Treasurer Joe Hockey says the Coalition will ditch or change tax measures worth $3.1 billion proposed by the previous government, including a contentious cap on self-education expenses.

The Government has set itself a December 1 deadline to resolve uncertainty over dozens of tax and superannuation policies dating back to 2001.

Of 92 announced but unlegislated proposals, Mr Hockey says the Government will keep 18, amend three and dump seven. The remaining 64 will be the subject of consultation about whether to cancel or keep them, “with a disposition not to proceed”.

Labor announced a $2,000 cap on self-education expenses at the last budget, to save $266 million over the forward estimates. But the Treasurer says that is “flawed policy” which will be dumped.

“Of the 174,000 taxpayers affected by Labor’s cap on self-education, 81 per cent earn less than $80,000 a year,” Mr Hockey said.

“They are the people who are trying to invest in their own education to get ahead. “It was flawed policy with no motivation other than a simple headline.”

As previously announced, the Coalition is dropping Labor’s proposed fringe benefits tax changes for the car industry.

It is also not proceeding with changes to the tax on superannuation pensions, which Mr Hockey said was worth $313 million at budget time but which were so complex as to be “undeliverable”.

But Labor says the Government’s decision shows “twisted values” and “wrong priorities”.

Opposition treasury spokesman Chris Bowen pointed to the Coalition’s plan to scrap the low-income superannuation tax offset linked to the mining tax as “unfair”.

“This Government fundamentally doesn’t understand, fundamentally does not get that it’s unfair for Australia’s low and middle-income earners to receive effectively zero tax concession on superannuation when Australia’s high-income earners get substantial tax concessions for superannuation,” he said.

Hockey defends hit to budget’s bottom line

Other measures will be altered, including a tightening of thin capitalisation arrangements designed to cut profit shifting mostly by transnational companies.

Mr Hockey says the cost to the budget will be borne through the four forward estimate years and defended the hit to the bottom line.

“Essentially these initiatives would not have in net terms raised less money,” he said.

He said the FBT changes to motor vehicles would have incurred “massive compensation” costs and the self-education expenses would have come at a “significantly greater” cost to the economy.

By proceeding with 18 tax measures, the Government says it is guaranteeing $11 billion in revenue over the budget forward estimates.

It has confirmed it will keep Labor’s increase in tobacco excise, which is set to raise $5.3 billion for the budget.

From December 1, the price on a packet of cigarettes will rise by 12.5 per cent per year, increasing the cost by more than $5 by 2016.

The Government wants to complete its review of taxation measures by December 1 so any decisions can be marked in its first budget update – the Mid Year Economic and Fiscal Outlook (MYEFO) – due before Christmas.

“MYEFO will illustrate graphically the problem that we’ve inherited and the budget will offer the solution,” Mr Hockey said. “In the interim, I want the Australian people to go out and spend for Christmas.”

The Opposition has repeated its call for the Government to release the MYEFO update immediately.

Coalition ‘tinkering at the edges’

Stephen Martin from the Committee for Economic Development in Australia (CEDA) says the Coalition is “tinkering at the edges” and a proper national productivity agenda needs to be put in place.

“We’re echoing the calls from business community leaders that we think substantive change needs to come to company tax to make us internationally competitive,” he said.

“What we are saying is the tax base should be broadened and should see an increase in the GST as part of that.

“These are substantial reforms that require political courage.”

The Government has promised a tax white paper, but says it will not make any changes to the goods and services tax (GST).

Professor Martin says reviews of the tax system have been “done to death”.

He says the Council of Australian Governments needs to play a much stronger role than it has to date.

“Getting back to a more sustainable level of cooperative federalism where we see some real changes that will be required as Australia goes into the next 20 or 30 years.”

Key points

• Coalition to keep 18 of 92 unlegislated tax proposals
• Remainder will be either dumped, amended or reviewed, a cost of $3.1b to budget
• Cap on self-education expenses dumped
• Low-income superannuation tax offset linked to mining tax scrapped
• Fringe benefits changes for car industry dumped
• Coalition keeping Labor’s tobacco excise increase, raising $5.3b for budget