A group of Australian academics are asking for the Federal Government to look at how much you really have to live on.
Key points:The authors of the report say Australia’s wealth is increasing faster than the economyThe study recommends a tax on capital gains, asset sales and other forms of tax that could be applied to the wealthyThe report says Australia’s total wealth should be around $1.7 trillionAccording to the study, Australia’s gross national product is expected to grow at an annual rate of 5.4 per cent between 2019 and 2021, while the number of Australians with assets worth $1 million or more is expected grow by more than 5 per cent over the same period.
The report was released on Thursday ahead of the annual report of the Productivity Commission.
Its authors, from Monash University and the Australian National University, say Australia has become a very high-income country where people are living comfortably, have access to good quality education and are well-off.
In particular, they say Australia should look at taxing capital gains and other types of tax on the wealthy.
“The wealthy have become so powerful that the only thing they can do is make money from it,” Dr Robyn MacNeil, the report’s author and a senior fellow at Monash’s Centre for Economic Policy and Research, told reporters.
“They can take advantage of this by taking advantage of the tax system.”
MacNeil said the wealthy are also increasingly concentrated in high-value sectors, such as real estate, infrastructure and telecommunications, and that this can exacerbate income inequality.
“If you have a small number of very rich people, you don’t have the ability to move up,” she said.
“In that case, the other people will just be poorer.”
The report’s authors recommend that the Federal Parliament consider taxing capital income, a type of income that includes income from capital gains or other forms and assets, such for example real estate.
They also recommend the government introduce an annual tax on real estate assets, similar to the GST.
They say that, although the Government has not made a proposal, this is something that has been a major issue in the last parliament, when the Government introduced a levy on residential property.
MacNeil also recommends a $2,000 cap on tax-free savings accounts to prevent people from moving money into and out of the system.
“We are seeing that this has an impact on inequality, particularly among people who are the wealthiest and have very high income,” she explained.
“This is something we want to address, but we are also not necessarily comfortable with a cap.”
MacNeal said she was not convinced that the tax on savings accounts was enough to address inequality.
The Federal Government says it will introduce a $1,000-per-year cap on savings.
“The Reserve Bank will be making further comments on this matter in due course,” a spokesperson for the Treasurer said.
MacNeal says there needs to be more analysis of what impact the tax would have on inequality.
MacNeil, however, said she does not expect that the government will introduce the $2 million cap on the total amount of savings in the future.
But she does believe the Government will have to consider changes to the way it deals with capital gains.
She said that is likely to involve the introduction of a tax that requires investors to be in the system for a period of time.
If they are, they will pay a lower tax rate on the proceeds than if they are not in the account.
This could be used to make capital gains tax-sensitive, she said, which could help prevent some people from shifting assets into an account.
“There is a need to be able to assess the risk of asset movements,” MacNeil said.
In the past, the Federal government has also sought to impose capital gains taxes on some types of asset sales.
It is believed to have imposed a similar cap on capital income in 2012.