NEWSFLASH! In September I will join The Conversation as its Business and Economy Editor. I have been honoured to work at The Age for the past ten years, originally alongside the legendry Tim Colebatch, and for the past four years as economics editor in my own right.

At The Conversation, my job will be to make the best thinking from Australia's 40 univerisites accessible to the widest possible audience. That means you. From the new year I will also write a weekly column.

On this site are most of the important things I have written for Fairfax and the ABC over the past few decades. I recommend the Search function. The site is a record for you, as well as me.

I'll continue to post great things from The Conversation and other places here, and also on Twitter and Facebook. Enjoy.

Monday, September 04, 2017

Remove Medicare levy loopholes: ACOSS

Australia's Medicare levy is riddled with loopholes and should climb with income, as do tax rates, according to a Council of Social Service position paper to be released as the Senate decides whether or not to boost the levy to pay for the National Disability Insurance Scheme.

The government wants to raise the levy from 2 per cent of income to 2.5 per cent to help fund both the NDIS and a "Medicare Guarantee" to better pay for Medicare.

Labor has agreed to raising the rate, but only for the one-fifth of Australians earning more than $87,000. In addition it would reintroduce the so-called deficit repair levy on very high earners on more than $180,000.

The position paper points to problems with both proposals, saying Labor's scheme would leave in place the same loopholes as the Coalition's' scheme. It would also create a sudden jump in tax for Australians whose income climbed above $87,000, taking an entire 0.5 per cent, sending backwards their take-home income.

"The current levy and the Medicare Surcharge are complex and lack transparency," ACOSS chief executive Cassandra Goldie said before the release of the report. "People on higher incomes with smart tax advice can avoid paying their fair share through tax shelters such as salary sacrifice and negative gearing."

The Medicare Levy is imposed on "taxable income", meaning tax deductions such as those associated with negative gearing can eliminate the need to pay it. The latest tax statistics show that 48 very-high-income Australians, each earning more than $1 million a year, paid no income tax or Medicare levy in 2014-15, even though some paid the more broadly calculated Medicare Levy Surcharge.

The Council of Social Service wants the levy calculated on the same basis as the surcharge, making it impossible to avoid through the use of trusts or negative gearing. It also wants to phase in the levy with income, as happens with income tax.

The most radical option in the paper is to combine the levy and surcharge and make them a set percentage of income tax paid. It would no longer be possible to escape part of the levy by taking out private health insurance. Setting the levy at 12 per cent of tax paid would raise about the same amount of money as a 2.5 per cent levy and the 1 to 1.5 per cent surcharge.

Economic modelling in the paper shows Labor's plan would hit high-income earners the hardest, and the Coalition's plan would tax low-income earners more than Labor's.

In The Age and Sydney Morning Herald