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MEDIA RELEASE
14 December 2009
For immediate release
Tax system needs to offer the disadvantaged more opportunity to build assets:
Brotherhood of St Laurence
A recent analysis by the Brotherhood of St Laurence, “Assets for all?” has found that while
our tax system actively encourages the wealthy to build assets through a series of tax
concessions, little is provided to the less well-off. The report, which uses existing data to
examine who benefits from tax concessions, finds that wealthy homeowners, property
investors and high income earners who invest in super all win, while the poorest in the
community get little from the system, many of them not even completing tax returns.
The richest 25% of the community has a household mean net worth almost 20 times
that of the poorest 25%.
Tax concessions for housing and superannuation are considerable and amount to
around $74.4 billion each year – most of this benefit goes to the wealthiest sections
of the community.
44% of the $54bn in tax concessions on housing go to the wealthiest 20% of the
community.
Income earners in the top 25% benefit from as much as $11,000 in tax concessions
on superannuation each year while the super co-contribution scheme for low income
earners only provides an average of $785 per person to the 20% of eligible
participants who join the scheme.
Women are overrepresented in the groups who are unable to access any form of
support to build retirement assets.
Recent research suggests that those with lower household incomes are significantly
less likely to lodge a tax return than higher income households.
Research in Australia and internationally demonstrates that well designed programs
can assist low income people to build assets.
The Executive Director of the Brotherhood of St Laurence, Mr Tony Nicholson, said: “While
we are encouraged by recent comments by the Treasurer that the Government is likely to
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use the tax review to crack down on some of the more inequitable aspects of
superannuation, we think much more can be done both within the tax system and outside of
it to make the system fairer, and to introduce measures that will help low-income people
build assets. We also welcome announcements that the Review will recommend changes to
simplifying lodging a tax return as this could help make the system more accessible to low-
income earners, many of whom do not even complete tax returns at the moment.”
The Brotherhood is using the Report to call for a number of policy changes that would assist
low-income people to build assets. These include:
Reform tax concessions on superannuation for high income earners.
Implement an expanded targeted superannuation co-contribution scheme for low
income earners.
Allow a proportion of superannuation to be available for mid-life purchases (eg
housing).
Expand on recent investments in established asset building programs (eg the
Saverplus program developed by ANZ and the Brotherhood of St Laurence) for
eligible low-income earners to enable universal access.
Allow quarantining of up to $11,000 for singles and $22,000 for couples or singles
with dependants in legitimate savings from the liquid assets test for people seeking
Government income support.
Developing and implementing a National Financial Inclusion Strategy.
Case Study
The case study below illustrates the inequity of current asset building strategies.
Existing support for asset building is more valuable to, and accessible by, high-income
earners with existing properties. This is drawn out in the following examples. While the two
cases presented are hypothetical, Jane’s case reflects the best possible access to
Government support for a person in this income bracket who does not own a home. In
contrast, Mathew’s case reflects the bare minimum of support a person in this income
bracket and situation can access and amounts to ten times the support Jane is entitled to.
Case one, Jane, a single mother working part-time and earning around $30,000 and saving
for her first home. Jane opened a First Home Savers Account and managed to save $5,000
in the last financial year to qualify for the maximum Government contribution of $850. Jane
was able to put an extra $1,000 last year into super and receives the Government co-
contribution. The benefits Jane receives from the Federal Government’s asset building
policies total $1,850.
Case two, Mathew, a married father working full-time and earning around $160,000.
Mathew owns his own home and an investment property. Mathew is making only the
compulsory contributions to superannuation. In total, the benefits Mathew receives from the
Federal Government’s asset building policies total $18,784.
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Table 1.1 – Who gets what
Jane
Mathew
Owner-Occupier
capital gains tax
exemption
$8,372
Land tax exemption
$1,456
Investment capital
gains tax discounts
$1,560
Negative gearing
$3,796
First Home Saver
Account
$850
Concessional
taxation of super
contributions
$3,600
Super co-
contribution
$1,000
Total
$1,850
$18,784
Media queries contact Grahame Whyte on 0410 221 574
or Gerard Brody on 0404 805 770
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