Rich get richer, poor pay their taxes

Source: The Courier-Mail

Source: The Courier-Mail

CORPORATE Australia is not paying its fair share of tax, a new Treasury analysis reveals.

Since the onset of the global financial crisis, Australian companies have been paying just 27 cents tax for every dollar of profit they generate. The statutory rate is 30 cents in the dollar.

A Treasury issues paper to be released today by the Assistant Treasurer, David Bradbury, has examined the evidence on tax avoidance by multinational companies operating in Australia.

In the new global economy, it is easier than ever for big companies to avoid tax by shifting their profits to low tax countries.

According to Treasury's analysis, the proportion of profit that companies pay to the federal government is as low today as it was during the 1990s recession.

According to Treasury: "In comparison with other countries, Australia's corporate tax collections have fallen by more and recovered by less since the onset of the GFC."

Company tax receipts - including the mining tax - accounted for 22 per cent of total tax receipts in 2011-12.

Treasury says it is too early to say whether the reduction in tax paid by companies is the result of tax avoidance or companies simply carrying forward losses incurred during the GFC.

"The ...analysis provides a number of indicators that suggest the existence of base erosion and profit shifting in Australia. However...it is difficult to reach a definitive conclusion," Treasury concludes.

The Assistant Treasurer, David Bradbury, said the government had already tightened loopholes to protect more than $10 billion in revenue over the next four years.

"We don't want to see a future where hardworking Australian families and businesses have to pay disproportionately high taxes because multinational corporations are not pulling their weight," he said.

The paper also reveals the dominance of big business in Australia, with just 0.1 per cent of companies paying over half of all company tax paid in 2009-10.

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Aussies ditch their life insurance

Financial Services Council CEO John Brogden. Picture: James Croucher Source: National Features

THE number of Australians dumping their life insurance is at a decade high.

About one in five are failing to renew life insurance, taken out either as an extension on their default cover in their super fund or through individual policies, insurers say.

Financial Services Council chief executive John Brogden says the lapse rate is a worry for the nation, which has a chronic underinsurance problem.

"We are having high lapse rates, we are getting a higher level of non-renewals and it's at a 10-year high," he says.

"It's a concern that people aren't being covered and are dropping their cover."

Different types of personal insurance cover fall under the life insurance umbrella:

* Death cover pays a lump sum to your beneficiary if you die.

* Total permanent and disability insurance pays a lump sum if you are injured or disabled.

* Trauma insurance pays a lump sum if you are diagnosed with a specified life-threatening illness or injury.

* Income protection insurance covers you if you are sick or injured and cannot work.

Brogden says it's important Australians take time to look through their life insurance cover if they have any and determine whether it is enough.

"Believe me, $200,000 or $300,000 is not enough if you're 35 or 40," he says. "It's partly due to the cost of living.

"The more people who have insurance the less people who are on the welfare, it's a very simple formula."

Jim Minto, managing director at life insurer TAL, says "consumer affordability" and "price shopping" are to blame for the drop in cover.

"It's just the same as what is happening in retailing and general insurance; it's really shaking the life insurance industry because it never planned for it to be like this," he says.

"We are seeing people in tighter financial situations managing a budget that's tighter, tighter and tighter and they are more inclined to ask the questions, 'Do I need life insurance and is it too much?'"

The cost of life cover varies greatly, from a few hundred to thousands of dollars a year.

Mark Vilo, executive manager of insurer Asteron Life, also blames affordability for the high lapse rates.

"Regardless of whether life insurance is inside or outside of superannuation, 71 per cent of our business lapses is because of affordability issues," he says.

> PROTECT YOURSELF

If you died tomorrow, how would your loved ones cope financially? Work out the worst-case scenario and how those around you would survive financially.

* Would they be able to pay for expenses such as funeral costs, medical bills, taxes and debts?

* Before buying life insurance, check any cover you may have through your super fund, the amount of cover and if you can increase that level of cover if needed.

* Life insurance is a particularly important type of cover for people with children, debts (such as mortgages) and other hefty expenses (such as school fees or car loan repayments).

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