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ACOSS budget submission calls on Hockey, Abbott to close tax loopholes rather than cut spending

The peak social welfare group is urging the Federal Government to focus on closing tax loopholes, rather than making spending cuts, to repair the budget.

In its budget submission for 2015-16, the Australian Council of Social Service (ACOSS) said more than $13 billion of savings would be available next financial year, and $18 billion the year after, from reducing tax concessions and tightening middle and upper-class welfare.

Among the tax loopholes, ACOSS said the Federal Government could save $6.6 billion in 2015-16 from axing the private health insurance rebate, $2 billion by curbing the use of trusts and private companies to reduce income tax liabilities, about $800 million through tightening and extending the taxation of superannuation and $2.2 billion from cutting poorly targeted tax rebates and concessions.

ACOSS also recommended reforming negative gearing so that expenses on investments (such as interest payments) would only be deductible against earnings from the same investments, rather than against the taxpayers' whole income.

The organisation's chief executive Cassandra Goldie told AM that reducing negative gearing would not only save the Government money, but would also be good for first home buyers.

"We're fuelling professional investors into the real estate property market. It's to the detriment of people who are trying to get into that market for housing purposes," she said.

"We have a problem with affordable housing in Australia and we also have a problem with the lost revenue that comes from this kind of property speculation leading to tax minimisation."

The welfare group also pointed to $1 billion in savings available from removing capital gains tax concessions for small business assets, which it argued encourages risky speculation.

Tighter expenditure measures include an estimated $1.35 billion saving from tightening the age pension assets test, $1.8 billion from reducing subsidies for out of patent medicines, and $400 million from abolishing the extended Medicare safety net.

Cassandra Goldie said ACOSS is only proposing taking the pension assets test back to pre-2006 levels, before it was increased by the Howard government.

"Now what happened during that period was the government of the day eased the assets test for eligibility for the aged pension," she explained.

"All we're simply saying is we need to restore it to where the test was prior to that period."

In its submission ACOSS suggested that some of these savings could be put towards a $51-per-week increase in allowances, such as the Newstart unemployment benefit, a 30 per cent increase in the rent assistance cap, the indexation of allowances and family payments to wages, an investment in dental care, maintaining Aboriginal health funding and establishing an affordable housing growth fund, amongst other programs.

ACOSS estimated the Government would come out more than $7 billion ahead in 2015-16 if it adopted all the proposals, and more than $10.5 billion in 2016-17.

In December, the Federal Government revealed the projected 2015-16 budget deficit had blown out from $17.2 billion in May's budget to $31.2 billion in the Mid-Year Economic and Fiscal Outlook (MYEFO).

That deficit also assumes that the Government will get through a number of budget savings measures still currently stalled in the Senate.