Bert Van Manen (Forde, Liberal Party) Share this | Hansard source

As I was saying before I was interrupted, whether it's to do with franking credits or superannuation, you can't trust the Labor Party on tax. Before the election, both the Prime Minister and the Treasurer ruled out changes to franking credits, yet we have a piece of legislation before us that actually does exactly the opposite of what they ruled out. Before the election, both the Prime Minister and the Treasurer ruled out changes to superannuation. But what have we seen in the last week? We've seen changes to superannuation, and we've seen, this afternoon, the hapless Assistant Treasurer not even able to confirm what their policy is. I doubt he actually even understood the question that was asked by my colleague on our side of the House. Less than a year in, this government is just adding to the list of broken promises.

In speaking about this piece of legislation, I particularly want to focus on the part about franking credits. Franking credits, I think, are one of the great creations of the Australian taxation system. We hear frequently from the Treasurer that he wants to emulate Paul Keating and Bob Hawke. Well, this was one of Paul Keating's great creations: a system in which our companies pay tax, and, out of their after-tax profits, they pay a dividend to the shareholders, but that comes with a tax credit attached so that the shareholders aren't taxed twice. That system has been of enormous value and benefit to the Australian economy over the last, nearly, 30 years. It has created the environment in which people wish to invest in our listed companies, knowing that, by investing in those companies and assisting them to grow, they are going to get a return on that, which is from after-tax revenue. In particular, if their situation is such that they're a retiree or a super fund, they are going to get a tax refund. Even somebody on the highest marginal tax rate is still going to pay an effective rate of 15 per cent over and above the 30c credit.

I think it's been a tremendous system. Given that we have a government that purports, in another piece of legislation elsewhere in this building for the National Reconstruction Fund, to want to see the development of manufacturing and a whole bunch of other industries across this country—and I don't disagree with the notion of that, but I think the model proposed by the government has more holes in it than Swiss cheese—why on earth would that government then want to tie businesses' hands behind their back?

The cheapest way for business to accumulate or to access capital to grow their business is through retained profits. If you have $1 of after-tax profit and you distribute 70c of that to your shareholders, you then retain 30c of that for reinvesting and growing your business. The franking credit that goes with that 30c sits on your balance sheet in a franking account for distribution at some later point. How that's distributed is up to the board of the company, as it rightly should be. Companies should be free to make the capital allocation and distribution decisions that they believe are in the best interests of the company and the shareholders, whether in the short, medium or long term.

The government's proposed changes fly directly in the face of that, because they say to companies, 'If we think you've done a capital raising and you're going to distribute some of your raised funds as a dividend to your shareholders, we don't like that idea.' That's none of the government's business. Business should be free to distribute those franking credits as they see fit. That's the way the system was designed. So these changes will do two things: they'll make it more expensive and difficult for a business to raise capital, and, if a business doesn't raise capital and wants to grow, there's a strong likelihood that the business is going to have to use debt to fund that capital expansion. We all know that interest rates are going up under this government's watch, so debt is becoming more expensive. So each and every way you look at this, this is a bad outcome for listed businesses.

As I said on the National Reconstruction Fund Corporation Bill earlier today, this is, in my view, just the thin end of the wedge. This is looking only at listed companies. What are they going to do with the myriad of unlisted companies that operate in all of our electorates? They're small family companies that probably don't even distribute 70 per cent of their after-tax profit as a dividend to their owners. They probably reinvest all of that money back into their business, to grow it. In each and every way this is put together, it is a bad piece of legislation for the Australian economy—at the very time when we want to be encouraging businesses to invest and grow. The best way they can invest and grow is through the retention of capital earned on their activities today.

But this is just an addition to a range of other things we are now seeing. We saw today in question time the Assistant Treasurer asked a very straightforward question. Any of us here who have had anything to do with business understood the question very well. Say you own a piece of property in a self-managed super fund—and many small to medium businesses do; they own their business premises in their self-managed super fund, they run their business out of it and they pay a lease payment to their self-managed super fund. Now this is what the government is proposing to do: if that building is valued at $100,000 at the start of the financial year and at the end of the financial year it's valued at $120,000, you will be taxed on that $20,000 as an unrealised capital gain. Well, I can tell you: there is nowhere else in the world that is proposing to have that sort of system and apply that sort of taxation arrangement. It is a complete and utter disgrace. It is a betrayal of the Australian people by this government, for the government to propose to do that with those changes. And these proposed changes to franking credits will achieve exactly the same thing.

As I said earlier, look at what this government does, not at what they say, because nine times out of 10 they are two very different things. The government, on the one hand, is wanting businesses to grow, develop and invest, and yet, on the other hand, is doing everything it can to make that increasingly difficult for Australian businesses to do. That is in addition to the IR changes last year and a range of other things that they are doing, including doubling taxes on superannuation.

They argue that that's going to affect 0.5 of a per cent. Well, I read today that actuaries have come out and said, 'What are you going to do with defined benefit funds?' Again, it's a thought bubble. They are raising a whole range of legal and other issues with regard to defined benefit funds. Again, it has not been thought through, as this has not been thought through. It's just a tax grab.

In the National Reconstruction Fund, we see the government wanting to have equity in your business. Rest assured that, when I was in business, I didn't want the government having any equity in it, and I'm sure my colleagues here don't want the government having equity in their businesses either. The government want to have equity in your home. They want to have equity in your super fund, because, as the member for Sturt said, the Assistant Treasurer just uses it as a honeypot to reallocate it to whatever their pet project is at the time.

What else do they want to have their hand in? Now we're seeing they want to get their hand into your super fund or your franking credits and your entitlement to a tax refund from the tax that the company you've invested in has already paid. It is a complete and utter disgrace and a betrayal of the Australian people.

I am quite proud to stand here, on this side of the House, along with my colleagues, and oppose this bill tooth and nail, because it will have a negative impact on the ability of companies to raise, manage and access capital, to do the very things the government says it wants them to do. This bill should die an honourable death. I oppose this bill, as do my colleagues.

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