The Turnbull government is shifting its focus from reforming the goods and services tax to flattening superannuation tax incentives in a bid to raise more revenue, while at the same time protecting itself from potential voter backlash.
While a 5% increase to the GST could raise $130 billion in the 2017-18 financial year, research published last week by the Australian Council of Social Service found a hike to the GST would hit low and middle-income families the hardest.
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Labor and the Greens have come out against a GST increase, saying everyday consumers should not have to be slugged with a bigger tax bill.
The budget deficit should instead be reduced with bigger taxes for the wealthy, according to the opposition and Greens.
The Australianreports superannuation reform is emerging as the favoured option within the government, with backbenchers worried voters will view a GST hike as unfair.
Professional services firm Deloitte last month found making superannuation tax incentives 15 cents in the dollar for all tax brackets, as well as taxing superannuation like income, could raise more than $6 billion a year.
Deloitte’s Mythbusting Tax Reform report also suggested tweaking super rules in this way would allow the government to slash Australia’s company tax rate from 30% to 26%.
Small business minister and assistant treasurer Kelly O’Dwyer has repeatedly said the government will consider all good ideas because “all of the options interrelate” when it comes to tax reform.
But will superannuation reform be enough to fix the budget bottom line?
Brad Twentyman, partner at Pitcher Partners, told SmartCompany this morning the revenue gained from increasing the GST versus increasing superannuation taxes “isn’t comparable”.
“To sit there and say increasing super taxes across the board is going to result in some significant increase in revenue to fix the budget… I don’t think it’s believable,” Twentyman says.
“What you’ll find in super is that to significantly increase revenue by raising super taxes, you really need to hit middle income earners because that’s where the mass of taxpayers are who are receiving concessions for making contributions into the system.
“The only way you’re going to raise [tens of] billions from super is to increase taxes across the board.
“If that’s the approach, you’re going to encounter exactly the same fairness arguments you encounter with the GST argument.”