Archives for June 2014

Paid parental leave and childcare belong together

Date  – June 18, 2014 – 12:15AM

Marie Coleman

What a time for the Minister for Social Services Kevin Andrews to finally release the report reviewing the operation of the existing Rudd-Macklin Paid Parental Leave (PPL) Scheme. 

Amid strong opposition to the Abbott government’s proposed parental leave extensions and the prospect of outright mutiny by National Party senators, it’s unsurprising that the beleaguered government has seized on this report to legitimise its controversial scheme.

Minister Andrews asserts that the report supports an extension of the PPL scheme from 18 to 26 weeks as well as an increase in the amount of the payment, consistent with his government’s proposals. It does no such thing.

It is also claimed the report was overseen by a steering committee comprising highly regarded business associations, employer and employee groups and policy-makers such as the Australian Industry Group, the ACTU, the Sex Discrimination Commissioner and the National Foundation for Australian Women. This claim is also wrong.

None of these independent organisations (originally appointed by Ms Macklin) had the opportunity to provide the direction needed to produce a robust report that could have served as a foundation for ongoing policy development.   Where we would expect to see recommendations drawn from solid evidence reviews, research and the public consultation process, there are none.

The data is nevertheless valuable in painting a picture of who has benefited from the existing scheme, how employers have responded, and the like.  However, it should be analysed with caution by all participants in the current debate over the proposed extensions to the PPL scheme.  And it certainly should not be selectively used to categorically support or reject any particular PPL formula.

To put things in perspective, the Rudd-Macklin PPL scheme resulted from a Productivity Commission recommendation to establish a PPL scheme where public and private funding would coexist.  The taxpayer-funded system would set a minimum payment but could be ”topped up” by additional amounts employers and employees agreed to separately.  The commission expressly rejected the option of a national PPL system predicated on income replacement believing that industry was not ready for such a move.

Take-up of PPL has been very strong. By early 2013 around 96 per cent of employed women were receiving paid parental leave.  Of these some 49 per cent received the government payment alone, while 51 per cent received both the basic payment, plus an additional contribution from their employers.

The review report makes some positive findings about the existing PPL scheme.  It has been successful in delaying mothers’ return to work in the critical first six months following the birth of their child and slightly increased their likelihood of returning to work within a year.  The effects were particularly pronounced for low-income earners and self-employed women for whom the period of predictable income gave them the confidence to remain at home.  PPL also increased employers’ retention of women when they returned to work.

What the report does, is reinforce the importance of a PPL scheme in any economy that values women’s workforce participation.  But its findings do not go so far as to endorse the current government’s proposed approach.

The Abbott government’s PPL proposal will see greatly increased PPL payments funded by a levy on big business.  Businesses’ concerns stem not just from the scheme’s cost, but also because they foresee a loss of their ”employer of choice” differentiation when Centrelink becomes the exclusive paymaster.

More importantly, since the Rudd-Macklin scheme was introduced, childcare affordability and availability, has overtaken PPL as the defining issue for women in the workforce. Many see improvements in childcare as a higher priority than increased PPL payments. Yet, in the recent budget, measures have been proposed that will raise the cost of childcare.

At present, the government is awaiting the interim report of the Productivity Commission on childcare.  Amid the controversy surrounding Abbott’s PPL scheme, influential groups including the National Foundation for Australian Women are urging the government to expand the Productivity Commission’s terms of reference and develop an integrated set of proposals covering improvements to both childcare and paid parental leave.

PPL, together with childcare, are essential drivers of parental workforce participation and should be considered in a related framework rather than in complete isolation.

Abbott’s PPL scheme has become a political liability and the government urgently needs to defuse the heat from its contentious measure.  It can do this through the sensible expedient of referring the issue to the independent experts at the Productivity Commission to come up with a comprehensive, ”big picture” solution to women’s workforce participation.

Marie Coleman  is Chair of the Social Policy Committee for the National Foundation for Australian Women, and was a member of the steering group for the review of the paid parental leave scheme.

For an electronic copy click here – http://www.canberratimes.com.au/comment/paid-parental-leave-and-childcare-belong-together-20140617-zsahv.html

The super rich and tax: lifters or leaners?

A recent report from think tank Per Capita highlighted increasing concern over inequality in Australia’s taxation system, particularly whether high income earners are paying their fair share of tax. Despite…

Author

  1. Helen Hodgson

    Associate Professor, Curtin Law School. Curtin Business School at Curtin University and a member of NFAW’s Social Policy Committee

Disclosure Statement

Helen Hodgson was a Member of the Legislative Council in Western Australia from 1997 to 2001, elected as an Australian Democrat. She is not currently a member of any political party.

A recent report from think tank Per Capita highlighted increasing concern over inequality in Australia’s taxation system, particularly whether high income earners are paying their fair share of tax.

Despite the 2% tax rise on incomes of more than A$180,000 flagged in May’s federal budget, it is low income families that are doing most of the heavy lifting through cuts and freezes on transfer payments.

Per Capita’s 2014 Tax Survey explored the attitudes of Australians to taxation and government expenditure, and was conducted in February – well before the budget.

Most Australians believe they pay the right level of tax and would support more spending on health, education and transfer payments, according to the survey. Significantly they also think high income earners are not paying their fair share and would support higher taxes on the top 5% of income earners to fund improved services.

The 2011/12 tax statistics show that only 2% of income earners return a taxable income of more than $180,000, contributing 26% of the total tax revenue. This compares with 37.4% of income tax collected from the 14.4% of individuals earning between $80,000 and $180,000.

Many people would be surprised to find out that only 2% of Australians pay the top rate of tax, which raises questions over how high flyers are reporting their income, or structuring their tax affairs.

Last week the Australian National Audit Office (ANAO) released its report on the Australian Tax Office (ATO) program to manage tax compliance of high wealth individuals.

The ATO identifies wealthy individuals as individuals controlling wealth of $5 million or more, with highly wealthy individuals controlling $30 million or more. Importantly, this takes account of the assets and entities controlled by the taxpayer, not on the taxable income returned by the taxpayer as an individual.

In 2010 the 2,600 individuals identified in the report as high wealth individuals contributed 1.2% of the tax paid by individuals and 5% paid no tax. By 2012/13 the number of high wealth individuals had increased to 2,650, controlling $301 billion in wealth, with a further 3,700 controlling a further $212 billion, although their contribution to the tax pool is not yet available.

How they do it

High wealth individuals are often able to structure their affairs with resources to support their lifestyle that don’t include taxable income. Lifestyle assets owned by other entities within their control may be used. For audit purposes, the ATO looks at the structures these individuals adopt, particularly the movement of funds and profits between these structures.

They also have access to tax planning opportunities that facilitate tax minimisation. Their tax structures can be very complex, usually involving a number of different entities often located in different tax jurisdictions. As most income is taxed on receipt, the use of foreign structures can defer the taxing point.

The Australian foreign attribution rules are intended to tax income where an Australian resident controls a foreign entity, but these rules are complex and have been criticised as being an impediment to international business.

Different entities can also be used to divert income to other members of the controlling individual’s family; in particular family trusts have become notorious for their flexibility in diverting income away from the controller.

Although the maximum rate of tax is applied to minors, adult beneficiaries are taxed at their personal marginal tax rate which may well be less than the tax payable by the individual who controls the family arrangements.

What the ATO is doing about it

None of these strategies alone constitute tax minimisation: all of them can be validly explained as a commercial arrangement, or on the basis of providing for one’s family. High wealth individuals will tend to use a combination of strategies that, in combination, move funds around between entities in a way that makes it difficult to identify who the proper taxpayer is, and the point at which the income becomes taxable. They also have the resources to contest assessments – 65% of assessments issued to a high worth individual following compliance activity are contested, and half of these result in a reduction in the tax payable, according to the ANAO report (page 99).

The government needs to empower the ATO and other authorities to pursue those high wealth individuals who are not pulling their weight. Unfortunately, it has already sent signals that it is not committed to action in core areas: in December 2013 it announced the proposal to modernise the foreign source income attribution rules would not proceed; and the review of the taxation of trusts has also disappeared from the Treasury work program.

The ANAO report highlights some inefficiencies in the audit of high wealth individuals that must be addressed, but the ATO is also facing staff cuts as a result of the 2014 budget.

In the mean time Australians will continue to ask if the highly wealthy are bearing their share of the pain.


https://theconversation.com/the-super-rich-and-tax-lifters-or-leaners-27700?utm_medium=email&utm_campaign=Latest+from+The+Conversation+for+11+June+2014+-+1710&utm_content=Latest+from+The+Conversation+for+11+June+2014+-+1710+CID_42328667c444eabdfb7abe96ef131e31&utm_source=campaign_monitor&utm_term=The%20super%20rich%20and%20tax%20lifters%20or%20leaners

Budget 2014 – Training and higher education cuts discriminate against women

The biggest losers from the 2014 Federal Budget cuts to vocational training and education are women, with many of the proposed measures either overtly favouring male-dominated occupations or penalising female-dominated industries, an analysis of the implications of the 2014-2015 Budget has found.

Read more here – NFAW – Release – Budget & Education – May 2014-2