These 'perks' are among the reasons why the rich are getting richer in Australia - MASHAHER

Key Points

The wealthiest Australians hold 90 times the wealth of those with the least wealth, according to Anglicare.
The group also found those on low to modest incomes receive little benefit from tax breaks.
Anglicare is calling for an overhaul to capital gains tax, negative gearing, and franking credits.

A range of tax breaks are allowing wealthy Australians to get richer and build big superannuation balances, property portfolios and investments — while those on low to modest incomes receive little of the benefit.

That’s the finding of a new report by Anglicare Australia, which is calling for an overhaul of generous tax breaks such as negative gearing, capital gains tax and franking credits the organisation says is fuelling inequality in Australia.

Drawing on Australian Bureau of Statistics data on wealth inequality over the past 20 years, the social advocacy group found that tax breaks for superannuation and housing investments had allowed the wealthiest Australians to hold 90 times the wealth of those with the least.

For example, the average wealth of the highest 20 per cent of wealth-holders was $3,240,000 as of 2019-20.

That compares to the average wealth of the middle 20 per cent — $588,000.

It’s 90 times the wealth of the lowest 20 per cent with just $36,000.

Tax perks for housing investors fuelling inequality

A major cause of Australia’s housing crisis and wealth inequality is a tax system that favours speculative investment in housing, Anglicare said.

It points the blame at negative gearing and capital gains tax (CGT) concessions, which Anglicare said entrenched wealth inequality by providing government support for the wealthy to grow their assets.

The group said the CGT discount of 50 per cent — which came into effect in 1999 — disproportionately benefits wealthier Australians who can afford to hold assets for long periods, as well as those with substantial investments who can reduce taxes on income from profits.

Anglicare said the CGT discount effectively halved the tax rate on long-term investments.

To address these issues, Anglicare said the CGT should be incrementally reduced over the next 10 years, while negative gearing should be used to target investment in social and affordable housing.

Superannuation tax breaks

Anglicare also said that superannuation tax perks were too generous for high incomers and inequitable for people on low incomes — costing taxpayers $48 billion in 2023.

For example, it said, a worker earning $30,000 annually received no tax support for employer contributions while another worker on $200,000 annually saves 32 cents in tax per dollar contributed.

Anglicare said the flat 15 per cent superannuation contributions tax should be replaced with a “refundable rebate” that provides the same or greater support for each dollar of contributions for people with low incomes as that provided to middle- and high-income-earners.

Separately it also wants reforms to dividend imputations, ending the practice of paying cash refunds for people who have managed to reduce their tax rate to zero and pay no income tax.

“Australia is becoming more unfair and more unequal,” Anglicare executive director Kasy Chambers said.

“People who earn income from work are paying more tax than people who earn income from their wealth. That needs to change if we want to make our tax system fairer.”

Source Agencies