams, Tax Policy Centre (2 May 2011)

A report on the beneficiaries of tax expenditures in the US, which finds that more than 90 percent of the tax savings from preferential tax rates on long-term capital gains and qualified dividends go to taxpayers in the top fifth of the income distribution, and nearly half the benefits go to people in the top one-tenth of 1 percent.

How large are tax expenditures?
Donald Marron, Tax Policy Centre (Mar 2011)

A discussion of tax expenditures in the US and how to measure them appropriately.

The Great Superannuation Tax Concession Rort
David Ingles, Australia Institute (February 2009)

A research paper examining the cost of superannuation tax concessions.

Tax: A Broader Mission
Ian McAuley, University of Canberra and Centre for Policy Development (7 May 2009)

Discusses the impact of higher social security expenditure on other needs for public investment and tax revenue.

The Ethical Basis of a Good Tax System
Eva Cox, Centre for Policy Development (7 May 2009)

Argues for more collective risk-sharing and shared public responsibilities, supported by increased tax revenues.