TAX breaks for older Australians should be scrapped to help fund vital social and economic reforms without derailing the promised budget surplus, a new analysis says.

The Australian Council of Social Service has also called for a major crackdown on government waste and reform of private trusts to stem their use for tax avoidance, a practice it says costs the budget $1 billion a year.

In its submission to the 2012 budget process, released yesterday, the peak welfare lobby group says its proposed measures would help resolve the tension between the government's commitment to restore the budget to surplus from 2012-13 and the urgency of unmet social needs and key reforms.

ACOSS says the senior Australians' tax offset and the mature age worker tax offset should be abolished and the private health insurance rebate removed from ancillary health cover (in addition to the government's proposal to income test the rebate).

''The solution to the tension between resources and need is not to retreat from reform but to pursue it more comprehensively with a sustained attack on wasteful expenditure and tax breaks,'' said the acting chief executive of ACOSS, Tessa Boyd-Caine.

ACOSS said Australia was the eighth-lowest country for taxes among the 30 developed nations in the Organisation for Economic Co-operation and Development. Australians were not overtaxed but taxed unfairly and inefficiently. The main problem was an array of tax shelters and loopholes that enabled well-off people to avoid paying tax at the appropriate marginal rate.

In highlighting areas for reform, ACOSS said individuals could reduce the marginal tax rates on their income by: sheltering income in a private trust; sacrificing salary for superannuation, which allowed taxpayers on the top marginal rate to reduce their tax rate from 46.5 per cent to 15 per cent; taking advantage of the concessional treatment of ''golden handshakes'', which in many cases were taxed at 15 per cent.

Small businesses could reduce tax by taking advantage of capital gains tax concessions not available to other taxpayers and international companies could shift profits from Australia to lower tax jurisdictions, while maximising Australian debt levels.

ACOSS wants the $243.40- a-week Newstart Allowance for singles and the $194-a-week Youth Allowance for those living independently of parents increased by $50 a week. It says the real value of the allowances had not increased since the early 1990s.

It proposes a national oral health program in place of the Medicare chronic disease dental scheme and teen dental program, which it says have not stopped the growing gap in oral health between the advantaged and disadvantaged.

It urges the establishment of an affordable housing growth fund with a down payment of $750 million in the first year to expand affordable housing.

The proposed spending measures would cost an additional $3.6 billion in 2012-13, while the government would save an estimated $4.8 billion through the suggested attack on ''tax waste and tax breaks''.