Monday, June 22, 2015

PM's audit chief Tony Shepherd says it's time to better tax super, capital gains

The head of Tony Abbott's Commission of Audit has broken ranks with the Prime Minister on the question of superannuation, saying it's time to ask whether the multi-billion dollar system of tax concessions is achieving its aim.

Tony Shepherd has also called for a doubling in the rate of capital gains to bring it into line with income tax and help bring negative gearing under control.

Mr Shepherd, a former president of the Business Council, was handpicked by Mr Abbott to lead the examination of government spending which recommended Medicare co-payments and tighter eligibility for the pension.

Speaking to the Committee for the Economic Development of Australia in Canberra, Mr Shepherd said the Commission of Audit had not been asked to examine tax, but he said if it had it would have recommended an increase in the rate and coverage of the goods and services tax, something he described as "a no-brainer".

Superannuation tax concessions "definitely" had to be reviewed, he said.

"The idea of these concessions was to lift the rate of self-funded retirees. But it's been stubbornly fixed at 20 per cent for a long time," Mr Shepherd said. "The incentives do not appear to be working to encourage growth in the number of self-funded retirees.

"It is definitely something that has to be reviewed, and I believe that some of those concessions should be modified."

Mr Abbott has promised no changes to superannuation tax concessions in this term of parliament or the next, accusing Labor of wanting to "trouser" superannuation money by winding back concessions.

"I agree that that it should be looked at, and it should be looked at in the context of the whole retirement income question, including age pension," Mr Shepherd said. "You would need to be careful on the incentives side that you didn't deplete the 20 per cent that you've already got."

On capital gains tax, the former head of the business council said the 50 per cent discount should go, pushing the capital gains tax rate up to the income tax rate.

"I'm personally in favour of putting the rate up to the income tax rate," he said. "I can't see any reason for treating it differently, and I think it probably leads in some respects to a greater emphasis on negative gearing. I can't see any reason for treating capital gains any different from income tax."

The headline rate of capital gains tax was cut to half the income tax rate by then prime minister John Howard in 1999. It made negative gearing much more attractive and sparked a climb in house prices.

Mr Shepherd said he thought the budget forecasts for revenue and economic growth were optimistic, adding: "I pray they are correct".

In The Age and Sydney Morning Herald