- by foxnews
- 25 Nov 2024
The report by the Grattan Institute presents a menu of options it believes could take a bite out of the $50bn-a-year structural deficit facing the federal budget.
The report finds that Australia now needs to shrink its deficits by 1.2% of GDP every year. If deficits are not slashed, Australia faces a rising debt interest bill that adds a further $10bn to the deficit every year by 2033.
But others are now on the table after the government refused to rule out further changes when releasing its proposal to save $2bn a year by halving tax concession for earnings from super on balances above $3m.
The report comes as the Coalition prepares to take the budget fight to the government, with deputy Liberal leader Sussan Ley visiting 16 seats in 16 days to campaign on the cost of living crisis.
Ley will visit a range of marginal seats in five states, including four held by teal independents (North Sydney, Warringah, Mackellar and Goldstein), Labor inner city gains from the Coalition (Bennelong and Higgins) and metro seats the Liberals are desperate to hold (Menzies and Sturt).
The Grattan report noted that the stage-three income tax cuts will cost the budget about $20bn a year from mid 2024, rising to $31bn by 2030.
Stage three abolishes the 37% marginal tax bracket completely and lowers the 32.5% marginal tax rate to 30%. It also raises the threshold for the 45% marginal tax rate, meaning everyone earning between $45,000 and $200,000 will pay the same 30% marginal tax rate.
Grattan estimated this would net the budget an extra $8bn a year.
The Greens and the Senate crossbench have repeatedly called for stage three tax cuts to be revisited.
While the government studies options to reform the petroleum resource rent tax, the Grattan Institute proposes two such changes: changing the method of pricing for gas to raise $3-4bn a year, and introducing a 10% commonwealth royalty on offshore gas for a further $4bn.
The Grattan report proposed $11.5bn more could be saved from super tax concessions including by applying the 30% tax rate on earnings on balances of more than $2m, taxing earnings in retirement at 15% and capping pre-tax contributions at $20,000.
Setting a minimum tax rate of 30% on distributions from trusts would save $2.3bn a year, it said.
After releasing its super policy in February, the only tax change the government has ruled out is changing the existing capital gains tax concessions for the family home.
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