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Modest tax and super changes could fund major welfare boost

A report commissioned by St Vincent de Paul Society from the Australian National University (ANU) has revealed how modest changes to personal income tax, welfare and superannuation policy could significantly alleviate poverty and financial stress. 

A Fairer Tax and Welfare System for Australia was released on 4 September 2023 at Parliament House, Canberra. It comes at a time of mounting calls to review taxation and superannuation policy, with the Treasurer himself saying it is time to start discussing the tax regime.

The report from ANU’s highly regarded Centre for Social Research and Methods models three options calculated to reduce the numbers of people living in poverty. Even the most ambitious option would not impact significantly on better-off Australians, yet it could lift 834,000 people out of the poverty they currently face. The ANU report follows the recent release of Treasury’s 2023 Intergenerational Report (IGR) that calls for ‘an efficient, fair and sustainable tax system’.

Taxation is clearly an elephant in the room for both major parties. Suggestions of raising taxes send a shiver through the spine of workers and business, while talk of tax cuts raises the spectre of reduced government services. This is especially concerning for organisations such as the St Vincent de Paul Society which are working exclusively with people who depend on these services to help make ends meet.

We know from research and our experience that many Australians living in poverty rely on income support as their main source of income. We also know that the gap between income and housing costs is locking low- and middle-income earners out of the property market and increasing competition for rentals. With rents soaring, and income support payments below the poverty line, a financial storm has arrived. 

The IGR says an improved tax system of the future is ‘vital to ensuring Australia can pay for the essential public services that will need to be delivered over the decades ahead.’ All of these will come with ballooning costs, notably in the areas of health and aged care, and the NDIS . Changes to taxation will be key to this funding, including a growing government reliance on personal income tax.

But we can do much more with taxation to reduce poverty. The tax system has far-reaching consequences and shapes the fabric of our society. The Stage 3 tax cuts, due to take effect from next year, are a particularly egregious example of unfairness. They will divert $243 billion into the pockets of higher income earners over the next ten years, and the Society continues to voice our strong opposition to them.


'We can have a fairer tax and welfare system, we can help lower- and middle-income earners, and we can reduce poverty. On any given night over 122,000 Australians are homeless. It is high time we had a fairer society for all.'


If implemented appropriately, a more progressive tax system can reduce poverty. It was therefore heartening to see the Australian Government establish the Economic Inclusion Advisory Committee, formed to provide advice in the lead-up to budgets on policies to address disadvantage and boost economic participation.

Now we need to heed its advice, particularly its recommendations to increase Job Seeker, other related working age payments, and Commonwealth Rent Assistance.

The report A Fairer Tax and Welfare System shows that poverty is worst among JobSeeker recipients, with almost 60 per cent of JobSeeker recipients living in poverty. Working-age pension recipients, single parents, lone individuals, and renters are all grappling with terrible financial stress. A Fairer Tax and Welfare System highlights that after paying living costs, including housing expenses, the after-housing poverty rate in Australia is 11.7 per cent of households, or more than three million people.

The ANU report shows that when low income and high housing costs co-exist in any one geographical location, poverty increases. Four of the top five affected locations are in suburban Sydney, the west being specially impacted, and the other in outer Melbourne.

When other factors, including education and occupation, are considered, the ANU found the highest financial stress to exist in regional and remote NT and Far North Queensland, and outer Adelaide. Financial stress is also highest for households whose main source of income is  JobSeeker (51 per cent), working age payments (42 per cent) and other welfare payments (48 per cent). And this is much higher than the national average, of around 14 per cent. Single parent households are more likely to experience financial stress than all other households.

The aim of social security is not to force people to live in poverty but to lift people up. A Fairer Tax and Welfare System shows how painless changes to the tax system could demonstrably boost welfare and lift many thousands of Australians out of their current unacceptable circumstances. Simply put, decisive action could reduce the number of households in poverty from 11.7 per cent to 8.6 per cent and give 834,000 Australians a fresh start to life.

A Fairer Tax and Welfare System for Australia models reforms to personal income taxation thresholds, the capital gains tax discount, and superannuation tax concessions. It lifts the tax-free threshold from $18,200 to $24,000 per year for the modest and high options described.


Low option ($4BN): 

This would lift 193,000 people out of poverty by increasing JobSeeker by $176 per fortnight (pf) and Parenting Payment by $167 pf.

Modest option ($10BN): 

This would lift 491,000 people out of poverty by increasing JobSeeker by $249 pf, Parenting Payment by $238 pf, and Disability Support Pension and Carer Payment by $69 pf.

High option ($20BN): 

This would lift 834,000 people out of poverty by increasing JobSeeker by $338 pf, Parenting Payment by $351 pf, Disability Support Pension and Carer Payment by $249 pf, the Family Tax Benefit A by 20 per cent, and Commonwealth Rent Assistance by 25 per cent.


The ANU modelling shows that the proposed tax changes would also increase average superannuation balances for early career people with lower and middle income and wealth by around 16 per cent. 

We need to consider the younger generations, or those without savings or property. They cannot be sacrificed just to balance the budget or lower inflation. Fairness must be the key consideration for our tax and welfare system. As shown in the IGR report, there is a real danger of an unfair burden being placed on the younger generation. We also need to consider the dignity of people living in poverty. Catholic social teaching highlights that economic justice cannot be ignored. Economic policies pushing people into poverty and disadvantage are inherently unjust, and therefore must be changed.

It is time to be bold. We can have a fairer tax and welfare system, we can help lower- and middle-income earners, and we can reduce poverty. On any given night over 122,000 Australians are homeless. It is high time we had a fairer society for all.




Mark Gaetani is National President of the St Vincent de Paul Society.

Main image: (Getty images)

Topic tags: Mark Gaetani, Welfare, Super, Taxation, SVDP



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