While fighting the Covid-19 Pandemic, the Australian Government has committed to spending an enormous amount of money supporting the economy and fighting the disease.
It should not come as a shock that taxes may have to rise to pay back the huge levels of debt the Government has taken on, amounting to A$320bn.
Whilst we will have to wait until October and maybe beyond to find out, many believe that among the options the Treasurer could consider are:
- Reform of negative gearing and the CGT Discount – Negative gearing and CGT discount distort behaviour to encourage borrowing rather than saving.
- Possible GST increase – this has the extra benefit of taxing people’s accumulated wealth as they spend it.
- Changes to the taxation of Superannuation income payments.
- Higher land tax – a switch from stamp duty to land tax to better capture the value of increased asset prices and make it easier for people to buy and sell houses.
- Possible Medicare Levy increase – much of the additional interest cost of the new borrowing could be paid by raising the Medicare levy from 2% to 2.14%.
With the spectre of increasing taxation, it is increasingly important that we structure our savings to maximise tax efficiency and protect against the worst of tax rises.
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