THE Federal Government is backing childcare rebates over tax deductions because it benefits more families, but says it is open to discuss potential changes at the tax forum.

Transfer payments, such as income support and family assistance, are listed on the agenda for the second and final day of the Government's big tax forum, which kicked off at Canberra's Parliament House this morning.

Child Care Minister Kate Ellis said the forum was all about engaging in a constructive debate with stakeholders, but added that she saw no reason to change how childcare payments are currently made.

"I'm really surprised at some of the women's groups that are advocating for deductibility when we actually know that the overwhelming majority of families would be receiving considerably less," she told Sky News.

"And, of course, they'd be waiting to receive any such payment once a year rather than fortnightly."

Under the non-means-tested childcare rebate, up to a maximum of $7500 a year is refunded to eligible families who use approved childcare services.

The Government is being urged to reform the system by increasing or scrapping the cap and introducing a tax deduction for working families, thereby giving them greater control over how money is spent.

Income tax and how the tax system is managed by the government will also be up for discussion on today's program, which started at 8.35am (AEDT) with an address by former Treasury boss Ken Henry.

What Australians want

Meanwhile a news.com.au survey of readers found the average Aussie wants the GST rate lifted and other taxes cut to make our outrageously complex tax system fairer.

The survey found overwhelming demand to simplify the tax system.

The most common idea, though, was to increase the GST something the politically fragile Government has already ruled out. Carbon and mining taxes are also off the agenda .

A simpler flat rate of income tax and compensation for low income earners who spend more of their money on basic goods and services are what readers want as trade-offs for a higher GST.

But the Government has already flagged that any calls for tax cuts must be matched by revenue-raising measures elsewhere.

“Double the GST to 20 per cent, compensate the socially disadvantaged and then abolish stamp duties and other taxes,'' suggested one reader.

Tax summit: See the talkfest's two-day program here

Allowing married couples to split income is one idea to create fairness.

"Why should a household with only one person earning $100,000 pay more tax than a household that has two people earning $50,000?" asked Tony of Brisbane.

Another reader, Rachel, agreed that families should be taxed by the household rather than for each person.

"This would make a huge difference to women and their ability to stay home with their babies," she says.

Recent migrants cannot understand why people can make more money by staying at home on benefits rather than working.

"I recently migrated to Australia and I have found it very interesting that people who work less or earn less will benefit in two ways pay less tax and get more government benefits," wrote a reader in Brisbane.

Other reader ideas include scrapping the tax on savings account interest, making child-care expenses tax-deductible, super taxes for high executive salaries, and abolishing capital gains tax.

Some came up with suggestions such as scrapping negative gearing and so-called middle-class welfare, or abolishing all tax deductions.

Your Money columnists David and Libby Koch agree with you that the Government needs to simplify Australia's tax system.

“We're not confident about the outcome. Not since the Hawke-Keating tax summit in the 1990s has any government forum produced fundamental change to the system.”

“This one can't be about fundamental change either, because no one is allowed to talk about the carbon tax, GST and mining taxes. If it was serious about reform, then every tax should be open for discussion.”

David will be attending the forum and says the most common suggestion has been to increase the GST from the current 10 per cent up to 12.5-15 per cent to allow a major drop in income and company tax.

“In other words, to tax consumption and encourage earning income.

“But GST changes are off the agenda. While it is a great idea, I suspect the problem is all GST revenue goes to the states and the Federal Government wants to keep control of the revenue purse strings.

“A flat tax is also a common suggestion but the problem with that is most income taxpayers are in the middle tax brackets. This means a flat tax rate would have to be relatively high and thereby disadvantage low income earners.”

David will be lobbying for these changes today and tomorrow following your suggestions:

1. Increase the small business entity turnover threshold from $2 million to $10 million.

This is basically the Federal Government's definition of a small business. Any organisation with a turnover less than $2 million is eligible to a range of tax, investment and depreciation concessions which can be a big financial benefit.

Last year's Henry tax review has even recommended an increase to $5 million but lifting it to $10 million would help those groups caught in the no-man's land of moving from small to medium in size.

2. Limit negative gearing of non-productive assets.

Given current tax rates and low capital growth, negative gearing of property and listed shares doesn't really stack up unless you're on the highest marginal tax rate.

Even so, the tax concessions are a huge drain on the budget, affecting only a small proportion of taxpayers.

3. Introduce a small business tax rate of 25 per cent.

Small business owners take an enormous amount of risk to build their operations which is never really identified or rewarded. They put their homes and personal life on the line in a way employees and big business executives never do.

A 25 per cent small business company tax rate will encourage more start-ups as well as a great tonic to keep building and taking those risks.

4. Simplify and reimburse payroll tax.

Payroll tax has always been a crazy disincentive to hiring staff. To make matters worse, payroll tax rate can be different between states.

The first step is to standardise payroll tax rates across all the states and for the Federal Government to reimburse small business.

5. Carry forward and carry back provisions for super contribution limits.

Some years we have enough cash to contribute up to our superannuation limit and other years are so tough that there is nothing left for extra super.Taxpayers shouldn't be penalised for going through a tough period.