As I foreshadowed, the road to tax reform will be a bumpy and difficult one. Prime Minister Malcolm Turnbull has already backed off on increasing the GST, and now the media are throwing around ideas about attacking negative gearing, and raising the tax on contributions to superannuation.
It is most unlikely that negative gearing will be changed, and as I mentioned in my last newsletter, taxing contributions at marginal rate would be a re-run of the ridiculous superannuation surcharge that John Howard introduced in the August 1996 budget. It was universally condemned, cost more to administer than it raised, and everybody heaved a great sigh of relief when it was eventually abandoned.
I am amazed that no journalist has mentioned this aspect, but when you come to think about it, 1996 was 20 years ago and most of the journalists would have still been in their teens. I guess one of the benefits of being my age, 76, is I do have some accumulated wisdom.
The problem for the government is that the population is steadily ageing at the same time as our financial situation continues to get worse. Latest figures from Treasury indicate Australia’s debt is around $400 billion and our interest bill is $1 billion a month and rising continually. Obviously, such a sad state of affairs cannot continue indefinitely: the only options for the government are to increase taxes or reduce its own expenditure.
An accountant friend of mine tells me one strategy for the government might be to extend the time for the capital gains 50% discount from the present one year, to maybe three or four years. I responded that I didn’t think that would make much difference, but he assured me it would. As he has just retired as the senior tax partner of a large accounting group I figured his judgement would be worthwhile.
All my friends in the health services industry, people like doctors and dentists, complain about the costs of the bureaucracy. Maybe this would be a good place to start to cut costs.