Stephen Jones (Throsby, Australian Labor Party) Share this | Hansard source

I rise to speak on the Tax Laws Amendment (2011 Measures No. 4) Bill 2011, a bill which amends various taxation laws to implement a range of improvements to the Australian tax laws. The measures set out in the bill before the House today are all sensible measures to continue to improve and maintain the integrity of Australia's taxation laws and to help in the difficult and challenging task of meeting our government's commitment to return the budget to surplus in 2012-13.

The first of these measures, set out in schedule 1, will reduce PAYG instalments, and I will explain that if I may. Under the pay-as-you-go instalment system taxpayers earning business or investment income pay instalments during the year towards their final tax liability for that income year. This helps taxpayers meet their income tax liabilities and it is important for the effective and timely collection of tax liabilities. Taxpayers may pay their quarterly PAYG instalments on the basis of either the GDP adjusted notional tax or on the basis of instalment income. For the most part, small businesses, individuals, trusts and small superannuation funds pay their instalments quarterly using the GDP adjustment method. The first of the measures set out in schedule 1 will reduce the PAYG instalment for the 2011-12 income year for taxpayers who pay quarterly instalments on the basis of the GDP adjusted notional tax method, by setting the GDP adjustment for the 2011-12 income year at four per cent. Setting the GDP adjustment at four per cent will provide taxpayers with a smoother transition from the two per cent GDP adjustment factor that has applied for the previous two income years as the economy recovered from the global financial crisis. Without the measures in this bill, the GDP adjustment factor would be eight per cent. In other words, this provides tax relief for small businesses. It is a practical measure which will assist small businesses throughout the year by providing what we estimate to be something in the order of $700 million in cash flow benefits.

The second of the measures in this bill deals with low-income tax offsets, which will reduce the incentive for families to split income with their children. The purpose of the low-income tax rebate was to provide tax relief for low-income earners, not to be used as a vehicle for tax minimisation. The measure in this bill removes the ability of children under 18 years of age to use the low-income tax offset to offset tax on unearned income such as dividends, interest, rent, royalties and other income from property. The level of tax for low-income earners has already been reduced by the Gillard government through the doubling of the low-income tax offset from $750 to $1,500, and a benefit has been delivered to taxpayers earning up to $67,500. But, as I said before, this offset was never meant to act as a tax minimisation vehicle. This is an important part of our plan to ensure that we return the budget to surplus and that tax offsets and rebates are used for the purpose for which they were designed.

The third measure goes to disability superannuation benefits. It is in essence a measure of simplification. Schedule 3 of the bill contains amendments to streamline the process for claiming tax deductions for the cost of total and permanent disability insurance which is provided through superannuation funds. The amendments in this bill will give funds the option of using a simple method for apportioning TPD insurance premiums with reference to a schedule of percentages in the regulations, without having to incur the cost of an actuary, which is the case at present.

The fourth measure is an amendment to the reportable employer superannuation contributions, otherwise known as RESC. The purpose of RESC is to assist in the accurate reportage of income, especially as that relates to an employee's entitlement to receive government benefits or to make certain government payments. The measures in this bill will introduce amendments to ensure that additional employer contributions imposed by an industrial agreement, or the rules of a superannuation fund, will not be reportable employer superannuation contributions defined by the law. The definition of RESC is designed to reflect the fact that these additional contributions could be taken as income, and this definition prevents higher income earners from salary sacrificing a large proportion of their income into superannuation and, by doing so, reducing their income to become eligible for government financial assistance or to avoid payment of other requisite payments. The amendments in this bill clarify that contributions will not be considered RESC where they are mandated by an industrial agreement or the rules of a superannuation fund. That is to say, the purpose is to ensure that RESC is only applied to the non-compulsory contributions of a superannuation contributor.

The fifth issue I wish to address goes to some of the matters raised in the previous contribution, by the member for Bradfield. As I said in opening, the measures in the bill do two jobs of work. First, they are sensible measures to adjust and tweak the administration of our taxation system so that it is efficient and effective for both the administrators and the taxpayers, so that the taxation laws do the work they are intended to do. At the same time, they ensure that we are able to find savings to find the income to ensure that the budget returns to surplus in 2012-13 as promised.

Our taxation laws are the foundation of our system of financial management, enabling successive governments to fund the services and infrastructure that we all collectively rely on each and every day. It is a simple fact that there will always be competing priorities for spending measures and that making the hard decisions about those priorities is what characterises a government, a Prime Minister and a Treasurer. It is no accident that this budget has been described as a Labor budget that aligns with the core Labor values, because it is a budget which prioritises jobs and prioritises getting people who are at risk of long-term employment back into employment or re-engaging with the education system, by record investment in skills and assistance to the long-term unemployed to ensure that, as we move through mining boom mark 2, we do not leave people behind.

The second area of priority which defines this as a Labor budget is the record investment of $2.2 billion in mental health. In complete contrast to those opposite, we do not believe that we should be investing in the mental health system by robbing Peter to pay Paul—that is, we do not believe that we should run down the primary health system to enable us to make record investments in the mental health system. I am like every member and senator in this parliament; we all have our wish lists of local projects for which we seek funding. In my own electorate of Throsby, I know that the National Broadband Network, for example, will make an enormous difference to the lives of those who currently have to commute to Sydney for their employment and will create a great incentive for local business and new businesses to invest in the region. That is why I cannot understand the intransigence of those opposite—including the member for Gilmore, in whose electorate a trial site for the NBN exists—and how they constantly carp about and criticise the NBN project.

Like the member for Cunningham, I would dearly like to see Commonwealth funding for the Maldon-Dumbarton rail link, and we will continue to lobby for this project as a long-term goal for the Illawarra region. However, we on this side of the House understand that there are pressing national priorities and that we have to move away from the Santa Claus notion of federal budgets, which is that unless there is a present for everybody under the tree it is not a good budget or not a budget in the national interest. While we do not restrain ourselves from representing the interests of our electorates, we on this side of the House understand that it is the national interest which must come first. Prioritising jobs and mental health is in the national interest. Ensuring that we bring the budget back to surplus is in the national interest, as we deal with the record investment that is coming our way in mining and other industries in the outyears of the forward estimates.

I am proud to be a member of a government that has done so much over a short period of time, through measures such as those contained in this legislation, to attempt to rein in government spending, make savings where that is possible and ensure that we bring the budget back to surplus while investing in Labor priorities. That is in stark contrast to those opposite. We saw a typical contribution from the member for Bradfield earlier, where he stood up and criticised the measures in this bill as somehow a conspiratorial tax grab, or some backdoor way to attack family trusts or trusts. We on this side of the House understand that trusts have a legitimate purpose in business, but they should not be used for illegitimate reasons and they should not be used merely as a means for tax minimisation. Indeed, if there is a controversy in Australian politics in the area of the regulation and the use of trusts, it is on the other side of the House, not on this side of the House. We understand that there are some aggressive advocates for taking the axe to the use of family trusts in corporate arrangements—

Mr Perrett interjecting—

including, as my colleague reminds me, the member for North Sydney. So, if the member for Bradfield is looking for a conspiracy, he should look inside his own party room and not at those on this side of the House.

But it was interesting, from the party that lectures us day in and day out about the need to do more to bring the budget back into surplus, that when you listened to the appropriation speeches of those opposite there was not one contribution on how we could bring the budget back into surplus. I will have more to say about this in future speeches. There were millions and millions of dollars in proposed new spending from those opposite in their appropriation speeches. The member for Hasluck made an Olympic effort in his proposals for new spending, and it will be interesting to see whether he gets up some of these proposals in his own party room. We are told they have $50 billion in spending. Well, the member for Hasluck has put a big dint in that $50 billion, I can tell you, and he is not alone. The member for Paterson, the member for McMillan, the member for Murray and many others have stood up here day after day and proposed new spending measures at the same time as opposing our saving measures. If there is to be a debate about spending and probity in this House, we should not be taking lectures from those opposite. In fact, they need to look closer to home.

The member for Bradfield was wont to talk to us about the need to rein in taxation. I remind the member for Bradfield, as I remind all of those opposite, that the coalition government was the highest taxing government in this nation's history. I will finish on this point. Under the Howard government, the tax to GDP ratio never dropped much below 25 per cent of GDP, whereas it runs at 22 per cent of GDP under this government. I commend the legislation to the House.

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