Michael Keenan (Stirling, Liberal Party) Share this | Hansard source

There is not a lot that I admire about the member for Lilley, although in this instance I do admire his front. We have just heard him accusing the government of a litany of sins in the midst of the most sustained economic growth in this nation’s history. This expansion has been created in large part by the policies of this government—policies that were opposed at every stage by the Australian Labor Party. The shadow Treasurer accused the Treasurer of lacking policy vision by not outlining the nature of the tax system or how the tax system will look in a decade’s time. This is from a shadow Treasurer who has trouble articulating an economic policy for the ALP for next week and from a shadow Treasurer of a party that has comprehensively failed over the past 10 years to outline any coherent economic or fiscal policy at all.

In speaking on the Tax Laws Amendment (Personal Tax Reduction and Improved Depreciation Arrangements) Bill 2006, I am pleased to report that the Treasurer recently took time out from his busy post-budget tour of Australia to officially open my new electorate office in Stirling. (Quorum formed) I had mistakenly assumed that the Labor Party had learnt from last year’s experience of trying to block personal tax cuts, but obviously they have not. Let the record reflect that they tried to close this House down whilst the government was introducing this round of personal tax cuts.

What is it about tax cuts that the Australian Labor Party hates so much? Mr Deputy Speaker, I can tell you that the people in my electorate of Stirling are very pleased with this year’s budget. When the Treasurer came on his post-budget tour to open my electorate office, he received a rousing welcome from local community leaders, families and business owners. The people of Stirling know that real and practical benefits will come out of this year’s budget. The Treasurer’s visit only reiterated that this budget will continue to build on the policies that have been put in place over the past decade by the government to ensure that our economy remains strong. One of the things at the heart of this strategy is personal tax reduction—putting more money into people’s pay packets—and another is improving the taxation arrangements for business so that investment and growth are encouraged.

This bill has several purposes: to reduce personal income tax rates, to increase the low-income tax offset and to decrease the amount of Medicare levy paid by low-income senior Australians. It also increases deductions of the decline in value of the depreciating business assets under the diminishing value method. The measures contained in this bill will cut personal income tax for all Australians from 1 July this year. These tax cuts are another step along the road of comprehensive tax reform—a process that was started after the election of 1998 and has provided personal income tax cuts for Australians in the years 2000, 2003, 2004 and 2005.

From 1 July this year the government will reduce the 47 per cent and 42 per cent tax rates to 45 per cent and 40 per cent respectively. This reduction will build on the cuts already made to lower income rates over the years, most recently in last year’s budget. In addition, the government will increase the thresholds so that the 15 per cent tax rate will apply up to $25,000 of income, the 30 per cent rate will apply up to $75,000 of income, the 40 per cent rate will apply up to $150,000 of income and the 45 per cent rate will apply to income earned after that. Under the workings of this bill, the government will cut the fringe benefits tax rate from 48.5 per cent to 46.5 per cent to bring it into line with the top marginal tax rate, including the Medicare levy.

The low-income tax offset will be enhanced by increasing it from $235 to $600. It will begin to phase out at $25,000 from 1 July this year, compared to $21,600 currently. This means that those eligible for the full low-income tax offset will not pay tax until their annual income exceeds $10,000. The Medicare levy low-income phase-in rate will be cut from 20 per cent to 10 per cent, which ensures that low-income taxpayers pay a reduced rate of Medicare levy. Australians who are eligible for the senior Australians tax offset will now pay no tax on their annual income up to $24,867 for singles and up to $41,360 for couples.

Overall, the greatest tax cuts have been provided to low-income earners. This is a point that seems to have been lost on the Labor Party, so I repeat for their benefit that those who pay small amounts of tax cannot receive huge tax cuts on an overall basis. These tax changes will ensure that more than 80 per cent of taxpayers face a top marginal tax rate of 30 per cent or less. The increase in the 30 per cent threshold and the low-income tax offset will provide more incentives for those outside the workforce to re-enter it and for those in part-time work to work additional hours. This is vitally important. We must always strive to make sure that we create a system that puts someone in a job in a stronger position than they would be if they were on welfare.

Under these new arrangements, a taxpayer will need to earn $121,000 to pay an average tax rate of 30 per cent. From 1 July this year the top marginal tax rate will apply to only two per cent of taxpayers. Taxpayers will not reach the highest marginal rate until they earn more than three times average weekly earnings. When this is compared to other OECD countries, reducing the top marginal tax rate and increasing the top threshold will bolster the competitiveness of Australia’s tax system. This bill will put Australia’s top marginal tax rate in line with the OECD average and the increase in the top threshold will place Australia as the 10th highest in the OECD.

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