Craig Kelly (Hughes, Liberal Party) Share this | Hansard source

I am pleased to rise this morning to speak on the Tax and Superannuation Laws Amendment (2016 Measures No. 1) Bill 2016. There are three schedules in the bill. The first schedule is 'tax integrity: extending GST to digital products and other services imported by consumers'. The second schedule deals with GST treatment of cross-border transactions between businesses, and the third schedule is changes to the farm management deposit scheme.

Before I get into some of the nitty-gritty of the bill, I would like to respond to a few comments made by other members during the debate on this bill. I will start with the contribution of the member for Melbourne. The member for Melbourne was talking about how he had to go to five or six auctions before buying a house. He talked about other buyers who were part of a tax scheme that allowed them to rent it out—meaning the residential property that they were purchasing—at a lower rent. The member for Melbourne is exactly correct, because if we remove negative gearing you will get higher rents. It is the fact that we allow negative gearing that rents are lower in this country than they would otherwise be. Backing up the member for Melbourne's assumption that this leads to lower rents, this is exactly what we have seen overnight in the BIS Shrapnel report. They found that if this country were to adopt Labor's policy of repealing the ability of individuals to use negative gearing, it would result in capital city rents increasing by up to 10 per cent. BIS Shrapnel said: 'The policy intervention'—that is, Labor's changes to negative gearing—'would raise rents.' For anyone listening to this: if Labor were to be elected to government later this year and they implemented this policy, BIS Shrapnel say rents would increase on average across this nation by $2,600. How are people going to find another $2,600? That will be the outcome of Labor's policy.

At the moment in Sydney the median rental is $510 a week per property. If negative gearing were to be taken away, to compensate for the losses landlords would need to raise rents in Sydney by $73 a week for the median rent. I ask the constituents of my electorate who are renting to consider that the election of a Labor government would see their rents increase by $73. This is a finding from one of the nation's most respected economic-modelling companies.

The member for Melbourne was complaining about housing prices and having to go to five or six auctions. He fails to understand that policies from Greens- and Labor-controlled state councils and governments, year after year after year, have simply failed to release enough land. The problem with housing affordability is not because of negative gearing but because of supply. It is simple economics. We know what the demand will be. We know there will be more demand for housing in this nation every year.

Demand from our immigration policy, demand from overseas and demand from our population will see an increase in demand every year. But the supply is not allowed to respond like a normal market would to meet that increase in demand because of all the artificial restraints from Labor- and Greens-controlled state councils and local governments. For a member of the Greens to come into this parliament and whinge about how difficult it was for him to get into the housing market and to blame negative gearing is simply missing the point. The point is we must fix the issues of supply to deal with the housing affordability crisis, not play with negative gearing.

A lot is said about negative gearing. I found a quote from former Treasurer Peter Costello. One day after the 20th anniversary of the election of the Howard government in 1996, the government that brought so much prosperity and wealth to this country, I thought it worthwhile to quote the former Treasurer. He said:

When I was treasurer we looked at all of these things—

referring to negative gearing—

and the basic principle of the tax law is this—if you have an expenditure, a necessary expenditure, incurred in the course of producing income that expenditure is deductible.

The cost of interest is a necessary expenditure in the course of producing a rent return from a particular asset. Former Treasurer Costello also said:

Expenditures are deductible against income that is the basic principle of our tax law.

What Labor want to do is change all that, put all these distortions in without dealing with the main problem which is supply, supply, supply, supply. We have seen the damage that this would cause.

Also in this debate we had the speech from the shadow Assistant Treasurer, the member for Fraser, in which he rabbited on and said, 'We have announced measures on housing affordability which will boost housing supply.' Wrong. The BIS Shrapnel report has shown the exact opposite. This would not be the first time we have seen that the effect of a Labor policy is completely the opposite to what they think it would be. The shadow Assistant Treasurer says their policy will boost housing supply. Far from boosting supply, the BIS Shrapnel report says of Labor's policy: 'At the end of a 10-year horizon'—this is after the implementation of Labor's policy—'the market would find a new normal but the legacy would be a lost decade. The dwelling stock deficiency will be 60,000 homes instead of 20,000.'

So we are going to see a decline in housing construction of 7,200 new houses per year. The shadow Assistant Treasurer could not be more wrong. If Labor's policy will cost 7,200 new houses not being built, just think of all the jobs that that will affect. Think of the carpet-layers, the kitchen-makers, the plumbers, the builders, the electricians, the landscapers, the tilers, the painters and so on who will not have work. The BIS Shrapnel report estimates that as a result of Labor's ill-conceived and ill-thought out policy, the net job loss over the next decade will be 175,000. This is complete insanity, but this is the policy of the Labor Party of Australia.

The shadow Assistant Treasurer talks about 'improving housing affordability' and 'helping young Australians attain the dream of owning their own home.' He says that Labor's policies on negative gearing and capital gains tax will deliver $32 billion to budget over the next decade—but he is dead wrong again. The BIS Shrapnel report estimates that, yes, if Labor introduce these changes, at first they will get an extra $2.1 billion a year—you beauty; the Labor Party can spend that over and over again—but they also calculated the secondary effects. They said that, firstly, there would be a loss to government revenue of $1.8 billion from a drop-off in building activity. So we get $2.1 billion but we lose $1.8 billion in revenue. So we are only $300 million in front. But then we have to add an extra $1.95 billion loss on lower tax receipts, lower stamp duties, lower GST receipts, lower council rates and lower land tax receipts. When all these are taken into account, we do not end up with more revenue; we end up with less. We actually end up with a cost to the budget of $1.65 billion a year.

So here we have classic Labor policy, thinking, 'This is great; we'll get all this extra revenue that we can then go and spend'—tax and spend, tax and spend—but the damage that they will do to the economy will have a negative effect on revenue. So, at the end of the day, the money flowing into the government's treasury will be $1.65 billion less than if they had not implemented this policy. It just goes on and on and on. We have seen this before from the Labor Party. We saw this during their six years of government—poorly thought through policy brought in on the run. We saw it with the BER, we saw it with green loans schemes, we saw it with the carbon tax and we saw it with the mining tax. I could go on and on and on about their ill-conceived policies, damaging the very people they think they are helping. History is repeating itself with the current Labor policy. The Labor Party's change to negative gearing—which was brought up by the member for Fraser during debate on this bill—will damage the economy. The risk to our economic prosperity should now be crystal clear to every single Australian.

We have this economy on the right track. We saw yesterday GDP growth in this nation hitting three per cent for the last year. That places us above every single G7 nation. We are well above the average of the OECD nations. In addition, over the last two years, we have seen 400,000 new jobs created in this economy—not created by government, but created by business, and mainly small business, because we have been getting the economic settings right to encourage them to go out and take risks. What do the Labor Party want to do to those people we have encouraged to take risks, to start new businesses and to try new ideas? They want to increase the capital gains tax. They want to slug the very people out there in our society creating wealth, taking risks and creating new jobs with a 50 per cent hit in capital gains tax.

What is quite tragic in this is that it is clear that many in the Labor Party simply do not understand the capital gains tax system in this country. That was shown during this debate, when we heard the member for Melbourne talk about a capital gains discount at the end of it. The 50 per cent allowance on capital gains tax is not a discount. That came about from a change made back in 1999. The simple principle of a capital gain is that it is only the gain you get over and above the rate of inflation. So, if you bought an asset for a million dollars in the year 2000, with the rate of inflation, you would need a 50 per cent increase just to keep up with the rate of inflation. It is only anything above that that is true capital gain. That is how we used to tax capital gains in this country. We have taken away that allowance for inflation but the offset is that you now get a 50 per cent reduction on the tax rate that you pay. It is simple economics 101—something this Labor Party simply do not understand.

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