Christian Porter flags replacing family benefits with tax breaks


Human Services Minister Christian Porter

Sarah Martin   The Australian  24 Sept 2016

Social Services Minister Christian Porter has flagged replacing family welfare payments with direct tax breaks when technology improves, saying the current system has “deep structural inefficiencies” that must be addressed.

Mr Porter said there were “hundreds of thousands” of families paying about $12,000 in tax each year, who were then receiving the same amount back in family tax benefits.

“You can imagine that that is an extremely inefficient and costly system to, in effect, draw money from one group through tax to give it straight back to them, with all of the administrative costs and loss that occurs in moving that money through government back to the pockets of the people from whom you took it in the first place,” he told Sky News’ Australian Agenda.

“So there are quite deep structural inefficiencies in the system that has kind of grown in an ad hoc way.”

Mr Porter, who last week outlined the framework for a major overhaul of the welfare sector, said that giving direct tax breaks to families was preferable to a system of family tax benefit payments.

“The Family Tax Benefit System, when it was designed in its present form by John Howard and Peter Costello, had always envisaged tax credits rather than direct transfer welfare payments, but for a variety of reasons that didn’t occur at the time,” he said

“Allowing people to keep more of their own money, rather than taking money off them, washing it through government with all of the expense and administrative burden that that takes and then giving it back to them, the first situation of letting them keep more of their own money is far preferable.”

He said technological limitations at the time the FTB payments were introduced had been one of the reasons for the system’s structure, but this could soon be addressed when the Australian Taxation Office moved to a single touch payroll system in 2019-2020.

“We will have certain junctures in the future that are available to try to sort through some of these very long standing, very inefficient problems and do it in a way that actually advantages recipients of welfare payments rather than disadvantages them.”

Original article here



  • International analysis shows Australia has one of the most hostile tax systems in the world for single income families.
  • A key reason for this is that double income families have access to two tax free thresholds whereas single income households, by definition, only have access to one. This means that two families, earning the same income and making the same contribution to the economy, are treated markedly differently under Australia’s taxation rules.
  • While this has long been an issue in Australia, the problem was made much worse by the increase in the tax free thresholds as part of previous government’s carbon tax changes — from around $6000 to $18,200.
  • A single-income household (with income of $120,000) now pays around $10,000 more tax in Australia than a double income family with the same joint income of $120,000. The disparities carry through across income levels. This situation violates the key tax principle of horizontal equity. People with similar ways and means should pay similar amounts of tax.
  • To address this, Australia should introduce a capped form of income splitting based on the successful scheme introduced by the Canadian Government last year.
  • The proposal would allow a couple with dependent children to transfer an amount of income equivalent to the tax free threshold from the higher income earner to the lower income earner for tax purposes. This would in effect give single income couples access to the same tax free thresholds as dual income couples.
  • Total tax relief per couple would be capped at $2,000 per annum. The program would deliver tax relief to upwards of 800,000 families, costing around $1.5 billion per year.
  • Shared tax arrangements such as this are not uncommon, with around half of all OECD countries having some form of shared tax arrangements.
  • Australia’s social security system, family law and child-support arrangements all assume that family income and assets are shared between family members. However, as it is presently structured, Australia’s tax system does not recognise this economic reality.
  • If we are serious about helping families in this country we should look at what happen overseas and how successful it is there. We should consider how best to provide a system that does not discriminate between families and gives the best form of care for our young children.
  • Reforms are needed that recognise the reality of family economics, including family based taxation. This would remove the problem of so-called ‘middle-class welfare’ by encouraging family self-provision, and letting people take care of their own families, which is how it should be.

Original web link here

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