03 December 2014

One Year In

It's a bit over a year since the last Federal election and I had been considering doing a post to show the changes that have occurred in the tax-transfer system over the first 12 months of Parliament 44.  I have to confess though, that the charts showing the 12 month results are, for the most part, pretty boring, and to date this had stayed my hand.
 
However, I have been intrigued by the continuing coverage that the Government's first budget has been getting, a recent example being this opinion piece by Ross Gittins. The article outlines a number of budget measures that might be perceived as unfair, suggesting that this is giving the Government continuing grief, popularity-wise.  What struck me about this is that almost none of the measures mentioned in the article have actually come into effect, having been held up, voted down or amended by the Senate.
 
In fact, despite the rhetoric around the impact of the Government's budget measures, the changes to the tax transfer system that have actually occurred over the first 12 months arguably look more like stereotypical Labor outcomes.  That's not to say that this will remain the case.  Many budget measures have had their implementation dates pushed back as part of the wheeling and dealing to get them through Parliament. Others are still before Parliament and may yet see the legislative light of day.  But the key thing, for me at least, is that most of the 'horror' budget has yet to actually bite.
 
So, let's look at how the first 12 months has treated some selected household types, but with an added twist: we'll also look at what the Government had intended to achieve, tax-transfer wise, and thus see the difference between intention and outcome.

15 September 2014

Fixed at last!

As is usual, on 20 September 2014 the rates of a number of payments in the Australian social security system will be adjusted to take into account increases in the consumer price index (CPI).  The new rates were formally announced via this press release, with a detailed set of tables provided in the attachments available here.
 
One of the many figures provided in those tables is the 'partner income free area' and its new value appears to be the only clue that a wrong has been righted.  That correction should, it appears, provide an increase in payment rates to some couple households that is significantly larger than announced in the press release.

11 March 2014

March 20 Newstart changes- more than just a rate increase

The rate of Newstart allowance (NSA) is adjusted twice a year - on 20 March and 20 September - in line with upward movements in the consumer price index (CPI).  This time round, the various NSA rates (and some associated payments) will increase by 1.9%.  Coinciding with these changes, the amount of private income a person can have before NSA is reduced under the income test is also being increased, from $62 a fortnight to $100 a fortnight.  This will be the first increase in the "income free area" or "allowable income" since 1 July 2000 when it was increased by $2 a fortnight as part of a range of measures intended to compensate for the introduction of the goods and services tax.
 
While the CPI based rate increases have received some coverage (go here for the press release and here for a detailed list of the changes), the increase in the income free area hasn't had much at all.  So, herewith, a few charts showing the combined effect of the CPI rate increases and the changed income test free area!

25 January 2014

And that was Parliament 43...


Note: I edited this post on 19 February 2014 to replace Chart 5 with the correct chart (mistakenly, the original was for the yet to be completed Parliament 44).

A little over a year ago I wrote a post about how tax-transfer system changes made by Parliament 43 had affected 9 different household types.  At the time Parliament 43 was still a going concern, making the picture I painted incomplete.   We are now well into Parliament 44 so it’s possible to redo the Parliament 43 post with results for the entire period.  I’ve also been giving some attention to 5 additional household types since the original post, so this one will cover 14 in total.

07 November 2013

Spiky EMTRs can also be prickly - how to really stick it to students


A little over 18 months ago I wrote a post about the way in which the Austudy income test seemed to me to be only half-built, causing substantial financial losses for some couples.  I finished it with a comment that the problem would only get worse over time.  There will be a few changes to Austudy payment from 1 January 2014, so with that earlier comment in mind I thought it might be interesting to see how the problem looks once these are in place.  And here’s a spoiler – it isn’t pretty.

22 August 2013

4 Parliament comparison - single earner couple with an invalid partner


This is another in my occasional multi-Parliament comparison series.  This time the subject is single income couples where one is unable to work due to a disability – an invalid spouse as the tax law puts it.  I’ve been meaning to do this one for a while because the combination brings up quite a few interesting issues around policy and system design. 

08 July 2013

A tail's tale

The maximum rate of Newstart allowance (NSA) has been the subject of much debate recently, but it’s not the only contentious aspect of that payment.  Another commonly raised issue is the effective marginal tax rates (EMTR) faced by NSA recipients (and those on payments with related income tests, such as partnered parenting payment) who have some private income, particularly earnings.  In truth, in most cases the EMTRs are actually quite a bit lower than they used to be – NSA once had an income test with a 100% withdrawal rate, whereas the highest taper these days is 60%.   There are, however, some persistent problem areas and one of these lies at the tail end of the income test for couples.  There, EMTRs remain stubbornly high and the reasons underlying this raise interesting issues involving differences in the fundamental basis of assessment between the tax system and the transfer system, and also the flow on effects of tinkering in different parts of the system.