- ATO (Australian Tax office) website crashed as people hurried to withdraw super and lodged tax returns on the first day of the new financial year.
- Under the superannuation scheme, those impacted by the outbreak were able to grab $10,000 from their super in 2019-20 financial year and $10,000 again from 1 July until 24 September.
- NSW government-commissioned report has given recommendations to improve the tax system.
- The report urged that states must expand the base of GST or lift the rate from the current 10% and calls for the replacement of stamp duty with a broader land tax.
The first day of the new financial year was struck with an early release of super placing strain on ATO online system.
The website of Australian Tax Office crashed in the morning of 1 July as people rushed to take an additional $10,000 from their superannuation accounts and thousands lodged tax returns on the first day of the financial year. Users reported witnessing issues with systems where few were getting messages of high volume of traffic, causing lengthy waiting time.
However, no details were given about the number of people trying to access superannuation lump sum and the number trying to lodge tax returns. About 2.4 million people have applied to remove up to $10,000 from their super savings, and $17.1 billion has been paid out so far.
The Federal Government of Australia launched the Early release Super scheme in April granting Australians to access $20,000 of their super across 2 years. The first $10,000 could be withdrawn in 2019-20 financial year and the same amount during FY2020-2021. The applications for accessing super at the beginning in 2020-2021 financial year is available through the MyGov website and close on 24 September.
Australians could access their super only if they are jobless, are eligible to get a JobSeeker payment, have been out of a job since 1 January or had their work hours decreased by at least 20%. The retirement funds were made available for those who have experienced a plunge in income due to coronavirus induced lockdowns.
However, the government’s superannuation scheme has been controversial as significant proportion of people are taking out money from super, in spite of not being under financial stress and some people have been alleged to be using the withdrawn money on activities such as gambling, alcohol and takeaway food.
GST system in Australia
GST was introduced about 2 decades ago, and the compelled elimination of taxes on fuel, alcohol and cigarettes struck a massive hole in government revenues. Still, negotiations that were made to get GST across have meant it has never raised as much revenue as was anticipated. Moreover, food, health, and education were exempted from the GST net.
GST is a crucial source of funding to pay for schools, hospitals, and many others. GST raises about $70 billion a year, which comes to around 13% of Australia’s total tax haul that has been falling since it was introduced due to spending on housing, education, and health and less on GST attracting sectors. Within states, GST revenue is just above 20% of total income in New South Wales, while it has been noted ~40% in Tasmania.
The Grattan Institute has argued that broadening GST to incorporate food, health and education would be more economical and decrease costs for business. It would also catch more expenditure by wealthier people who are more prone to spend on private education and health. But the idea was not appreciated much by Victorian Treasurer who did not want to cause massive disruption to settings.
Australia’s rate of 10% is well below the OECD average of 19%.
NSW presses on altering GST
A panel led by David Thodey (former CEO of Telstra) released a draft report of an extensive review of federal financial relations. The review was assigned by NSW Treasurer Dominic Perrottet in 2019, and is expected to be powerful as governments consider tax reforms and other ways to improve federation amid COVID-19.
The report recommended that states must approve to increase the tax rate, or expand the base of 10% GST to finance reductions in more harmful taxes like property stamp duties, while replacing it with broad-based land tax and lift economic recovery. The report has called for a national strategic approach to payroll tax reform.
NSW government has estimated to raise $9.8 billion in revenue from payroll tax in 2019-20 out of $32.5 billion in state taxes collected.
Another recommendation of the report was the initiation of user-pays road charging for electric vehicles due to a projected shortfall of $11.3 billion fuel excise. The report has cautioned that state governments are under the risk of higher debt, which can act as a hurdle to deliver essential services and infrastructure sustainably.
Before coronavirus crisis, Morrison had ruled out lifting GST from 10% to 12% or expand the base to include fresh food and other basics. NSW Treasurer has urged his state and federal associates to consider changes to GST to get rid of less efficient taxes.
Mr Perrottet was due to release a review of the tax system on 1 July.