Tony Windsor (New England, Independent) Share this | Hansard source

I was interested to hear the wide-ranging speech by the member for Canning. I would like to make a few comments on tax reform and tax policy generally but, firstly, I extend my congratulations to the Treasurer on his 10 years of service to the nation. Obviously there have been occasions when we have disagreed with him, but I think the Australian people, in general at least, would suggest that he has been able to keep a reasonably firm rudder on the economy over his 10 years. The next 10 years will be different. A number of tax reform issues are coming forward. It has been one of the positives of the last six months that many members have raised those issues. The Parliamentary Secretary to the Minister for the Environment and Heritage, who is at the table, Mr Hunt, is one of these people, and there are others as well.

Before I get into the general tax reform area and the changes that I believe need to be looked at, let me say that the concentration on tax policy that has been a feature of the last few weeks should not forget about the priorities of the electorate. In my electorate—and I think most surveys that have been carried out in other electorates show this—there is a feeling, irrespective of the custodians in some cases being, obviously, the states, that the spending on the health budget needs to be increased both at a state and Commonwealth level. I would argue that in any reform that takes place the key focus should be on health and education spending. It would be counterproductive to give back $2 or $3 a week to the electorate at large through tax reform if people were not able to engage a doctor or find a bed in a hospital or send their children to university. A balancing act needs to occur. We do not want to lose sight of what our taxes are raised to do. There is a legitimate debate about how we raise that money, who we raise it from, and how it is spent.

I would like to mention a few things about policy changes. Whilst the parliamentary secretary is at the table, I will proceed to an issue that is of major concern in the north of New South Wales. I know he has recently spent some time looking at the Cubbie issue; I will not debate that matter today. I wish him well in his determinations with regard to that issue. In the Namoi Valley, he would probably be aware of the issue of Commonwealth government taxation policy and the way it is impacting on the compensation that is due to the ground water entitlement holders for the loss of ground water entitlement. The irrigators in that area, I stress, are ground water irrigators, so the water they are using cannot be just left to the market, because it is not fluid in that sense; it is ground water. It is not to be confused with water held in storage or in the river systems.        

But the ground water users in that area—and there are something like 700 of them—agreed, through the National Water Initiative process, to embark upon a three-way compensation arrangement: $50 million to be contributed by the Commonwealth government, $50 million by the state government and $50 million, partly in kind, by the entitlement holders. This was to establish a process so that the entitlements could be adjusted down to a sustainable level, and I do not think anybody would argue about that. In a sense, current water entitlement holders were embarking on this process of adjustment for the long-term good of the ground water resource and the obvious benefits that will have for future generations.

The Prime Minister and the then Premier, Bob Carr, announced this program with great glee and saw it as one of the initiatives of the National Water Initiative. What they did not happen to say on that day—and the irrigators have only recently found out about it—is that the contributions being made by the irrigators, the state and the Commonwealth are going to be assessed as income for taxation purposes. So, even though the Commonwealth is giving a third of the money—and the entitlement holders are very appreciative of that—in some cases, depending on the individual’s taxation system, some of that money will be totally returned by way of income tax assessment. The problem there is that they are actually losing a capital asset that should not be assessed as income, and there is a difficulty here. I have raised this issue with the Prime Minister on a couple of occasions, and I thank him, for he has written back as well as having answered questions in question time. The problem is that, in discussions with the taxation commissioner, the Prime Minister is saying that, based on long-term arrangements, this compensation would be considered as, in a sense, a subsidy for or a bounty to those people and, as such, be assessed as income. That rankles the entitlement holders because they were not told that this would be assessed as income when they entered into the arrangement as a one-third shareholder. However, the Prime Minister had that determination from the taxation commissioner.

The difficulty here—and this is why I am pleased that the Parliamentary Secretary to the Prime Minister is here today—is that we should not keep going back decades and, in a sense, applying old tax law to new resource management policy. The government deserves to be congratulated for putting in place the National Water Initiative. There are a lot of jagged edges, and it will take time to be bedded down, but the general principles are good. The general principles of looking at water across state boundaries and working with users of water and with the environment towards sustainable goals are good objectives. The parliamentary secretary is attempting to do that, I hope, with the debate about what is happening on the New South Wales-Queensland border with Cubbie Station. The Premier of New South Wales, the Prime Minister and others took great credit in putting in place the ground water program, one of the first initiatives of the National Water Initiative. In effect, the users of the water, the state and the Commonwealth, under the so-called leadership of the Commonwealth through the National Water Initiative were able to come to an agreement where these people could be assisted, and the environment generally, and the resource made more sustainable. But, at the first jump we saw a determination by the Australian Taxation Office that this is to be assessed as income, because, in the Prime Minister’s words, that is the way it has been done; it was done by the Labor Party, and it has been done by the coalition.

The suggestion I would make to the parliamentary secretary and to the Prime Minister is that we are entering an era of new resource management policy. If this cannot be avoided by way of current tax law, we need to adjust the tax law to take these new initiatives into this century. With something like the compensation arrangement for the loss of an entitlement, the recognition—even though I have some argument with this—of the property right issue in the National Water Initiative and some of the COAG arrangements and the national action plan agreements et cetera that have been put in place, our tax law does not reflect on that favourably. The precedent that is going to be set here if this is allowed to take place will have an impact on any entitlements, particularly in the farming community, where it may be in relation to the reduction in land clearing for the greater good of the community, where a compensation arrangement is put in place, or it may be for further reductions in property rights for water entitlement holders in other valleys, in ground water systems or in storage systems. In Cubbie Station, for instance, there may well be undertakings that governments can put in place to achieve a more sustainable outcome.

This first hurdle has to be overcome. There are a number of ways that that can happen, but I make the plea today that, if we get this wrong at the start, it not only is bad policy but sends a dreadful signal to the current users of an entitlement that was issued by government in a legitimate sense, and investment took place based on those entitlement arrangements. It will send a dreadful message to anybody who has an entitlement and is involved with the National Water Initiative or other resource management initiatives. I would encourage the parliamentary secretary to take those comments on board.

There is another issue with regard to water tax. I was amazed yesterday as I listened to the answer to a dorothy dixer from the member for Barker to the Minister for Agriculture, Fisheries and Forestry. The minister was berating Premier Beattie in Queensland for putting on a $100 bore tax and a proposal for some sort of windmill tax. I agree that that is quite ridiculous, but the Commonwealth government is imposing a tax not only on its own contribution but on the state contribution and the irrigator contribution through the National Water Initiative. I do not think the minister for agriculture can hold his head up high in relation to that general issue.

Another issue I raised yesterday similar to this was about the Australian Rail Track Corporation. One of the good programs the government has put in place—and I congratulate it—is the cap and pipe program, which takes pressure off the Great Artesian Basin. These artesian bores were spewing water out willy-nilly 24 hours a day into bore drains, and those bore drains would go some hundreds of kilometres, in some cases, and locate water to the appropriate properties. The government, in conjunction with the states—I think it is 20 per cent from each of them and 60 per cent from the landholders—has embarked on a cap and pipe program where it caps the bores and runs polythene pipe to these various properties. There are massive savings in water—it is a great initiative—but bear in mind the landholders are paying 60 per cent of it for the greater good of the resource; and there are those issues again.

I received some messages from people in the Burren Junction area. I will use it as an example; I am sure it is happening in other areas where the cap and pipe program is in place. The railway line through Burren Junction has had bore drains running underneath it for decades. Under the cap and pipe program, part of the process is that it will bore under the railway line and put a polythene pipe in. The Australian Rail Track Corporation, which is fully owned by the Commonwealth government, is charging $1,000 for that to occur under its land. Worse than that, it is charging a fee of $200 per annum to allow that pipe to be there, even though the bore drain has been there, in some cases, for 80 or 90 years—nearly as long as the railway line.

I again say to the Parliamentary Secretary to the Prime Minister: when we are talking about tax and the signals it is sending, particularly in the resource sustainability areas, we have to get serious about using some of these opportunities to raise revenue. We promote a program, and that is good—both of those programs are good—but there is this little sting in the tail that claws back money or makes people pay for something that they have not had to pay for in the past.

There are a number of other issues. Superannuation is an issue that everybody understands. It is a position that has been bastardised over the years by a range of governments in terms of the take at the start, the take in the middle and the take at the end. I know—and I congratulate the Treasurer on this—that positive moves have been made in relation to that, but if we are serious about the future of our aged we must address that issue.

I noticed with some interest the other day that Paul Keating was saying that two of the things he regretted in instituting the superannuation arrangements were some of the clawbacks that were put in place and the rate of nine per cent, which in his view was too low. The first objective must be that we remove all taxation from superannuation, because it would send a positive signal about saving for retirement rather than the one that exists now, which at best is a mixed message and at worst is a negative one.

The fuel taxation arrangements are another area that, if we are serious about tax reform, we need to look at. We are raising $14 billion from fuel taxation; we are spending about $2 billion back on roads. We should not be doing that. Any fuel tax that is charged should go back on roads. If it is not required for roads, it should not be charged at all. Obviously people will say, ‘You’ve got to get money from somewhere, and fuel taxation arrangements have been a source of income for government.’ If we are serious—and some people would consider this political dynamite—then we really do need to have a close look at the rate of GST. We also need to look at how a consumer tax—and I am not in favour of it being applied to food—can raise some of the revenue that is being raised through the disjointed fuel tax and superannuation arrangements that are currently there. If the Treasurer is looking at genuine tax reform, he really must have a look at the goods and services tax area.

Zonal taxation is an issue that is raised from time to time, particularly in relation to regional areas, trying to overcome some of the bottom line factors about locating business in country areas and the economies of size of some businesses being located in city environments. If we are serious about changing the demographics and encouraging regional growth, zonal taxation is one of those things that, if plugged into some of the renewable energy areas, could help drive developments in many country areas.

In conclusion, I reiterate the point I made at the start of my speech. Personally, I believe we really do need to do something at the lower end of the tax scale to have a direct incentive that encourages people to work rather than concentrating on the top end like we have in recent years. Irrespective of how the reform is done and how the cards are juggled, the first area that has to be written on the top of the balance sheet is health. Irrespective of who gets the money and how it goes through the states or whether those arrangements are rearranged, you have to make sure that particularly health and education, those key issues, are adequately funded.

In the other areas, I think we have to start sending positive messages about saving for our future and addressing the various issues with regard to fuel. Australia prides itself on being competitive overseas but at home we have shackled ourselves with virtually a 50 per cent goods and services tax on the use of our major energy sources: petrol and diesel. I encourage the Treasurer, the parliamentary secretary and the Prime Minister to take those few comments on board and to also do something about the taxation anomaly in respect of water entitlement holders.

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