The Turnbull government is under further pressure to cut back hundreds of billions of dollars in concessions that primarily benefit the rich, with Treasury figures showing the cost of capital gains tax concessions and superannuation concessions will be almost $380 billion.
Subscribe now for unlimited access.
$0/
(min cost $0)
or signup to continue reading
Updated forecasts from Treasury show the capital gains tax exemption on the family home, the 50 per cent CGT discount and superannuation concessions, remain the biggest costs to the federal budget.
Treasury's tax expenditure statement, released on Friday, shows the largest cost to the federal budget was the exemption of capital gains tax on the family home and the CGT discount. The exemption of the family home will cost almost $100 billion over four years to 2018-19. The cost of the 50 per cent discount on capital gains will be $121 billion by 2018-19. And the cost of CGT discounts for individuals and trusts will hit $29.2 billion by 2018-19.
Employer contributions, up to certain concessional contributions caps, are taxed at a concessional rate of 15 per cent (although individuals with income greater than $300,000 get taxed at 30 per cent, which is still typically lower than their marginal tax rate).
The Treasury figures show the concessional taxation of employer superannuation contributions will cost $68 billion over the four years.
Then there's the reduced tax rate of 15 per cent on super earnings (during the phase people are accumulating their savings) as well as the zero tax on super once people hit 60, which Treasury says will cost $61.1 billion over four years.
Future estimates
Treasury said since the report only gave estimates for future years, "in many cases, this unavoidably reduces their reliability because of the inherent uncertainty around forecasts of future economic conditions".
Nevertheless, the Turnbull government has been under pressure to scale back concessions that are primarily benefiting the wealthy. The head of its own financial systems inquiry David Murray has said the system is inequitable, as have groups including The Australia Institute, The Grattan Institute and Australian Council of Social Service.
ACOSS has said about 50 per cent the value of super concessions accrue to the top 20 per cent of taxpayers. And half the value of tax deductions for housing – including the 50 per cent capital gains tax discount for investors and negative gearing arrangements – go to the top 20 per cent of taxpayers earning $80,000 or more in gross income.
The Treasury statement also shows that the government's small business instant asset write off is expected to result in a short term budget blowout of $370 million over the next two years.
The accelerated depreciation measure, which allows small businesses to claim up to $20,000 in immediate deductions for assets, will cost $2 billion over the 2017 and 2018 financial years. The budget was based on the tax break costing $1.65 billion over this period.
The tax break is set to be abolished on July 1, 2017, when the threshold small businesses can claim, will return to $1000. So the government is predicting collections will outweigh the tax benefit.
The statement notes that "revenue gain estimates should be treated with particular caution" and "readers should exercise care when comparing tax expenditure estimates with direct expenditure estimates".