With the release of the budget by the Coalition just over a month away, possible inclusion of the controversial policy of collecting student debts from the dead, as well as increasing student fees could find themselves to be on the table in an attempt to achieve savings.
Currently HECS debts of deceased estates worth more than $100,000 are written off by the government, recognising that these sums will never be recovered. If however such policy was to be implemented, it would lead to a potential $800 million in savings. This is something Education Minister Simon Birmnigham would very much welcome, due to the pressure the education sector is under to produce some substantial savings.
Although other options are under consideration to gather funds, a positive in recovering HECS debt from deceased individuals is that it would be mostly affecting wealthy households, ensuring that low-income graduates would not be affected due to the $100,000 basis.
While such a policy would see a small contribution to the deficit in the short-term, it would highly impact on the debt that the government still had outstanding in the long-term, meaning that future budgets and economic activity would benefit.
Additionally there is still the matter of a 20% cut in funding and increasing student fees without full deregulation of the system, options that still remain official government policy, and will apply with other reforms the government decide to adopt.
Such savings are important for the government in order for the budget to eventually come back into surplus, and furthermore to provide resources to fund other projects it has set on it’s agenda. What goes against such a death tax and its need to create savings is the fact that almost a third of large private companies paid no tax in the 2013-14 period. These figures would immediately make one believe that such companies were dodging their obligations, yet the fact that such companies are associated with a variety of entities, means that the aggregate of these private groups could result in no profit, or losses in previous years which are offset, and therefore no tax.
Oxfam Australia’s Joy Kyriacou said upon this instalment that “it’s time for the Australian Government to crack down on large companies…. [they] should justify their investments in tax havens, and be required to publicly report the taxes they pay- both in Australia and overseas.”
Such insight would clarify and ensure that companies operating in Australia are paying their fair share of tax, but then the question arises of where do we draw the line in terms of information that companies should report? AASB standards reflect the requirements and important information users need to make informed decisions. What is clear is that users will never be completely informed of everything going on in relation to a company, and publicly reporting taxes paid in various countries may not be of extensive use to such a point as to make it a requirement. But would it assist in getting rid of unfair tax breaks? Possibly, a matter that ultimately would need to be debated by the government and accountants in the industry.
What is imminently clear though is that voters will not warm highly to the idea of a ‘death tax’ where tax isn’t being contributed by large private companies operating in Australia. Tightening tax laws just might have to occur in order for other elements proposed by the government in their looming budget to be accepted by the Australian voters.