Chris Bowen (McMahon, Australian Labor Party, Shadow Treasurer) Share this | Hansard source

Hasn't the contrast been clear today, and for all of the last fortnight, between the government and the alternative government? It's a contrast that is crystal clear. On the one hand, we have the government—and I do use the term lightly, because there's not much governing going on at the moment, but I will give them the credit of their official title—spending all their effort and energy going into contortions to prolong the amount of time in which our country is the last English-speaking country to embrace marriage equality. So determined are they to ensure that situation continues that they're prepared to spend $122 million on a postal ballot. They are the priorities of this government as they go about in this disunity and dysfunction.

On the other hand, the alternative government tackles the task of outlining an agenda for the challenges and opportunities in our economy—an agenda, which we intend to implement in government, of returning the budget to balance in a way that improves fairness and equity as well. It's a task this government is simply not up to. They can't tackle the problems because they just don't get them; they don't understand the problems in the Australian economy. We have a Treasurer who's an inequality denier: he says it's fine; nothing's happening with inequality. It's going down, according to the Treasurer. There are not many people who agree with him about that. We've got a Treasurer who says the biggest challenge he's got is increasing wages, as they slash penalty rates for those who work on weekends. We've got a Treasurer who recognises that we have record low wages growth—in fact, we are only one of six OECD economies where wages growth has gone backwards since 2013—but we have record high profit growth. What's the government's answer? To cut wages and to cut corporate tax at the same time.

We have a government that is also utterly bereft of any plan to deal with housing affordability. In a week where there's new data showing the percentage of Australians under 40 who own their own home has fallen from 36 per cent in 2002 to just 25 per cent today—one-quarter of Australians under 40—this government just wipe their hands. No plan; nothing they can do. They are a government struck dumb, refusing to pull the lever of reform to negative gearing and capital gains tax.

The other thing that they refuse to act on is tax minimisation and high-income-splitting through the use of family trusts. The government lectures all Australians on the need for budget repair, on the need for tough decisions, on the need for cuts. But they stand by as family trusts continue to be used for tax minimisation. Last week, the Leader of the Opposition and I announced a policy that will add $4.1 billion to the budget bottom line over forward estimates and $17 billion over the decade. And what was the response of the party opposite? Well, not very much, actually. There was also very little at question time. The Treasurer whipped himself up into a scare campaign before the announcement and after the announcement he was back into the witness protection program, because all they've got is a scare campaign. When that doesn't work, they've got nothing—no vision; no plans.

They can't say they don't know about the problem. They can't say that they didn't know that family trusts were an issue, because previous treasurers have tried to fix it. Peter Costello tried to fix it. I don't mind giving credit where it's due. He tried to fix it when he was Treasurer. He got rolled by his party. And the 'Tax reform: not a new tax, a new tax system' paper in 1998 said:

Wealthier individuals with access to legal and accounting advice can target particular investments and structures to take advantage of the differences in tax treatment—and … minimise the amount of tax they pay. The rest of the community subsidises the wealthier investor.

That was not some radical document. That was the then Howard government's document when it came to tax reform. So Peter Costello tried to fix it.

Joe Hockey, when he held my role as Shadow Treasurer, tried to fix it. He gave a fine speech about tax minimisation through trusts. It lasted 24 hours before he was rolled in his party room. I tell you what: this party is committed to dealing with it and dealing with what the party opposite has squibbed for years.

Now, it falls to Labor, as it so often does, to lead on policy development. The fact of the matter is that there's $590 billion in discretionary trusts—double what there was just a decade ago. They're not available for everyone. If you are a nurse, a teacher, a policeman or a soldier, you don't access family trusts for tax minimisation. It's not available to you. We have a two-tier tax system in Australia, where family trusts are available for some, not for all, to spread around their income. We saw new data just last week showing that distributions through family trusts peaked just below the tax threshold changes—an amazing coincidence! It is amazing how these things work. They peaked just below.

In reply to this policy announcement from Labor, all we have is a scare campaign. I am surprised that the member for Riverina, the Minister for Small Business isn't here. He normally takes the MPI—God love him.

An opposition member: Where is he?

He was out there today writing in the Telegraph.He isorganising the ABS for the plebiscite. That's going to go well. He was out there today saying in the Telegraph: 'Labor is going to abolish trusts.' They make it up. Now they're asserting that we'll abolish trusts. Let's be very clear: trusts can play a role in asset protection and they can play a role in succession planning. We support that. That is completely undisturbed by Labor's policy. The government should start telling the truth.

I mentioned previous Liberal treasurers. I am going to give some credit to one Liberal treasurer who did actually try and deal with this, and that was John Howard in 1980. He cracked down on tax minimisation and income splitting through distributions to minors. He said, 'If you distribute money to a family trust for people under 18, I'll tax you at the top marginal tax rate.' That was introduced and it went through the parliament. What we have done is taken the unfinished business from 1980, all these years later, and said, 'We will extend that as a 30 per cent tax rate to distributions to those over 18.' Now, that is not a radical plan. That is a sensible plan. It is a plan which deals with the pressure on the federal budget. And it is a plan which improves the fairness of our tax system. It's a plan which is sensible and well thought out. Since this plan has been announced, there's been a reaction—not just a scare campaign from the government. There has been a reaction from people who actually know what they are talking about—experts in this field.

Robert Deutsch, the Tax Institute senior counsel, said of our policy:

It's a carefully crafted, clever, well-directed attempt to deal with what are perceived to be the worst cases of abuse in the area of discretionary trusts.

Alan Kohler, in The Australian, said of our policy:

It is, or at least should be, a no-brainer: income splitting is a device that should have been removed long ago …

Opposition members: Hear, hear.

'Hear, hear' we say. And in a telling point, he said:

… if distributing income to a dependent child is wrong, as decreed by John Howard and embedded in Division 6AA, then so is distributing it to a dependent spouse, or to a brother or sister who promptly gives the distributed cash back as a gift.

And that is dead right.

Here is the challenge for the government: if you think income splitting is so good, if you think it's so wonderful that you can distribute income around your family to minimise the amount of tax you pay if you're a high-wealth individual, then reverse John Howard's changes from 1980, because if it's wrong to distribute to children then it's wrong to distribute to adults for the same purpose of minimising tax.

We have also seen a response from Associate Professor Dale Boccabella, who said:

The current income tax treatment of the discretionary trust is grossly inequitable compared with other entities and other taxpayers. It causes large losses of tax revenue and significantly undermines the integrity of our income tax system; it is widely seen as a joke.

He went on to say:

Labor’s approach involves minimal change to the tax law thereby not adding complexity and administrative costs.

And:

… Labor ought to be congratulated for tackling the discretionary trust stain on our income tax system.

So, the people who actually know what they're talking about, the experts in the field, have endorsed Labor's policy and welcome the fact that the alternative government of Australia is prepared to do what the current government is not and actually tackle the big issues, do the hard things and have the difficult conversations—just as this side of the House has led the debate on negative gearing reform, just as this side of the House has led the debate on capital gains tax reform, just as this side of the House has led the debate on superannuation reform and just as this side of the House has led the debate on capping the amount you can claim to manage your tax affairs if you're a high-wealth individual.

On all these issues, Labor leads and the government has nothing. The government is struck dumb. They try a scare campaign and then they don't know what to do. Sometimes after the scare campaign fails they adopt a policy, like they did on superannuation and tobacco—and it's not too late this time. Or sometimes they just shrug their shoulders and say it's all too hard: 'Too hard for us,' they say, 'What can we be expected to do? We're only the government of Australia; it's all too hard for us.' Well, the time will come when you can get out of the way and let a new government implement what you didn't have the guts to do. The time will come when you can sit on this side of the House and let us implement the mandate which we seek to make our tax system fairer and repair the budget.

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