Australia proposes new tax for disability welfare

CANBERRA, Australia — Prime Minister Julia Gillard has pinned her government's re-election hopes on a new welfare program for the disabled, proposing on Wednesday a new tax to better fund care for Australians with severe physical and mental disabilities.

The tax would not be paid until July 1, 2014. Gillard said legislation to create the tax would not be considered by Parliament before general elections on Sept. 14.

Opinion polls agree Gillard's center-left Labor Party government is unlikely to retain power. While the conservative opposition supports the concept of a new disability support fund, it opposes a new tax to pay for it.

Gillard had rejected a new tax last year but said Wednesday the government could not fund the program through savings because company tax revenue was falling billions of dollars short of Treasury Department forecasts due to the cooling mining boom and a strong Australian dollar damaging business competitiveness.

"To announce what we have today, we've needed to make a choice," Gillard told reporters. "I will be asking the nation in September to make a choice too. To endorse this plan to make sure that we support disability care around Australia."

The government plans to fund the program by increasing a compulsory health insurance levy from 1.5 percent of personal income to 2 percent. That would raise 3.3 billion Australian dollars ($3.4 billion) in the first year.

The new tax promise was welcomed by groups representing the disabled and doctors. But some business groups have warned that increasing the tax burden would harm the economy.

Around 410,000 disabled people and their caregivers stand to benefit from the program that would become fully funded by the 2018-19 fiscal year, by which time the tax would have raised AU$20.4 billion.

Opposition leader Tony Abbott, who polls suggest will become the next prime minister, said the program would cost twice as much as the tax would raise. He did not rule out supporting the tax but demanded detail on how the rest of the money could be raised.

"If you are only going to half fund the scheme, presumably you are only going to half deliver it," Abbot told reporters.

Gillard said her government would continue to find savings in her next annual budget to be released on May 14 to fully fund the program. She challenged Abbott to commit to supporting the tax.

Disability benefits vary from state to state. Disabled people's financial security can dependent on how they were disabled and whether they can claim insurance in circumstances such as a car accident. All agree that Australia does not spend enough on the disabled.

Opposition treasury spokesman Joe Hockey said his Liberal Party opposes a levy because "business and consumer confidence was fragile."

"This levy is going to hit every household budget," Hockey told Australian Broadcasting Corp. radio.

"A new levy is not going to help business and consumer confidence," he added.

While Australia's debt level is low by the standards of other wealthy countries, the opposition is critical of the government for failing to keep a two-year-old promise to return the budget to surplus in the current fiscal year, which ends June 30.

The government conceded in December that it could not keep that pledge due to a slowing economy and weakening tax revenues.