OPINION: by Dr Lucy SullivanNews Weekly
The Henry tax review's better proposals
, May 29, 2010
I would like to say a few words in favour of the personal tax and family aspects of the Henry Tax proposals, two of which address infelicities I have drawn attention to in the past.
First is the system of claims for work expenses which is so convoluted that it has driven large numbers of Australians to tax consultants, thereby often losing in fees the majority, or all, of their legitimate tax refund (see my article, "The problem of work-related tax deductions", National Observer
, No. 80, Autumn 2009). This is to be replaced by a flat deduction for all in the paid workforce (unless greater expenses can be demonstrated), probably a fairer solution than my suggestion of total abolition.
The second is the recognition in family assistance of the greater cost of supporting adolescents as compared with younger children. The mid-to-late teens have emerged as a time of great peril and with continuing need for supervision; but the current tax/welfare arrangements (since the Hawke Government reforms of the 1980s) contrive to make this the period in the family cycle that most compels mothers, and the teenagers themselves, into the paid workforce to make ends meet. The Henry Tax Review recommends higher per child payments for older children, as was the case in the 1950s and 1960s.
I see it as a good move to get rid of the complexity of the Family Tax Benefits A and B, which make it difficult for families to keep track of where they stand, replacing them with a per child payment, which is a direct, not an indirect, response to the costs of children. With this in place, the greater needs of large families and multiple births will be met without the need for special categories of assistance. (Of course the adequacy of the payments is crucial.)
The much raised tax-free threshold will compensate for the abolition of the inadequate Type B benefit, and will make a low level of part-time work by mothers (when children are older) much more profitable than previously, when it merely resulted in loss of these benefits, and a high level of participation was necessary to gain any advantage.
I see nothing to object to in the goal of encouraging "parents" into the paid workforce, if this means primarily fathers, in these times when families with children are the group most likely to be entirely dependent on welfare. The progressive loss of benefits as paid work is undertaken has been the great impetus to this situation, and the Henry tax proposals should largely eliminate this invidious situation.
Encouraging mothers into the paid workforce is quite another matter at this time of concern for child safety and protection. The requirement that mothers seek work when their youngest child reaches four, rather than five when free public education begins, beggars belief. Any tax savings will be more than lost in the childcare subsidy.Dr Lucy Sullivan is the author of Taxing the Family (Centre for Independent Studies policy monograph, 2001).