Alan Cadman (Mitchell, Liberal Party) Share this | Hansard source

I believe they should. The amendment will fail because what we are dealing with here is a reduction of regulatory burdens on businesses, which is part of the government’s 2005 commitments. The Treasurer has ripped hundreds of pages of useless tax law out of the tax act. It is appropriate that that should happen. The one complaint that I consistently hear from businesses is that to compete they need to spend less time at their books burning the midnight oil and more time in their businesses competing on production and saving costs. One of the big costs that businesses have had to confront is the administrative arrangements required as part of compliance with a whole range of Commonwealth taxation law. The Treasurer is determined to reduce that taxation cost—that overhang which makes it extremely difficult for Australian businesses to compete with their colleagues, whether they are based in the United States, Europe or Japan. The thrust must be to have an efficient taxation system, just as it must be to have an efficient workplace.

The compliance costs being tackled in this legislation are primarily those attached to fringe benefits tax. To give the House some idea of the complexity of fringe benefits tax and the way in which it can be calculated, I am told a simple meal between two people, depending on which organisations they come from and how the meal is paid for, can be calculated in 59 different ways. It depends on the concessions for individuals; it depends on the type of meal; it depends on where they have the meal; it depends on the premises where the meal is held. The complexity of the fringe benefits tax is enough to make anybody completely lose trust in any capacity to think logically.

The arrangements being considered by the House today are simple and welcome. The first is to change the minor benefits threshold from $100 to $300. The minor benefits exemption applies to certain benefits with a notional taxable value of $100 provided to an employee. That means the value of any benefit of any description—whether it is a tank of fuel from the company bowser, clothing that employees are allowed to keep, or maybe it is Christmas presents—that an employee gains will increase from $100 to $300.

Another change that will be welcomed broadly by both employers and employees is the in-house fringe benefits and airline fringe benefits increase. If we can find a complicated way of saying things, we seem to be able to do it. In-house fringe benefits—supplying financial advice to employees in a banking institution, the capacity to buy goods from a Harvey Norman store at a discounted price, or the capacity to use travel entitlements supplied by some airlines for people to travel more frequently at a lower cost—are benefits to employees and they are available in a tax year.

The current benefit allowed without being accounted for is up to $500, and this maximum will be lifted to $1,000 as an in-house fringe benefit. As I have already indicated, it can be a good or a service. A lawyer may offer free professional advice to his staff, airlines may provide benefits, as may builders et cetera—all sections of industry seek to look after their employees by providing additional benefits of one type or another, which are counted under the current system as fringe benefits tax. It has been obstructive, really, to the sensible relationship between employers and employees. The whole of the fringe benefits tax complexity is something that, whilst understandable in some circumstances, seems to have gone far beyond sensible necessity.

The extension to the remote definition is something else that has been changed. Those living in remote areas have additional costs they have to pay for their lifestyle—to uplift and transport themselves to their place of employment, higher prices to pay for groceries and goods—and so there are often concessions made for people living in remote areas by employers. State governments often provide concessions on housing and other amenities for people who are schoolteachers or policemen living in remote areas. A sensible concession for those living in remote areas is an encouragement for people to feel comfortable and satisfied, even though they may be a great distance from normal social contact. Having lived in remote areas of Australia myself, I see this as an important issue.

However, in this instance the changes are made for those localities which are considered to be remote where the shortest practicable route involves travel by water. The changes are that the shortest calculated practical surface route by water and the total number of kilometres are doubled to bring it more in line with the equivalent to land travel. That is a reasonable proposition, and I am very strongly in support of the definition of remote concessions.

I now want to turn to the reportable fringe benefits threshold. Employers are currently required to report fringe benefits up to a value of $1,000. That has been extended to $2,000. The increase in the threshold will reduce compliance in record-keeping costs for businesses by not having to report fringe benefits for employees who receive no more than $2,000 worth of fringe benefits. These changes, as I have already said, were announced in October last year. The Treasurer announced the establishment of a task force to identify action to address complaints about the burdensome and complex nature of record keeping. Many of the processes are redundant and duplicate each other, and it is good to see the government starting to move to reduce the cost of compliance. It is an absolute necessity if Australia is to remain competitive against all comers. The total cost for this process will be $14 million in the next financial year, and the impact will increase year by year.

The next concession in this revision is for people who are covered by the Military Rehabilitation and Compensation Act—mainly diggers and veterans. This allows certain prescription medicines and pharmaceutical products to be provided GST free. It also allows people with disabilities to purchase vehicles GST free. I am afraid I do not really think that this is a very wise way of going about support for veterans and people with disabilities. I would rather not fiddle with the GST. I would rather do it in another way. I would rather increase their benefit. I would give them a concession or some sort of rebate rather than fiddle with the GST.

The objective is understandable. The objective will provide certainty. My concern is that it will build a demand for further concessions in other areas, and it will be a difficult process to say to people, ‘We’ve given concessions to veterans, and rightly so.’ I would be the last person to want to deny that but, in denying concessions to others outside the veterans area, it may be difficult to argue that those other people should not also receive some GST-free provisions.

However, the government has decided to do this, and I think that it is a worthy cause. I would not want anybody to consider that it is not a worthy cause. Certainly, the concessions are deserved. So that is a change to the GST provisions which will reduce the cost of medicines for veterans and reduce the cost of motor cars for people who are seriously impaired. I must stress that I am really supportive of the assistance to people in these conditions.

The removal of the part-year tax-free threshold for taxpayers who have ceased to be full-time students also seems to be a simple and worthwhile administrative arrangement. Just reverting to some of the key features of the new law concerning the Military Rehabilitation and Compensation Act, it is interesting to look at the explanatory memorandum and compare the differences between the new law and the current law and see where there has been a simplification and a much clearer definition of who is eligible for motor cars or for prescription pharmaceutical drugs. I think that that is also a worthy addition.

In the time remaining, I would like to broaden my remarks to those things covered by the previous speaker, to deal with some of the broader issues of taxation and expenditure and, in particular, to look at the need to apply our minds to infrastructure and infrastructure costs. I regret to report that I think the states of Australia have neglected infrastructure costs, and the cost of travelling and the affordability of homes have changed dramatically over the last few years.

I have some figures available to me from the Housing Industry Association which indicate that home affordability is 6.1 per cent lower in this month than it was in December last year. In just six months affordability has dropped. The median price for a vacant block of land has risen by 143 per cent since 2000 and now accounts for between 52 per cent and roughly 80 per cent of the purchase price of a new home. The average price for vacant land across Australia has risen from $90,000 per block in 2000 to $219,000 in 2006, and the supply has actually fallen from 46,000 lots in 2003 to 27,000 lots in 2006.

There we have a really dramatic and pretty awful picture if you are looking at the opportunity for homebuyers in Australia—a halving in the number of available blocks of land but an increase in the cost of that land by 140 per cent. It is a very difficult proposition. In 2001, a median block in Sydney cost $220,000. That has risen to $300,000 in the current year. But what is even worse is that the lot size has diminished by about 30 per cent. So the lot size has come down and the price has massively gone up. The demonstrable lack of application of thought to this problem is most concerning.

The lack of local infrastructure is now being shifted from government sources and general taxation to levies that are applied on each new home as the development goes ahead. So rather than the community at large looking at covering the cost of roads and railway lines, what is happening is the first home buyer is paying that. Instead of the community at large paying, people are singled out because they are homebuyers. This dramatically shifts the cost and also means that, instead of state governments playing a role of any type through the taxation mechanism, they are shifting the total cost of the railway lines, the main roads, the streets, the water, the gas and all of the other amenities supplied to a block of land to the first home buyer, and that first home buyer is paying for the lot up-front.

The lives of these facilities are between 50 and 100 years for roadways and railway lines, but the first person has to pay the total cost. Instead of amortising the cost, as would normally be the case, by borrowing or through a tax system or some other arrangement, state governments have thrown the lot on the first home buyer. The difficulty of this approach means that the first home buyers are not getting what they want but they are being forced, because there is no other option, to purchase blocks of land that are smaller and more expensive than they want.

It would be very interesting to see what would happen if the total provision of all railroad infrastructure were given to private enterprise and no taxes were imposed. If one looks at the taxes and charges imposed in the provision of a house-land package in Australia, one has to look at not only the cost of the rural land but also legal fees; partial rates; land tax; stamp duty; development applications; construction certificates; DCP and council information requests, which can be an average of $8,000 per block; the design demands; the servicing provisions; the roads; the engineering; the survey; the geotechnical provisions which are often required; landscaping; section 94 grants; other district- and city-wide charges; a transport levy, which is about the railway line; and the LPI cost of $600, building to a total cost, including the rural land, which is about half the total cost of $301,000 to the home builder.

It goes further than that because, if you then add construction to the final cost to the home buyer, the dwelling costs may be $200,000 but BCA compliance, other compliance, local regulations, sales and marketing costs, GST and other stamp duty taxes bring the final cost to the homebuyer to $605,000. Of that cost, land is $140,000 and the home is $205,000, giving a total of $340,000 for a home that ultimately costs $605,000. This is the wrong way for Australia to be heading. I draw the attention of the House to the need for us to urgently apply ourselves to these problems.

It is really serious in Sydney, as the state government claims that there are 26,000 blocks of land available but, from the best surveys available to the private sector, it may only be as high as 9,000—less than half that said to be the case by the New South Wales government. These serious problems relate to the cost of living and the use of taxation. The Commonwealth is reducing the burden of taxation through tax cuts and reducing the regulatory requirements where the state governments of Australia are piling on more and more.

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