Budget Repair !

The national debt has blown out by billions of dollars to fund relief for workers displaced by this coronavirus lockdown. It is inevitable that eventually the tax regime will need to change to restore this balance in government coffers.

A seventy page " budget repair " document prepared by Liberal/National Senator  Gerard Rennick will be used to lobby the parliament for tax changes to increase the tax flow into treasury.  It carries measures that may make the average taxpayer feel very uncomfortable.

Once again the ABC will be in the tax man's sights.   The proposal suggests that the Australian Broadcasting Commission be either sold, or instructed to pay its cost by introducing similar advertisintg as is the backbone of the commercial television networks.   The national advertising dollar is finite and if it is stretched another way we will probably see a sharp reduction in the fare shown on commercial television.  It would also introduce another influencing factor to ABC independence.

The primary objective in Senator Rennick's proposal would be a sharp revision of the rate applied to Capital Gains Tax.   At present, this is levied at the taxpayer's marginal tax rate  and it is suggested that be raised to the company tax rate of thirty percent for all assets in excess of two million dollars.
At present the taxpayers primary residence is exempt from the tax and rental properties are taxed  at a fifty percent discount provided they have been in the taxpayer's hands  for longer than a year.

Canny investors have been taking advantage of the endless inflation in Australian house prices by buying rental property and selling after that year has elapsed to make profits that are not available through traditional investment opportunities.   The whole idea of a " capital gains tax " was to give the government a share of windfall profits.

It seems inevitable that government eyes must fall on the huge inflation profits accrueing on private homes year after year.  To many people this is their retirement nest egg and assumes greater importance than whatever their superannuation account will deliver.  During the lockdown many withdrew from their superannuation and home equity now plays a bigger role in retirement plans.  Any move for the government to intrude on that area of investment will be met with fierce opposition.

If the government does move on taxpayer residences the capital gains tax exemption would probably still apply until the property reached double its purchase price, and then additional value would attract the tax.  For every dollar thereafter the governmenrt would collect ninety cents.

The universities also feature in this tax recovery plan with the tax office going after profits gained from admitting foreign students.  It is this profit that has kept the lid tightly closed on fees for Australian students and any rise in university overheads from tax must be reflected in higher tuition fees.  The universities are alread under pressure with the coronavirus deflecting entry into the country that may see a huge drop in overseas student numbers from next year.

This propsal is simply a talking point raised by this Senator.  The debate will contain many opposing views and it will be hotly covered in the media.  What is finally decided will probably bear little relation to what is contained in this proposal.   It is simply an early warning to the taxpayers that we face a serious financial outlay and bold measures will be needed to restore the situation.