Joel Fitzgibbon (Hunter, Australian Labor Party, Shadow Assistant Treasurer and Revenue) Share this | Link to this | Hansard source

Going into the 1996 election this government made, as a centrepiece of their campaign, promises to reduce the red-tape burden, in particular the red-tape burden and compliance costs on small business. Here we are 10 years later, still waiting. Indeed, their promise back in 1996 in the lead-up to that election was to reduce the red-tape burden on small business by some 50 per cent—a very ambitious target. Of course, it is a target that the government has not nearly met; indeed, it has failed badly in that goal. Not only has it not reduced the red-tape burden by 50 per cent, it has not reduced it by 10 or even one per cent. In fact, it has increased the regulatory burden on small business over the course of the last 10 years. You do not have to look very far for evidence of that. You need look no further than the GST, the business activity statement and all the compliance burdens which come from becoming a tax collector on behalf of the government.

Notwithstanding all of that, the opposition welcomes the fact that the Tax Laws Amendment (2006 Measures No. 5) Bill 2006 is the government’s first attempt, I suppose, to finally get on with doing something about the regulatory burden on business generally. Of course, business peak groups have been very active in their campaign in attempting to force the government to finally move and to do something about red tape and compliance, including tax compliance and the various burdens that go with it. The peak groups have been as one. Amongst them have been organisations like ACCI and the BCA, which is generally accepted to represent the bigger end of town—the larger businesses in this country. Organisations like COSBOA, representing small business employers and operators in this country, have also been very active in that regard.

This is an issue that has reached chronic proportions. There is no shortage of surveys which show that small business in this country is now spending on average some 40 hours a month just complying with the various regulatory burdens government imposes on it. This has a very real economic impact on those small firms. The enormous compliance burden saps business entrepreneurial spirit. It puts barriers in the way of small businesses attempting to grow, to turn a profit and to put food on the tables of their families. It also has enormous efficiency impacts on the Australian economy and, as a result, has an impact on GDP growth and therefore living standards in this country.

I have always said that the best thing any government can do for business and, in particular, small business in this country is to grow the economy, keep interest rates low and after that basically get out of the way. Getting out of the way is a critical point in that trifecta. There are some exceptions, of course, where market failure will call upon the government to intervene. There is no better example of that than the debate we are having in the parliament at the moment with respect to the petroleum repeal bill, where the opposition is insisting that the government finally move to restore section 46 of the Trade Practices Act to its former glory—a once very effective provision in that now quite aging act, but a provision that has been undermined by various court decisions, including decisions like Boral and Safeway, which the ACCC chairman himself said did clearly not reflect the legislature’s intention when framing those provisions.

With respect to the petroleum repeal bill, we have been saying that we agree that this 27-year-old regulatory regime is out of date, antiquated, anachronistic in some ways and in need of repeal. In its place we need a strong Oilcode, and I think we are pretty close to that now. I do not think we will ever get absolute agreement in the industry about the nature of the Oilcode but I think we are probably as close as we can be.

The important third tranche is the strengthening of the Trade Practices Act. The original sites act was designed to deal with market power abuse. It has not been effective in recent years, but that does not mean we throw the baby out with the bathwater. We need something to replace it. We need a very strong Trade Practices Act or, to say the same, reform of the Trade Practices Act. As we speak in the Senate we are debating this bill, and the opposition is maintaining its view that, while we support the repeal of the sites act, we do not believe the package is complete in the absence of reform to the Trade Practices Act and, in particular, section 46.

This, I suppose, is the government’s first attempt to get out of the way in the absence of examples where there is market failure and a reason to intervene. Its first attempt started with a reference of the issue of the various levels of government regulation and the way they are impacting on the business sector, including the small business sector, to an inquiry to be held by Mr Gary Banks. This led to the formation of the Banks committee and the report of the Taskforce on Reducing Regulatory Burdens on Business, Rethinking regulation.

This bill, as I said, is a first attempt to deal with some of the low-hanging fruit. Labor welcomes the measures involved, but we say they are not enough. Business is struggling just to understand the regulatory overload, let alone ensure it is always in full compliance. This is a real concern for business—not knowing whether month in and month out it is complying with the various regulatory regimes which are imposed upon it, particularly all the complex taxation rules it is expected to comply with.

In recent times the government has had a bit of an attempt at revising those tax provisions by removing a number of inoperative provisions in the tax act. We welcomed and supported that move. But I make the point again that we are not concerned so much with the inoperative provisions of the tax act as with the operative provisions of the tax act—the ones that are still in operation; that, on that basis, pose the greatest threat to business, particularly small business; and that cause small business major concern.

In recent times we have also seen the regulatory burden added to by the introduction of Work Choices. This is a nightmare for small business. Recent surveys, not surprisingly, have shown that—notwithstanding the government’s rhetoric claiming Work Choices is the best thing since sliced bread for small business—small business is not supportive of Work Choices. It is not supportive of Work Choices mainly because it simply does not understand it. How could small businesses understand what is ahead of them under Work Choices when some of the country’s best legal minds are still arguing about its implications and ramifications?

The bottom line is, in a relatively healthy economy, the overwhelming majority of small businesses are very happy with their arrangements, investing in the skills of their employees and working hard on a day-to-day basis, in the absence of an HR department, to make sure that their employees are happy and that they are getting maximum efficiency and productivity out of them. They are happy with their current lot; they do not need the threat of Work Choices. They do not need another layer of regulatory burden and compliance. They do not need another layer of complexity, and that is what Work Choices will present to them.

So the measures in this bill, while welcome, are just planing off the rough edges. We will be supporting them, but the government needs to embrace much more of what Gary Banks has had to say. We will be looking forward in the not too distant future to the government having much more to say on that than is contained in this bill. It is not all that hard. In June of this year the opposition leader and I launched the first tranche of Labor’s small business policy, a five-point plan with a key focus on reducing the regulatory burden for small business. It included the provision of a grant to small firms. Skills are an enormous issue for small firms at the moment; they are having difficulty acquiring staff. They cannot compete against big firms on wages, so the best thing they can do is to try to skill up those who are already on staff. Labor’s training bonus will give some assistance to small business people hoping to skill their staff or, indeed, skill themselves.

The second point of the plan was a new superannuation clearing house so that small businesses with obligations under the superannuation guarantee levy can rid themselves of super choice and obligations they have to their employees such as providing the infrastructure they require to take up the superannuation guarantee payment. It will also remove the fear some small business employees have about becoming financial advisers on employees’ superannuation. That new superannuation choice legislation threatens some significant fines and, indeed, jail for small business people who dare to offer advice about where their employees should turn for their superannuation savings.

The third point in the plan, which is most relevant to this bill, is the introduction of a red-tape reduction plan. It is a simple idea that puts incentives in place for government departments when they are formulating policy, tax law and law generally that is going to impact on small business. It gives a financial incentive for government departments to perform in this regard. In consultation with state and territory governments, we hope this plan will also flow on to the decision-making processes of those governments.

So there are things you can do. The fourth point in our plan is to try to improve cash flow for small firms by ensuring that larger businesses with which they do business pay their bills on time. It will allow small business to charge interest against those who are traditionally slow payers. That is an entirely appropriate thing to do, and it is an idea this government should be embracing. The fifth point in the plan is to deliver greater access for small business to appropriate broadband speeds, and to ensure regional small businesses can compete with their city cousins and are not disadvantaged by a lack of access to modern-day technology.

So it is not all that difficult. We have given the government some guidance; we have given them some ideas. We will be happy for them to steal them from us; I am sure the member for Mitchell thinks they are great ideas, and he might care to respond when he takes the call when I have completed my contribution.

Turning to the key schedules of the bill, the first measure involves an increase in the threshold for the minor benefits exemption as it applies to fringe benefits tax. The proposal is that the threshold exemption rise from less than $100 to less than $300. This measure is targeted at small businesses and means that an item that an employer provides for an employee under $300 is FBT exempt. This amendment is a simple and useful measure to reduce compliance costs for small business. The second measure associated with schedule 1 involves increasing the threshold for which fringe benefits are disregarded for the purpose of fringe benefits tax reporting. Currently, employers are expected to record and report the taxable value of the fringe benefits they provide to their employees when the value of those benefits exceeds $1,000. The amendment sees an increase in that threshold from $1,000 to $2,000. Again, it is to be noted that this is another recommendation of the Banks committee report. The measure is most relevant to the calculation of family tax benefits. Nevertheless, it does reduce compliance costs for business and makes the family tax benefit system marginally less complex.

The third measure associated with schedule 1 involves an extra concession for eligible in-house fringe benefits and airline transport fringe benefits. The amendment seeks to raise the concession from $500 to $1,000 per annum. This means that if an employer offers in-house benefits like free meals or discount goods to employees then up to $1,000 could be ignored for fringe benefits tax reporting purposes. Further, if employers such as Qantas or Virgin Blue, for example, offer discounted air travel to their employees then an aggregate value of $1,000 per annum could also be ignored as it relates to the reporting of fringe benefits tax. The measure is also of particular benefit to shop assistants and retail employees who receive discounts as a result of their employment arrangements.

The last measure associated with schedule 1 involves a change in the definition of the term ‘remote’ as it applies to fringe benefits tax concessions. The amendment introduces a new formula for calculating the distance between a tested location in an eligible urban area. Basically, travel by water will now be included in the calculation to determine whether a location is remote. The kilometres travelled by water will be assessed at double those travelled by land, and if the distance calculated is determined to be 100 kilometres or more then the location will be defined as remote. The amendment is clearly not one that will affect many Australian taxpayers. This is reflected in its estimated impact over future budget years, with a cost of approximately $1 million per financial year.

We have asked the government for more detail in relation to this measure. Minister Dutton’s staff who briefed my office indicated they would provide further details but, disappointingly, we are still waiting. But I note here that we are receiving much more cooperation from Minister Dutton’s office than in the past we received from Minister Brough’s office. It may be the case that the individuals on islands are not receiving benefits from remote location treatment, like FBT exemption for housing costs. This is reasonable, but the opposition is seeking assurance from the government about who will benefit from this particular change. We are presuming that it is not about big business executives getting FBT-free temporary accommodation on, say, Hayman Island. That would not be acceptable to the opposition.

I want to turn to schedule 2 of the bill. The amendment seeks to make a consequential amendment to GST law by making some personal vehicles and pharmaceuticals GST free under the Military Rehabilitation and Compensation Act 2004. The amendment seeks to make these items GST free for those receiving a special rate disability pension under part 6 of chapter 4 of section 199 of the Military Rehabilitation and Compensation Act 2004. As most of us are aware, the tragic Black Hawk disaster in June 1996 led to the review of the Military Compensation Scheme in March 1999, commonly known, of course, as the Tanzer report. Back then, the report recommended a new military and veterans compensation scheme, which led to the Military Rehabilitation and Compensation Act 2004. Yet, for some unknown reason, it has taken some two years for the government to get around to incorporating these significant entitlements into the appropriate legislation. The changes, however, are merely consequential amendments for the new compensation arrangements, so they should have been introduced much earlier. This is another example of the government not meeting its obligations to taxpayers in ensuring that tax changes are dealt with promptly and in a timely matter.

Schedule 3 of the bill seeks to remove the part-year tax-free threshold for taxpayers who have ceased to be full-time students. This will allow taxpayers who have ceased to be full-time students to gain the full $6,000 tax-free threshold. Currently the tax-free threshold is only received for that part of the year that a student first enters the paid workforce. However, most students now end up in the labour force for some time even before going to university—at McDonald’s is the prime example, but also in many other areas of work. So times have certainly changed and, on that basis, the opposition is supporting the bill.

It might be an appropriate time for me to move the second reading amendment circulated in my name, because I have something to say about a couple of other issues, including the James Hardie issue. I will ask the member for Lilley to sign that second reading amendment. The opposition has an ongoing concern about what is happening in the James Hardie case. We cannot understand why the Treasurer has been prepared to offer a tax break—a tax break we calculate to be worth about $1.4 billion over the course of the scheme—to the James Hardie company, which is very much the villain in this exercise, but he is not prepared to extend a similar tax break to the victims of James Hardie. It does not make sense.

The Treasurer first of all claimed that he was not prepared to legislate in this place to ensure that the James Hardie compensation fund gets the tax break it requires to be sustainable to ensure that the victims and their families are adequately compensated. Then he backflipped without saying so and moved in this place some amendments to the black hole expenditure provisions under our tax law. He did not say that it was about James Hardie, but the whole world knew it was a backflip on the Treasurer’s part. We knew that it was an amendment to accommodate James Hardie, but we welcomed that. He is too proud to admit the backflip, but we welcomed the fact that he change those provisions and we supported them to ensure that this fund operates in the way in which it is intended.

It took months and years of negotiations between the victims, the unions and the New South Wales government to get this fund into place. This is time sensitive because some of these victims are very sick, and we have to get on with it. We welcomed the changes to the black hole expenditure provisions, which extended to James Hardie the tax break they were looking for. But why will not the Treasurer extend the same courtesy to the victims?

Worse than that, why is the Treasurer attempting to claw back from the victims $1.2 billion of the $1.4 billion it is costing him to fund the James Hardie company tax break? Let me make that clear: he is spending $1.4 billion to give the James Hardie company a tax break because they say that, without the tax break, the fund is not sustainable or, worse, they will not make a contribution to the fund. They are making it a condition of their contribution that they get a tax break—that is, $1.4 billion of taxpayers’ money. We do not have a problem with that, because there are times when the collective move to fix a situation which is basically unjust, unfair and cannot be fixed in the absence of an intervention by the collective. If the James Hardie case goes to court, it will go on for years. I would like to find a way of putting this more subtly but it is hard to: most of the victims will be dead before that case is ever resolved. So it is a good thing for the Australian taxpayer as a collective to move together to fix this problem.

So we spent $1.4 billion of taxpayers’ money to give James Hardie a tax break. But the Treasurer, by denying the fund a tax break both on the money that it receives from the James Hardie company and on the money that it makes on its investments while it holds the money, is going to save $1.2 billion. So he is robbing the victims to pay for the James Hardie company’s tax break. It is morally obscene to be robbing money from the victims to pay for James Hardie’s tax break. He gets on radio—and I have heard him on a number of occasions—trying to make out that the Labor Party is weak in wanting to extend a tax break to the victims, a tax break that he has already extended to the company. He is trying to make out that the opposition is reckless, but it could be no further from the truth. It is the Treasurer who has been reckless in setting one rule for the villain company and another harsh rule for the victims. There is no logic in his approach.

So I do not want to hear the Treasurer on radio anymore trying to make out that the Labor Party is too sympathetic towards the James Hardie company. There is nothing the Labor Party can do for the James Hardie company. They have got their $1.4 billion tax break—what more could we do? Their $1.4 billion tax cut is set in concrete. What we are calling for is similar treatment for the victims and their families, and we ask for no more and no less. We have attempted to use the forms of this parliament to provide that relief—of course, the government has used its numbers to vote us down—but we will continue to use forms of this House to do so.

It is interesting we are debating taxation bill No 5 today; usually we do not get to No. 5 to all we have dealt with No. 4. Why aren’t we dealing with tax bill No. 4? There are two basic reasons. The government do not know what to do with our James Hardie amendments. We have to find a tax bill that has scope. We have to find a tax bill to which the James Hardie tax law changes are relevant. You cannot do it on tax bill No. 5 because sufficient scope is not there. The rules of the parliament, unfortunately, require us to find scope. Tax bill No. 4 has sufficient scope to include the required changes, but that bill has been magically pulled because the government do not want us in this place debating what they know is, in truth, an entirely appropriate thing to do. But, of course, Peter Costello will never do anything that might be an opposition idea. His pride comes before his responsibilities in this place, and he should just wake up and get on with it.

My second reading amendment also deals with loss recoupment. The government botched the crucial bill with respect to loss recoupment the last time it came before the parliament. This is a very important bill for business, particularly those involved in infrastructure, venture capital and mining. We should note that those areas are very much the real drivers of the Australian economy at the moment—in fact, those most responsible for giving the government the windfall gains it is enjoying. They like to claim credit for those windfall gains, but, of course, we know the truth is entirely different.

The reforms of the continuity of ownership rules were welcome, but changes to the same business test imposed a $100 million cap on these companies. The result is that non-listed companies might fail both tests and lose the benefit of those losses—not be able to carry those losses forward. The same day the government rejected Labor’s proposed amendments of the measures they called for a review which was to report in January but is now eight months late. Indeed, at the time I moved further amendments in this place which I have with me; I will not seek to table them because they are on the parliamentary record. That report is eight months late. Nothing could create more uncertainty for business than, first, a review and, now, a review that is eight months late. The review made the situation even worse. In many ways the government would have been best to not accept our amendment and just leave the bill as it stands rather than introduce greater uncertainty for those businesses which have been affected.

In response to a question in writing from me, the minister has indicated that there are billions of dollars in losses outstanding here. We are talking about billions of dollars, not small fry, and you can appreciate that this is having an enormous impact on the investment decisions of businesses in this country, particularly businesses which are at the forefront of our economic growth at this point in our history. So we need to deal with this matter urgently. The previous Minister for Revenue and Assistant Treasurer, Mr Brough, in one of his mistakes we used to infamously call ‘Brough-ups’, made the error, but now we have a new minister in place. He has been there for many months now and it is about time he tidied up the situation and gave business the certainty they are looking for in terms of loss recoupment. They are not asking for much; they are only asking for some certainty, some clarity and an opportunity to get on with the job.

The Reserve Bank governor tells us on a regular basis that one of the major things putting pressure on interest rates in this country is physical capacity constraints, particularly at our ports and in mining, and our inability to keep pace with the ever-growing demand of some of our customers, and yet at the same time we have mining and infrastructure companies in this country unable to make important investment decisions because this government cannot make a decision on an issue as simple as loss recoupment. I invite the member for Mitchell, who is due to speak next, to pass comment on that. I know he watches these statements on monetary policy closely. He knows what the Reserve Bank has been saying; every member in this place knows what the Reserve Bank has been saying. You would think this government would be spending lots of sleepless nights working out how they can best address those capacity constraints. But, instead, what do we have? We have an incompetent government and a lazy Treasurer who is not prepared to get off his backside and sort the problem out.

Minister Dutton is not prepared to do it. The Treasurer should intervene and get this thing fixed, and while he is at it he needs to move very quickly to extend the tax concession to the James Hardie fund on both the income it receives from the James Hardie company and, of course, the interest it receives on that money while it is holding it on behalf of compensation victims. I move:

That all words after “That” be omitted with a view to substituting the following words: “whilst not declining to give the bill a second reading, the House condemns the Government for failing to adequately deal with major unresolved taxation issues including; the

(1)

failure to provide certainty to the former employees of James Hardie and their families by providing tax exempt status to the James Hardie Asbestos Victims Compensation Fund, and

(2)

creation of great uncertainty in the Australian business community by its failure to bring forward its review of loss recoupment rules”.

Peter Lindsay (Herbert, Liberal Party) Share this | Link to this | Hansard source

Is the amendment seconded?

Wayne Swan (Lilley, Australian Labor Party, Shadow Treasurer) Share this | Link to this | Hansard source

I second the amendment.

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

The question is that the words proposed to be omitted stand part of the question.

Alan Cadman (Mitchell, Liberal Party) Share this | Link to 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.

Chris Hayes (Werriwa, Australian Labor Party) Share this | Link to this | Hansard source

I rise today to support the provisions of the Tax Laws Amendment (2006 Measures No. 5) Bill 2006, but I have to say that my support for that bill is not unqualified. This bill before us today deals with three aspects of tax law.

The first is the fringe benefit tax changes to implement some of the recommendations of the report of the Taskforce on Reducing the Regulatory Burden on Business: Rethinking regulation. The second is the GST car and pharmaceutical concession from the establishment of the military specific compensation scheme. The third is the removal of the part-year tax-free threshold for taxpayers who have ceased to be full-time students. These changes introduced under this bill will reduce the complexity of the system, and it can be reasonably expected that such a reduction will result in a reduction in compliance costs.

Fringe benefit tax changes included in this bill are broadly targeted at small business. I am a long-term supporter of improving the lot of people in small business and reducing their compliance costs. I know only too well what it is like to try to manage a small business, meet the regulatory requirements and try to find enough time to spend with your family, away from your business. It is difficult; it is a balancing act, and it is one that many small business owners find difficult to manage successfully—or at least manage to their satisfaction. This issue was raised with me recently, when I took part in Pollies for Small Business Week. Pollies for Small Business Week is an excellent opportunity not just to talk with the owners of small businesses about their specific needs but also to get involved, get behind a counter and, for a time, stand in the shoes of those on the front of running small businesses.

I had the opportunity to spend some time with Sam Cavallaro at Cavallaros Sweet Indulgence—which, I hasten to add, was a gourmet eatery—in Liverpool and also sell newspapers and stationery items with Chris Redondo at Ingleburn Newsagency, which is directly across the road from my office in Ingleburn. These are quite different businesses—one is a gourmet eatery and the other is selling newspapers—but they had some very similar themes.

Both small business owners expressed to me that the changing nature of their business environment had made their businesses tougher. By this they did not mean that their business was suffering a downturn as a result of a drop-off in the economic climate. Rather, competition was making things more difficult. Both men have been in business for quite some time, and both indicated to me that business was getting harder, not easier, in their line of work. Margins are thinner, competition is greater and cash flow management is more important than ever.

It is interesting that both businesses thought that competition is getting tougher. It is particularly interesting that they did not make note of this in terms of competition from like businesses establishing themselves nearby or down the road—although they freely admit that that would have some impact. Rather, the message that I received is that the competition that they were concerned about was unfair competition from larger organisations that have the capacity to engage in loss-leading behaviour—unfair competition—that means that they can secure a greater market share over a short period of time.

This brings me to the issue that I have raised on many occasions in this place: the failure of the government to implement the findings of the Dawson review of the Trade Practices Act and make businesses fairer for everyone in the market. I am sure both Chris and Sam—along with the more than 4,000 other small business people operating in my electorate of Werriwa—would enjoy the even break that the reforms of the Trade Practices Act would allow.

These small business operators are not asking for the playing field to be slanted disproportionately in their favour. All they are asking for is to be able to at least ply their trade on a level playing field. They are not looking for preferential treatment; they are just looking for the opportunity for genuine competition to be played out on a level playing field. They want the chance for the hard work and dedication that they give their businesses not to be wasted simply because a large organisation can set up shop and carry short-term losses in order to secure a greater market share.

I spent a number of hours with both these small businesses and their staff. I thank everyone involved for their time—and particularly for their patience, as I am rather a novice in both of these areas of business.

The operators made comments about how tough business can be. But what really struck me was another matter that they did not raise, and it is the second most interesting thing that I would like to draw this House’s attention to. At no time in my period with either of those businesses did these operators express any view about industrial relations or industrial relations policies. They certainly did not express a view that Labor’s position on industrial relations would ruin them. They did not express that view that the Prime Minister is attempting to perpetuate—that Labor’s plans for industrial relations would make their businesses even more difficult. They did not even express a view that Labor’s plan to clean up unfair dismissals would create the sort of burden that would ruin their businesses.

But the most telling thing about their size when it comes to industrial relations was that they did not sing the praises of this government. These businesses did not sing the praises of the government in any way as to the way in which they are being encouraged to treat their own employees. These two small business operators—and many other small business operators who I have spoken to since the Prime Minister made that famous ministerial statement on industrial relations in May last year—have not been telling me how good these changes are for them or how bright their outlook would be under Work Choices.

The government claims to have made changes with the strong backing and support of small business sectors, but when push comes to shove it is not the small business owners or operators who are singing the praises of this government’s industrial relations agenda. They are wondering what happened to the stalled trade practices reform to make their business environment a bit friendlier, a bit more of a level playing field. They are not praising the government on industrial relations.

Don’t get me wrong, Mr Deputy Speaker; I know that some business organisations and individual business operators are praising the government’s extreme industrial relations changes. However, these are not the mum and dad small business operations that the Prime Minister claims he was making these remarks about and making changes for. No, these business operations who are out there championing the cause of the government are from the big end of town. They are the people who Mr Hendy represents. I know the government says a lot about small business in their representations to the media about these things, but realistically we all have to concede that, whilst people are referring to small business, the people who are driving the agenda in the efforts that have been made to support this government’s industrial relations agenda are at the big end of town.

I mentioned earlier that a growing problem for many small business operators in my electorate is the difficulties they face in managing cash flow. I understand that a recent survey of small business operators—which was mentioned by the member for Hunter—listed cash flow management as the top issue for the management of businesses today. While the changes implemented through this bill will reduce the compliance costs faced by small businesses when it comes to fringe benefits tax and a more fundamental review of taxation, as Mark Fenton-Jones noted in the Australian Financial Review on 29 August this year:

The latest changes to the way GST and fringe benefits are calculated by small businesses are welcome measures to reduce the compliance burden. But it is only tinkering on the margin, as the whole tax system needs to be revamped with small business in mind.

I would not want to misquote the words of the member for Mitchell, but I note that in his contribution to the debate a little earlier he drew attention to the fact that he did not see the way ahead involving a tinkering at the margins but that we should be looking at fixing the system—and I think he was referring to GST arrangements for vehicles and pharmaceuticals for those covered by the Military Rehabilitation and Compensation Scheme.

The combination of small business cash flow problems and broader tax reform brings me to a problem experienced by a number of small businesses following the recent Australian Taxation Office ruling ‘Goods and services tax: deposits held as security for the performance of an obligation’. Mr Deputy Speaker, as you would appreciate, this tax ruling, which could force small businesses to pay the full GST on a sale price, even when they have received as little as 11 per cent of the price as a deposit, could have a serious impact on many small businesses and exacerbate the difficulties that they are already experiencing with cash flow. I note that the member for Adelaide has a particular concern in this regard, having recently placed a question on notice to the Treasurer about it.

This ruling has the potential to greatly cripple small businesses as they take another hit to their cash flow. Once again, it may present the opportunity for larger competitors to make a grab for market share as they are better able to manage the cash flow implications of this tax ruling. It will certainly impact very directly on small businesses—and I refer in particular to the small businesses in my electorate of Werriwa.

On 6 April this year, the Treasurer noted that the matter will go before the courts and that he will examine the findings of the case once the courts have dealt with the matter. I have to say that that is an abrogation of responsibility, if we are serious about protecting and furthering the interests of small business operators. I join people such as the New South Wales Minister for Small Business, David Campbell, in calling for the government to overturn this ruling in the specific interests of small business operators. It is about time that this government acted on behalf of small businesses across the country rather than using them to create a myth surrounding the demands of the small business sector for the industrial relations changes spearheaded by this government.

As I said, small businesses do not want these industrial relations changes. Small businesses like the certainty of the award system because they know how much they are required to pay their employees. They also like the certainty of the award system because they know that other businesses that they compete with are governed by the same set of rules. They like the certainty of the award system because it prevents the cowboys in their industry from using the full extent of the law to drive down costs and to force them to cut the wages of their staff. This is something they do not want to do, as staff in many small businesses are considered to be family rather than employees. Small businesses make every effort to look after their employees. They do not want to be forced to join this government’s race to the bottom. Despite the government’s attempts to perpetuate the myth that small business wants this government’s extreme industrial relations agenda—

Peter Lindsay (Herbert, Liberal Party) Share this | Link to this | Hansard source

Order! The member will return to the substance of the bill.

Chris Hayes (Werriwa, Australian Labor Party) Share this | Link to this | Hansard source

As I was saying a little earlier, this bill relates to fringe benefits tax changes in order to implement some of the recommendations of the report of the Taskforce on the Reduction of Regulatory Burdens on Business titled Rethinking regulation. Mr Deputy Speaker, the bill picks up some of the recommendations of that report and reduces the regulatory burden on businesses, and that is why I am drawing to your attention the position that small businesses are taking in relation to the government’s industrial relations agenda. They are being forced, through Work Choices, to embark on a pattern of behaviour which they do not want to follow. They are being forced to do this by the government—

Craig Emerson (Rankin, Australian Labor Party) Share this | Link to this | Hansard source

No choice.

Chris Hayes (Werriwa, Australian Labor Party) Share this | Link to this | Hansard source

and with no choice. This is why they are reeling. I appreciate that I may have taken a slight liberty in this regard, Mr Deputy Speaker, but I do want to draw to your attention, and to the attention of the House, that small businesses are concerned that every time the government talk about their industrial relations agenda they say that the changes are attributable to the demands made of them by small businesses. This is clearly wrong. As you would appreciate from what is happening in your own electorate, Mr Deputy Speaker Lindsay, this is not the reality when it comes to what local members are seeing in their connections with relevant small business operators in their electorates. But I do heed your caution in this regard, Mr Deputy Speaker.

I put on record that small businesses are sick and tired of being used in this debate and of being quoted by people like Mr Hendy who purport to represent small business, when everybody knows these industrial relations changes are about the big end of town and about industry driving the wage agenda.

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

The member for Werriwa will return to the bill or I will sit him down.

Chris Hayes (Werriwa, Australian Labor Party) Share this | Link to this | Hansard source

Having said that, Mr Deputy Speaker, let me talk a little about some student related issues that flow from this bill. The bill contains provisions which remove the part-year tax-free threshold for taxpayers who have ceased to be full-time students. Under existing tax law, the tax-free threshold is only received for that part of the year in which a student first enters the paid workforce. I support this change; it makes sense. This amendment, along with others contained in this bill, makes sense and on any reasonable analysis will result in a reduction in compliance costs for business.

Of course, I cannot help but wonder why this has happened. Sure, government members or, I should say, the lone government member, the member for Mitchell—the only one who had enough interest to stand up in this place and make a contribution to this debate—can make comments about how this government should not be tinkering at the edges of tax reform, particularly on certain aspects relating to car and pharmaceutical benefits provided by this bill. Quite frankly, I am sure we would be better off not tinkering at the edges but actually getting in and delivering a proper system.

To return to how the legislation applies to students, if you look more deeply into the change that is before us you cannot help seeing it in the context of the changed requirements of students under this government. Students now face a much harsher reality than at any time in the past. It is no longer possible—for the vast majority of students anyway—to simply concentrate on studies as a full-time occupation. Given that this government has acted to take away virtually all support from students, it is now necessary for students to work on a continual basis to support their studies. The eligibility rules for Austudy have particularly draconian aspects under this government. (Time expired)

Craig Emerson (Rankin, Australian Labor Party) Share this | Link to this | Hansard source

The Tax Laws Amendment (2006 Measures No. 5) Bill 2006 contains a range of measures that Labor supports. First, it begins the process of implementing recommendations from the report of the Taskforce on Reducing the Regulatory Burdens of Business, Rethinking regulation. That report was prepared by the Productivity Commission headed by Gary Banks. It was a timely report; in fact, it was a well-overdue report. I am glad that the government ultimately did get around to commissioning a major report from sensible people who came up with a range of sensible recommendations.

The reason I am saying that I am glad they got around to it is that before the government came to office in 1996 the now Prime Minister had indicated that he would commission Charlie Bell from McDonald’s to oversee a task force into cutting red tape with the aim of cutting red tape by 50 per cent. That task force report was produced within a couple of years of the coalition coming to office but nothing came of it. Subsequently the government, upon the introduction of the GST, said that the very act of introducing a $24 billion new tax would simplify the Income Tax Act. The Prime Minister said then that the number of pages in the Income Tax Act would go down substantially and this, too, would ease the regulatory burden on small business. Well, that did not happen until very recently, when the government, rather than simplifying the Income Tax Act, simply removed a large number of pages from it. It can certainly do with a reduction in the number of pages: it started out at about 3,500 when the government first came to office and had blown out to 9,600. The exercise in reducing the number of pages, however, was limited to reducing those provisions that were redundant rather than simplifying the income tax system itself.

Nevertheless, ultimately—finally, thankfully—the government has begun implementing some of the recommendations of the Banks review. One of those, which is the subject of this legislation before us today, is an increase in the threshold for minor benefits exemption from fringe benefits tax from less than $100 to less than $300. That means that an item that an employer provides for an employee of a value of less than $300 will be exempt from fringe benefits tax. Of course, that will be welcomed by the small business community. It has significant, but not huge, revenue implications. It works out at about $43 million over four years for that plus other measures that are provided for in this legislation relating to fringe benefits tax. While the revenue losses are not great, the simplification that is achieved through them is worthwhile and certainly beneficial for the small business community.

A related provision in this legislation for simplifying fringe benefits tax is that if an employer offers in-house benefits like free meals or discount goods to employees or, for example, cut-price travel for airline employees then an aggregate of $1,000 per annum could be ignored for fringe benefits tax purposes. That $1,000 aggregate is a doubling of the current limit, which is $500. Again, that will be of some benefit to employees but, at least as important, will simplify the administration of the fringe benefits tax. Labor supports it.

There are some GST arrangements provided in this bill. The amendments make a car and pharmaceuticals GST free for those receiving a special rate disability pension under the Military Rehabilitation and Compensation Act 2004. That, too, is a worthy objective. There are further amendments relating to a part-year tax-free threshold for taxpayers who have ceased to be full-time students. So, overall, this legislation does simplify and, in some instances, ease the tax burden on people, and therefore Labor supports it.

I do have to comment that I speak on taxation law amendment bills very regularly, along with the shadow minister for small business and the member for Werriwa and others. The reason we do this is that the government is submitting them into this parliament with such frequency, which is confirmation that the government has not got the income tax system right. It continues to tinker with it and change it. I know that no tax system should remain invariant to change over time. Circumstances change and clarifications need to be provided, but the truth is that the income tax system in Australia is unnecessarily complex. As a consequence, the compliance burden is far too high.

There have been substantial proposals to reform the income tax system. I was fascinated to note that just last week the Treasurer commented on tax proposals which he asserted would have cost the revenue from $20 billion to $30 billion a year. He regarded those proposals, based on comments made by the Reserve Bank governor, as pretty wild and irresponsible. In fact, he said that any tax proposal which would cost the revenue $20 billion to $30 billion a year in the current economic environment would create a great deal of inflationary pressure by stimulating domestic demand, and that would force the hand of the Reserve Bank to yet again increase interest rates—to increase them a fourth time since the last election campaign, during which the Prime Minister promised to keep interest rates at record lows. In total there have been seven interest rate rises in succession, three since the last election, a fourth in prospect and who knows what the new year will bring?

I thought I would have a look at this assertion by the Treasurer that people within the public domain are seeking tax changes that would cost from $20 billion to $30 billion. The closest I could come to it are the proposals by the parliamentary secretary for water, the member for Wentworth. Far be it for me to come into the parliament and spend a lot of time defending the member for Wentworth but, given that it would be unseemly if he had to do so himself in the parliament against these claims by the Treasurer, I thought I would check the Treasury costings on the proposals of the member for Wentworth. Indeed, the most expensive of those is quite expensive; it is quite costly. It works out at $14.55 billion in 2006-07. But the Treasurer said that people were making claims for proposals costing from $20 billion to $30 billion, so he is a fair way short.

The member for Wentworth did have something like 287 proposals, one of the most expensive being $14.55 billion. In defence of the member for Wentworth, he did in fact argue the case for base-broadening measures to help fund his tax proposals. I also looked at the proposals I had advanced, including a submission to the Treasurer in advance of the last budget, and mine cost $7.8 billion—a long, long way from $20 billion to $30 billion. Over the four-year forward estimates period it would cost $33.5 billion. That is still cheaper than the $35.8 billion that the government ultimately delivered. So the criticism of the Treasurer cannot have been directed at me. It could only have been directed at the member for Wentworth, and rather unfairly.

The Treasurer has been fast and loose with the truth not only on that occasion but on several other occasions, and some of them very recent. On 4 September, just last week, the Treasurer said in response to a question from the shadow Treasurer:

The Australian Labor Party never had the wit to actually balance the budget.

I have heard the Treasurer say this before. In fact the Treasurer said this in the parliament on 10 May 2000:

... we put the budget into surplus on a headline basis, which the Labor Party never did.

It astonishes me that the Treasurer of the country can make these sorts of claims. He is never picked up by the media in making them. They are absolutely false yet he feels that he can stand up in parliament, where there is supposed to be some effort to grapple with the truth—and perhaps even to tell the truth—and he knows that his statement that Labor never delivered budget surpluses is false. But he knows that he can continue to make it because, sadly, the members of the press gallery are quite happy for him to continue to make false claims in the parliament and not bring him into account.

I am bringing him into account. I used to be an adviser to Bob Hawke. If Bob Hawke ever came into the parliament and was put in a position of making a major statement that was factually incorrect, as advisers we would be horrified because we would be 100 per cent confident that Prime Minister Hawke would be brought to account by the media as having made a very bad mistake or for misleading the parliament. Of course those standards are now nonexistent.

The truth is Labor produced surpluses in 1987-88, 1988-89, 1989-90 and 1990-91. How do I know? I looked at Budget Paper No. 1: Budget Strategy and Outlook 2006-07. We just need to go to page 13-5 and we find that as a percentage of GDP such surpluses were recorded and, indeed, that in the middle two years of 1988-89 and 1989-90 the surpluses were 1.7 per cent of GDP. What is significant about that? They are bigger than any surplus that the Treasurer of this government has ever brought down. Indeed, at 1.7 per cent of GDP they are substantially bigger than the surplus that is projected for this year, 2006-07, of 1.1 per cent of GDP and in the out years of 1.0 per cent of GDP.

Here is the Treasurer, his own budget papers confirming that Labor produced four surpluses, including two that are bigger than any surplus that the Treasurer of this government has ever brought down, and the budget papers confirm it. Yet the Treasurer walks into this parliament with impunity and says that it never happened. His slipperiness and porkies are not limited to allegations about budget surpluses. The Treasurer has said on many occasions that Labor never delivered income tax cuts. I will just record a couple of them. The Treasurer said on Radio National on 10 May 2000:

Now let me make this clear, this is I think that first budget, well certainly in my memory, where there’s been income tax cuts ... Australians deserved it, they haven’t had an income tax cut for a decade ...

On radio 2AW on the same day he said:

This is the first time we have had a genuine income tax cut for well over a decade. A lot of people can’t even remember what it is like to have an income tax cut ...

Again, on radio 2SM on the same day he said:

I think there are a lot of people in Australia would say, a lot of young income earners, suppose you’ve only been in the workforce for 10 years, you’ve never had an income, they wouldn’t know, they have no personal experience of an income tax cut.

That is what he said. What is the truth? Labor cut personal income tax seven times in 13 years. It cut personal income tax in November 1984, December 1986, July 1987, July 1989, January 1990, January 1991 and November 1993. Three of those were in the decade to which the Treasurer was referring. Labor gave seven tax cuts in 13 years, handing back all of bracket creep and more, and yet the Treasurer says that no tax cuts were delivered in living memory and none in the 1990s—yet three of those were, in fact, delivered in the 1990s. I could go on, but the Treasurer never gets called to account for this.

While we are on the subject of tax cuts, the Treasurer says, ‘We have delivered the greatest tax cuts that Australia has ever seen.’ Let me make some remarks about the Treasurer’s taxing record. The fact is that when the Treasurer introduced the GST he pulled a gigantic fiddle because he moved to classify the GST as a state tax. When the GST was introduced, it was a $24 billion tax but it replaced the wholesale sales tax, which was regarded as a Commonwealth tax. So, overnight, the Treasurer replaced a $14 billion wholesale sales tax with a $24 billion GST and, hey presto, the budget papers showed a big reduction in tax. Terrific if you can get away with it. He counted the wholesale sales tax as a Commonwealth tax, declared that the GST was a state tax and then, despite increasing indirect taxes by $10 billion, he claimed that the $24 billion tax never existed in the first place. In so doing, he defied rulings from the Australian Bureau of Statistics and the Auditor-General, who came to the obvious conclusion that the GST is a Commonwealth tax. The revenue from the GST has grown to $39 billion.

But it gets worse. In the budget papers the Treasurer counts as a saving the scrapping of untied grants to the states, made possible by the allocation of all GST revenue to the states. So he chooses the best of all worlds—he makes the GST disappear from his budget, he makes the wholesale sales tax that the GST replaced appear in all budgets before the GST was born, and he chalks up as a budget saving the scrapping of untied grants to the states made possible by this orphan tax—the GST.

If we want objectively to assess the Treasurer’s record in tax and in overall budgets, we would either add back the GST or take away the savings from abolishing untied grants to the states. If we add back the GST we get these results: Commonwealth taxation revenue as a share of GDP in 2006-07 is 25 per cent. What is significant about 25 per cent? It is much larger than Commonwealth taxation revenue as a share of GDP when the government came into office, when it was 22.3 per cent; it is much larger than when Prime Minister Bob Hawke left office in 1991, when it was 22.7 per cent; and it is much larger than when Gough Whitlam was in power, when it was 20.2 per cent of GDP. It proves conclusively that this government is the highest taxing government in Australia’s history.

The truth is that under these fiddles in the so-called Charter of Budget Honesty the Treasurer could increase non-GST tax revenue by a massive $23 billion a year by the end of this decade and still claim never to have increased tax revenue as a share of GDP compared with what it was at the time of the change of government in 1996. He can keep increasing taxes and claim that he is reducing them as a share of GDP because he has been able to get away with this GST fiddle.

On top of these sorts of fiddles the government has been willing and able to open up more and more holes in the income tax base. When the government came to office there were 170 so-called tax expenditures. These are special concessions or special tax breaks. In the last year that had increased to 270 special tax breaks—an increase of 100 in less than 10 years. It took all of federation to get up to 170 of these tax expenditures and only 10 years for this government to increase them by another 100. As a consequence, marginal tax rates are unnecessarily high under this government. This government holds the record as a political party for the highest top marginal tax rate, which peaked, I think, at 62.5 per cent. Who was the Treasurer? John Howard. It took a Labor government to move to cut marginal tax rates. Labor is the party of tax reform; the coalition is wrecking the income tax base and imposing unnecessarily harsh marginal income tax rates on ordinary Australians.

Bernie Ripoll (Oxley, Australian Labor Party, Shadow Parliamentary Secretary for Industry, Infrastructure and Industrial Relations) Share this | Link to this | Hansard source

I rise today to speak on the Tax Laws Amendment (2006 Measures No. 5) Bill 2006 and offer my support to the amendments that were moved earlier by the member for Hunter and the comments that he made. The bill, according to the Bills Digest, does a number of things. I will speak on a variety of issues that have an impact on tax and a range of other matters contained in this bill.

The changes to fringe benefits tax in particular, according to the Bills Digest, are about reducing the regulatory burdens on business. Schedule 1 amends the Fringe Benefits Tax Assessment Act 1986 to do a number of things, including: increase the minor benefits exemption threshold from $100 to $300, increase the reportable fringe benefits amount threshold from $1,000 to $2,000 and increase the reduction of taxable value that applies to eligible in-house fringe benefits and airline transport fringe benefits from $500 to $1,000. It extends the definition of ‘remote’ for the purposes of the fringe benefits tax concessions where the shortest practical route involves travel by water. These amendments will take effect in the fringe benefits tax year starting on 1 April 2007 and later fringe benefits tax years.

The increase in the minor benefits exemption and the reportable fringe benefits amount thresholds were announced by the Treasurer and the Prime Minister in their joint press release No. 019 of 7 April 2006 as part of the government’s response to the report of the Taskforce on Reducing the Regulatory Burden on Business, which of course is something that this government needs to deal with seriously. After 10 long years of talking about being the best friend of government, little has been done on a practical level to deal directly with regulatory burdens on business. Although there have been a lot of reports, task forces and inquiries, the government has taken very little action. In fact, the amount of red tape and the regulatory burden on business today are somewhat weightier than they were 10 years ago when this government came to power.

This bill, according to the government, is also a rethinking of regulation in the 2006-07 budget. The increase in the reduction of taxable value applying to eligible fringe benefits and the extension of the definition of ‘remote’ were announced in the 2006-07 budget and in attachment B of the Treasurer’s press release No. 039 of 9 May 2006. So the government is at least moving forward, albeit slowly, and making some attempts to recognise the burden that is placed on small business and to do something about it.

This burden on small business has a number of effects on small business, particularly in the area of, for example, skills. While businesses are occupied and busy dealing with administrative issues, they cannot be dealing satisfactorily with skills issues, and we have plenty of evidence of that. The last 10 years has been marked by a growing skills crisis in Australia, to the point where today it really can be defined as a crisis.

We are seeing the government react in a number of ways to that skills crisis, through short-term solutions such as 457 so-called skilled visas and a range of other activities. The reality is that the number of Australian apprentices and trainees quitting their courses and not following through has hit an all-time high in this country, and the government has done little to nothing to address this issue. These issues form just as much of a burden as any regulatory burden that small business faces.

In fact, according to new figures from the National Centre for Vocational Education Research, in the March 2006 quarter, apprenticeship cancellations and withdrawals reached 36,000. That is up 13 per cent from the same time last year. Over that quarter 40,400 people completed an apprenticeship. That high number of those who did not finish, who either withdrew or cancelled, is startling and something that the government should be seriously trying to address.

The government is so out of touch that the training minister recently proposed building TAFE colleges not here in Australia but in Africa. I think it confused everybody, not only in this place and on his own side but out in the community as to why that would be a good idea. The government ought to be acting to cut the dropout rate by adopting Labor’s proposal for a $2,000 trade completion bonus to encourage more traditional apprentices to complete their training.

I think sometimes dealing with issues and burdens placed on small business, be they regulatory or otherwise, is not so much about trying to come up with new ways to attract people but about trying to stem the flow, stop the bleeding and stop the pain that is being felt by small business in trying to get skilled, qualified and trained people through their industries. Once again, the Howard government has forgotten what its top priority ought to be in this country—that is, training Australians first and training Australians today.

The NCVER figures from the March quarter also showed an increase of 24 per cent last year in the number of cancellations and withdrawals from apprenticeships in the trades and related workers category. So it is not just restricted to one area. The number of apprentices and trainees also declined slightly in the March quarter compared to the same time last year. It will take another 10 years at the current level of training to make up for the lack of training over the past decade—a terrible record and a terrible legacy that has been left by this government.

According to a recent report commissioned by the Australian Industry Group, Group Training Australia and the Dusseldorp Skills Forum, that level of training, that 10-year bridging gap, is a complete disgrace and something that Australia is going to struggle to fix. Building TAFE colleges in Africa obviously will not solve the problem, and the minister could not have backed away from it any faster than he did when we raised that issue and asked a question on it in this place. That is why Labor says our priorities are to train Australians and train them now. This is having a very serious effect on small business.

The Australian Hotels Association, at a briefing that you and I, Mr Deputy Speaker Quick, got just recently, raised some of the issues that we are both concerned with, including the quality of training of young people and the level of service within that industry. It is an industry particularly marked by the number of young people and transient and casualised workers who come through and, potentially, do not stay in that industry, or who come through the industry to support themselves while they are doing some further educational studies or perhaps while in between jobs. Or perhaps they are people who really do want to have a long-term career in that industry. But what the industry is finding is that they are just not being supported by government, and I do not believe they are being supported by the government’s extreme industrial relations changes. The changes are not benefiting the industry as a whole. While on the surface there may be this impression that they give employers greater flexibility to determine how people ought to work, they do not actually do anything for the industry itself.

What I am referring to is the dumbing down of skills in restaurants, coffee shops and service industries where we are finding that people no longer get trained. They no longer have those skills, and employers are no longer willing to spend the money that they otherwise would, and they cannot find enough skilled people to fill the jobs. So they are finding it very difficult, and that is causing major problems for the industry. One of the things we were told by the AHA is that there is a problem in the Australian market with domestic tourism, and I think this could be a part of that. If people are going to get a bad service experience or some other bad experience when they are travelling or holidaying domestically, then this skills crisis and all those other burdens that are on small business are not going to help.

That is the real and practical impact: the dumbing down of skills and noncommitment to an industry. Young people are not silly. If they do not find opportunities and prospects for career advancement in an industry then they just move on. But I believe the AHA is actually becoming involved; it is doing everything it can. It understands the problems with skills and the skills crisis in this country, and hopefully it will do much more to address these issues, to reinvest in its own industry and in young people and training, and make sure that we do not end up with a very second-rate service industry. This leads straight on to the relationship between the extreme industrial relations changes of this government and the 457 so-called skilled visas class. I say ‘so-called’ because once upon a time a 457 skilled visa was just that; it was a visa that somebody attained. They then came to this country and worked to fill a particular skill gap which was identified and which had selection criteria. The employer looking to fill that position would have done everything they could have to find somebody domestically. So they would apply.

It is a fairly big process, obviously, and a big leap for somebody to look overseas to fill a job. But that has all changed now, because this government has decided that it should go out there and relax the rules and regulations on how business can get so-called skilled labour—guest labour, as it were—into this country. Now those controversial temporary business long-stay visas are being used not to fill skills gaps but just to employ cheap labour. That is a real concern, because those people being displaced are the people in the service industries who I referred to earlier.

We are now finding an opening up of this new class, particularly when it comes to chefs and people working in hotels. You will find that now they are all from overseas, supposedly filling a skills gap. But the reality is they are being used as cheap labour, and I find that completely appalling. I think that this government ought to seriously reconsider its position on the use of foreign, so-called skilled labour in this country. At the end of the day, what this really means in practical terms is taking jobs away from people who probably ought to be in those jobs and who may develop long-term careers if they can receive the training they need. Labor have made a number of comments and proposals on 457 visas. What we have said from the outset, though, is that we support a 457 skilled visa class. We have always supported one, because it is an important part of the mix in Australia to deal with skills and particular industries. But it should not be used as a replacement for skills just to import cheap labour. It should not be used to exploit people.

There has been an inquiry on the abuse associated with the visas. There were problems with the launching and the administration of that inquiry on making it a more transparent visa class. The inquiry, rejected by the government, was to examine a number of things. I think these are very important. That inquiry would have examined the general efficiency and effectiveness of this visa class, the safeguards in place to ensure the integrity of the system, the government’s performance as an administrator of the visa system, the role of the domestic and international labour hire firms and agreements and the potential for displacement of Australian workers, and the difference between the pay and conditions of visa holders and the relevant rates in the Australian labour market. That particular point is another issue. Workers are brought in under this visa class not only to be used as cheap labour but also to undermine the wages and conditions of Australian workers working beside them. This is something that needs to be investigated fully.

The inquiry would also have examined the government’s labour market testing required before a visa can be approved, and we have already seen a number of test cases that have shown that there are unscrupulous employers out there who will exploit and abuse people under this visa class. If it had been accepted by government, the inquiry would also have looked at the regional certifying bodies for visa certification and the interaction of this visa with the Work Choices legislation. These are some very serious issues, and if the government were serious about actually dealing with this properly they would have allowed this inquiry to take place. But they have cut and run. They are hiding; they do not want anybody to fully examine the impact this is having on our economy and on Australian workers. All I can assess from this is that they just do not care. They do not care enough about Australian workers and Australian industry to make sure that this visa class is not going to have some long-term detrimental effect.

I will also add to that a very important part, which is that there are lots of very good, solid employers out there. Some are large employers. There are a number of them—quite a few, in fact, in my electorate, who are concerned about 457 visas. They use them themselves, but they use them properly. They do not use them to undercut wages and conditions; they use them to fill real skills shortages and gaps. The problem they are finding, though, is that some of their competitors are exploiting and abusing that visa class. And the problem they find is that it is getting harder and harder to compete with unscrupulous employers who are trying to undercut them and compete just on wages. If this government does not want a race to the bottom on wages and conditions, a dumbing down of industry and training and a running down of our own labour market then it should look very carefully at this visa class and its full impact on the Australian economy and labour market.

I also want to talk briefly on the issue of interest rates. I do not think you can talk about any tax bill or any other bill in this place without raising interest rates because they seem to be the daily discussion point and certainly the barbecue stopper and all those things that the Prime Minister always talks about. But something very special happened in this place this week—that is, for the first time for a long time Labor asked a question citing 17 per cent interest rates. We threw it at the government with open arms, saying: ‘Here it is. Here’s a free kick. We’re going to raise 17 per cent interest rates with you and we’re going to compare our record to yours.’ What do you think the Prime Minister had to say on it? He ran and hid and tucked his tail under because his record is worse than it ever was with 17 per cent interest rates. Even though 17 per cent interest rates were very brief, they did hurt people, but people are hurting more today. That is the new interest rate reality—that is, it is 50 per cent more expensive today, in today’s dollars, than it was with 17 per cent interest rates when Labor was in government.

This government has nothing to be proud of. It will leave no great legacy, apart from the fact that it is creating a whole generation of young people who now no longer consider it possible to even dream about owning their own home. They have other things to do. They have to worry about paying for their HECS and university degrees, which are now the price of a home. They have so many other bills, including personal debt and credit card debt, and are trying to survive the cost of living and all those other issues. As a young person, the dream of being able to save a few thousand dollars and to get into the housing market at the low end—something cheap and affordable but where you can start your family and start a bit of wealth creation, which this government seems pleased to crow about but does not do anything about in real terms—is gone. It is gone for a whole generation.

Interest rates are nothing that this government ought to be proud of. We have seen the seven back-to-back rises and we have seen the broken promise the Prime Minister made at the last election. There have been three or four interest rate rises since then and there are potentially more interest rises to come. We do not want interest rate rises. We think people are paying too much already. Just because it is a low number it does not mean that you are not paying a lot of money. In fact, people are paying more money than they ever have in history. Consider these facts: the average new mortgage in Australia is over $220,000 and, of course, it is much higher in major capital cities. I do not have to talk about Sydney for too long for people to understand what that means for people in that market. Since the election, repayments on an average new mortgage have increased by $108 per month. It is a lot of cash, a lot of after-tax dollars, that people have to find. This means that, over the last 10 years, since this government has been in, household debt has doubled. Again, it is a very terrible record and one that this government should not be proud of.

It is not going to be easy to fix. The only solution that the Prime Minister and this government ever put forward is: ‘Let’s blame the states.’ Okay, we will do that; that is fine. Do it for as long as you like, but at the same time start coming up with solutions and start looking at what you can do practically to deliver something, particularly for first home buyers, who cannot afford to buy a home anymore. The proportion of first home buyers in the market has hit a 12-month low. Of all loans, first home loans are now just 16.7 per cent. That is a startling figure and something that this government should be very concerned about.

A range of issues have come to the table over the last few days in this place. Certainly the tax take and its relationship to interest rates and to what this government has been doing is not good. This is the highest taxing government in Australian history. We just heard the member for Rankin give a very eloquent contribution on tax, and he gave some comparisons and reminded us of some of the porkies that have been told by the Treasurer on taxation. Make no mistake: this is the highest taxing government on record. It is the Howard-Costello legacy.

In the very few seconds I have left, I want to make a quick point about Medibank Private. It should not be sold. The sale should not go ahead. The government, whilst it has delayed the proposal for the sale, is still committed to this sale. It wants to flog off everything. I am waiting for the bill to sell off Parliament House! Maybe there will be some shares in it for Australians. Although they already own it, they will have to buy shares in their own parliament. Maybe democracy could be aligned with the number of shares you own. That is the mentality of the Howard-Costello government. It is unbelievable and incredible. This government ought to be condemned for even considering the sale of Medibank Private. (Time expired)

Michael Hatton (Blaxland, Australian Labor Party) Share this | Link to this | Hansard source

I am happy to support the amendment put forward by the member for Hunter on the Tax Laws Amendment (2006 Measures No. 5) Bill 2006. By putting his amendment forward, he has put Labor’s position with regard to the unfortunate people who have suffered at the hands of the James Hardie corporation over decades—people who have ended up with mesothelioma or asbestos poisoning, who have had their very health and lives destroyed. And it has impacted dramatically on their families.

This government has mucked around with the resolution of this process. It is not been forceful or put its foot down in relation to it. It has not put as much pressure on the company as it should have—a company that has sought through just about every means imaginable to run away from its responsibilities. The government, in a hands-off approach, has said that it can only rely upon the good graces of this company to come forward and give adequate compensation to people. Labor has argued that we in fact need to do more. The amendment refers to:

(1)

failure to provide certainty to the former employees of James Hardie and their families by providing tax exempt status to the James Hardie Asbestos Victims Compensation Fund ...

The government has argued that it should not create a special case and that it puts more pressure and onus on the company by not providing a tax exempt status. Given what has happened so far in relation to this, the opposition is of the mind—as the shadow minister has put it in his amendment—that we in fact should consider this, and the government should have done so. On one of the other great major unresolved taxation issues, the amendment refers to:

(2)

creation of great uncertainty in the Australian business community by its failure to bring forward its review of loss recoupment rules.

The shadow minister dealt with both of these areas quite extensively. I indicate my support for the action that he has taken.

This is a typical taxation bill and a combination of three very disparate measures under three schedules. The first relates to particularly minor changes in the fringe benefits tax area. The second relates to the treatment of veterans, extending the provision to them of pharmaceuticals and access to cars. The third relates to the availability to students of the tax-free threshold. I commend in particular the changes made in schedule 2. I will go to the specific provisions. The schedule proposes GST concessions in relation to the Military Rehabilitation and Compensation Scheme established under the relevant act. The amendments provide that the supplies of drugs, medicines and other pharmaceutical items are GST free if supplied as pharmaceutical benefits under that act and that the GST-free motor vehicle concession for veterans will be extended to include a new category of severely injured veterans under the Military Rehabilitation and Compensation Scheme. Previously, you had to be a totally and permanently incapacitated veteran to gain that concession; here they have somewhat lessened the extent of injuries necessary to qualify.

I think this is an entirely appropriate response to people who have suffered in the past and continue to suffer for their country from injuries sustained from fighting on our behalf. Just in this last year, we have had a special operations group in Afghanistan. They have fought for a full 12 months and 12 of those soldiers have been injured—one very severely in the jaw and another in the abdomen. Those injuries would not qualify for assistance under the existing provisions. A range of other measures are available to them, but taking practical measures to relieve the distress of and the financial burden on those veterans by creating a class under which they can be assisted is important because it recognises the particular needs they have and that they have done things that others have not.

I am not sure about schedule 3. I do not know why this was done and what drives it. I have looked at the Bills Digest; I have not been able to look at the explanatory memorandum to this, but there is a notation in relation to it. According to the Bills Digest it changes the application of the Income Tax Rates Act 1986:

... to extend the full tax-free threshold of $6,000 to taxpayers who cease to be engaged in full-time education for the first time from the year 2006-07; at present these taxpayers are only entitled to a proportion of the tax-free threshold of $6,000.

When the minister is summing up debate on the second reading, I would like to know exactly what the reasons are for this. I can see that, at present, a series of calculations have to be done—if a person ceases to be a student at some time during the tax year, they may have to do a calculation of one, two, four, six or seven months out of the 12 and only get a pro rata treatment. That is what the situation has been historically. If you are in the workforce for five months out of 12, then you should receive five-twelfths of the full tax concession of $6,000. I do not think it is beyond the wit or the imagination of all those students or the people who give them tax advice to actually work that out.

I do not see the compelling reason for changing this other than to make a simple change to the manner in which the act is operating for the benefit of students. Why is it being done? The argument is for less complexity and that it is less burdensome for those students, but is that it? Someone came up with the notion that what has been done historically should be turned upside down? The point here is not a question of appropriate generosity in schedule 2; the point goes to the question: why was this done? Is it just within the scope of this bill generally that there is a drive towards less complexity?

This brings me to the first schedule, which I might devote some time to. Schedule 1 is about fringe benefits tax. What is achieved here? The purpose of the schedule is to, firstly, increase to the minor benefits exemption threshold from $100 to $300; secondly, increase the reduction of taxable value that applies to eligible in-house fringe benefits and airline fringe benefits from $500 to $1,000; and, thirdly, increase the reportable fringe benefits amount threshold from $1,000 to $2,000. The schedule also changes the definition of remote areas. There is a specific provision that applies here—and this one is a doozy. Maybe this is for Tasmania, if you actually go by ship from Tasmania to the mainland. This provision says: ‘We recognise that it is more inconvenient and more difficult to travel by water than it is to travel by land. Hence, if you undertake a journey that is completely by water, we will allow you to claim double the amount. If it is partly by land and partly by water, that amount by water will be doubled.’

I would like to know the genesis of this and how many people it actually applies to. I do not know whether this is an amendment centred on Tasmania or not. I cannot think of many other applications, unless people are coming in from Lord Howe Island in the electorate of Sydney. That is one small aspect of that. These measures are not very great or significant. One could guess that they were just developed in the normal course of the Taxation Office doing its job. They are very small eggs to have been laid. If you looked at the genesis of this, on 12 October 2005 you might have expected that the eggs laid by the government goose with regard to this would be not only golden but goose sized. Instead of that what we have here are extremely small eggs—quail eggs or smaller. This is the scope of what the Treasurer and the Prime Minister announced on 12 October 2005. They released the task force report Rethinking regulation, which looked at reducing regulatory burden on business. They said it will:

• identify specific areas of Commonwealth Government regulation which are unnecessarily burdensome, complex, redundant or duplicate regulations in other jurisdictions;
• indicate those areas in which regulation should be removed or significantly reduced as a matter of priority;
• examine non-regulatory options (including business self-regulation) for achieving desired outcomes and how best to reduce duplication and increase harmonisation within existing regulatory frameworks; and
• provide practical options for alleviating the Commonwealth’s ‘red tape’ burden on business, including family-run and other small businesses.

As part of this, we have these changes on the fringe benefits tax: a hell of a lot promised; an enormously small amount delivered in these changes.

There were a couple of goes at how much was done and what came out of this, given that the government, when it came into government in 1996, from memory, promised to slash red tape by half. This is a government that has specialised in creating more complex legislation, particularly in the tax area, over the last 10 years. Here it is responding to pressure from a very wide ranging and deep task force, and what has it come up with? There were several parts to what was recommended. The Treasurer chose only the first couple of parts, and they are minor in their effect. All up in these three schedules, we have got about $13 million—there is $2 million for the student part, about $1 million for schedule 2 and about $10 million for the rest.

What is the reaction out in the community? If you have a look at the Australian Financial Review, on 29 August 2006 Mark Fenton-Jones, in an article entitled ‘Tinkering falls short of much-needed tax revamp’ says:

The latest changes to the way GST and fringe benefits tax are calculated by small businesses are welcome measures to reduce the compliance burden. But it is only tinkering on the margin, as the whole tax system needs to be revamped with small business in mind.

He went on to summarise the comments made by Pitcher Partners manager Gary Matthews on the FBT changes:

He says the government needs to take a more fundamental approach and evaluate the whole FBT legislation, which is about 20 years old, to see if changes in business practices during the past two decades should be reflected in broader changes to the legislation.

That basically gets to the core of it. Businesses would of course want to take their regulatory burden and place that on the employee. They like to mirror what the government is doing. What the government is trying to do through legislative workplace changes is take the on-cost of business and put that onto individual employees. If both achieve that then the employee would take the weight of just about everything that can be put on them.

But by reducing compliance costs, reducing burdens and so on, by putting so much into this effort and coming out with so little, you would have to ask fundamental questions. Why did this government choose to bring in a GST whose fundamental structure and approach was generated in 1962? Why did it choose a paper-driven GST, appropriate to the fifties, sixties and seventies, in a computerised age? The one fundamental change that could change things for small, medium and large businesses in this country is to change the GST regime from the old paper based system—although they use computers to operate it, it is paper based at every iterative step of the process of everybody having GST imposed on them, so they have to claim it and they have to take it back, put it in and put it out, in a mass of records—to a simpler proposal and a simpler way of going about things.

They could transfer this into a retail sales tax. If you want to take a burden off small, medium and large business in Australia, take an intensive GST and turn it into a retail sales tax. That was proposed by Treasury in 1985. When option (c) was put up, Treasury recommended that because it thought the full-blown GST would be too difficult to implement in a short time frame. I have had discussions since with certain Treasury officials who might have known something about what happened then and later, and they are reluctant to undertake this approach. There can be no impediment to this with regard to the question of what the effect might be on the black economy. In Australia and in Europe, it is absolutely evident that the GST regime we have got—the burdensome British and European 1960s regime—is still riddled with a black economy that has run rampant through various parts of Europe and has run rampant, despite the imposition of the controls that are there, in the GST.

If you wanted to make some of the changes that this task force was suggesting, which none of Australia’s businesses are doing, you need to look at it deeply and fundamentally and ask: is the very design of this tax correct? Is its implementation right? Shouldn’t the government be looking at dramatic simplification by having one point at which this tax is put on? Simplify it for everyone else except at the endpoint.

I want to make another couple of points. Originally this GST was to raise $24 billion. We know there is $32 billion-plus now, and rising. It replaced a wholesale sales tax that the government said was shambolic and all the rest of it. The wholesale sales tax had the benefit of being put on at one single point in the process. It was much simpler, much less complex, despite the fact that it had differential rates of application. And it was certainly far less costly to the community than this process is.

Just in passing, because we have had a very wide debate, there is something that is entirely pertinent in this regard. I join with the member for Rankin here with regard to the fact that this is the highest taxing government in Australia’s history. It is also the one that has put a whole series of burdens on people while arguing that those burdens really are not great. They have been significant burdens.

However, this is also a government with a Treasurer responsible for taxation matters in this country who is willing to completely distort the truth of the matter. He is currently swanning around the world, being in South Africa at the moment, but just last week, at the dispatch box, he told a complete and utter untruth. He said, ‘Why has the Labor Party never had the wit to be able to run a budget surplus?’ I interjected at the time, which was not parliamentary. However, my interjection at that time was quite simple. The first four surpluses in the history of the Commonwealth of Australia were under the Australian Labor Party. Guess who the Treasurer was. The member for Blaxland, Paul Keating. One, two, three and four. No-one had ever done it. Had John Howard, the member for Bennelong, in his years as Treasurer ever had a surplus budget? The answer is no.

Arch Bevis (Brisbane, Australian Labor Party, Shadow Minister for Aviation and Transport Security) Share this | Link to this | Hansard source

Not one!

Michael Hatton (Blaxland, Australian Labor Party) Share this | Link to this | Hansard source

Not one, not a single one. But double-digit John did achieve this: double-digit inflation and double-digit unemployment. That is a story that is not told. It is not impossible—he actually did it.

Labor made significant changes to the taxation regime. This bill, with its proposals reflecting the grand design, which should have been a goose laying very large golden eggs, has given us partridge eggs. It is an indictment of this government that they cannot think beyond tiny fractional approaches to things. Why don’t they go and have a look at the retail sales tax and really look at reducing the burdens on— (Time expired)

Tanya Plibersek (Sydney, Australian Labor Party, Shadow Minister for Childcare) Share this | Link to this | Hansard source

I am very happy to speak on the Tax Laws Amendment (2006 Measures No. 5) Bill 2006 because it gives me the opportunity to speak a little on fringe benefits tax and, in particular, the way that fringe benefits tax applies to child care. Certainly the fringe benefits tax system as it applies to child care is a mess, and I am not the only one who thinks so. In fact, there are so many problems with the fringe benefits tax regime as it relates to child care that even Bronwyn Bishop has lambasted the cabinet over its failure to act in this crucial area.

On 21 June, at a hearing of the work and family inquiry by the Standing Committee on Family and Human Services, Mrs Bishop said that the business premises rule as it relates to the fringe benefits tax on child care was an absolute mess. She said it was ridiculous. This is something—and let us be clear about this—that is government policy. This is not something that is at the whim of the tax commissioner or that the tax office could fix up if they just got their act together. This is a definite decision of the Australian government to insist on the business premises rule when it comes to child care, and the effect of this is that it makes it virtually impossible for your average business to deliver work based child care without paying fringe benefits tax on it. Mrs Bishop said, ‘The bottom line is that we do need the government to seize the initiative and amend the Fringe Benefit Tax Assessment Act.’ She also said:

... the government has not had the wherewithal or the stomach to make it a policy and do it properly ...

And so on. The chair of the committee made a number of other very sensible comments.

The tax commissioner admitted that the Australian Taxation Office does not know how many employers have on-site child care. What this means in effect is the government does not know how many employees are salary sacrificing child care, because the fringe benefits that employers are exempt from paying fringe benefits tax on are not reportable. Just one of the problems with the government not knowing how many parents have salary sacrificed child care exempt from fringe benefits tax is that the government has no way of implementing what the Treasurer said is the rule—that parents who pay for child care from pre-tax income are not eligible for the childcare benefit and the 30 per cent childcare rebate. The Treasurer confirmed this on 22 May in response to a question from me about the phenomenally generous Centrelink proposal—the tender for child care for Centrelink and other associated workers. The Treasurer said:

... where people are able to access pre-tax dollars for child care, as exists at the moment, the flipside is you cannot access the child-care benefit or the child-care tax rebate. The same rules that apply to any other employees at the moment will apply to those who may be eligible to take up an offer out of the human services agency.

That is all very good. People should not be double dipping. The problem is that the government has no way of knowing if they are because it has no records of who is salary sacrificing their childcare expenses in a way that does not attract fringe benefits tax for their employer. I do not know how the government could possibly cross-reference this information.

There are in fact very good reasons to suggest that parents paying their child care from pre-tax income may also be claiming the childcare benefit and the 30 per cent rebate—and it is not because they intend to rort the system. It is because the system is fiendishly complex and incredibly confused and because there are loopholes all through it. Take, for instance, the forms to claim the childcare benefit as a lump sum. The forms changed between 2004-05 and 2005-06. On the form for 2004-05 parents were asked:

Were all or some of your child care fees paid for you by someone else during the 2004–2005 financial year?

On the form for 2005-06 the question was changed to:

Were you liable for the cost of your child care during the 2005–2006 financial year?

I have been told by childcare providers that there are parents who are salary sacrificing child care at particular childcare centres and who are accurately stating that yes, indeed, they are liable to pay their childcare fees; at the end of the day, if they are not paid, of course they come looking for the parents. Some of them have even checked with the human resources area in their workplace and human resources have confirmed to them that yes, they as employees are liable to pay their fees—but the employees are simply paying the fees from their pre-tax incomes. So they are accurately answering that they are liable; however, they are still paying the fees from their pre-tax incomes.

What is happening is that a few lucky parents have employers who are able to comply with phenomenally narrow terms and conditions that allow a fringe benefits tax exemption on child care and thus allow their employees to salary sacrifice their childcare expenses. But, according to the paperwork that they are filling in, they are perfectly legitimately also claiming childcare benefits and the 30 per cent childcare tax rebate. It is obvious that this is not the Treasurer’s intention, but the system that he presides over is such a phenomenal mess, particularly when it comes to child care, that this is the result. It is just one more example of how the Howard government is failing parents when it comes to child care. If you look at the fringe benefits tax rule applicable to child care and its fiendish complexity and incredibly narrow scope and then have a look at the tender that Centrelink wrote for child care for its own employees, you get the notion that there is a phenomenal double standard applying here.

Incidentally, it is interesting that we have not heard of any progress on this tender since Labor exposed its conditions in May this year. Work based child care is a really good thing; work based child care for public servants is great and work based child care for other Australian workers is terrific too. What we should not accept is a system that allows two types of workers—public sector workers and private sector workers—to be treated differently under the Australian tax system. This is effectively what the tender for child care for Centrelink workers required the winning tenderer to do.

About 38,000 public servants would have had access to this, according to the tender documents. It was a tender drawn up under instruction from the Minister for Human Services, Joe Hockey. It covered 25,000 Centrelink staff and others who worked for Medicare, the Child Support Agency and other agencies. Basically the tender required the successful tenderer to provide child care wherever it was required by these public servants, whenever it was required—guaranteed. It required the successful tenderer to provide fixed price child care, to be paid from pre-tax income. This is something that the average Australian worker only dreams of.

The double standard is evident in a system where the Treasurer says: ‘We don’t need to do anything about fringe benefits tax on child care and we don’t need to accede to the suggestions of the chair of the work and family inquiry or other backbenchers like the member for Lindsay and others for tax-free child care, for a change in the tax treatment of child care. We don’t need to do any of that because’—as the Treasurer said at the budget—‘uncapping family day care and out of school hours care was going to fix every childcare shortage in the country. There are no real childcare shortages. There is no issue with price. We have done all of that by uncapping out of school hours and family day care.’ Then, at the same time, they are actually looking for a guaranteed, fixed price pre-tax system of child care for its own employees. This strikes me as extraordinary. If there really are not problems with childcare affordability and availability in Australia, why is there a special deal for 38,000 public servants? If there are genuine problems of affordability and availability in child care, why not address them for public servants but also for ordinary Australian workers across the country?

If you look closely at the provisions of the tender, it really is quite stunning. One of the things that the successful tenderer would have needed to commit to was priority placement over other children. Clause 3.3.1 states that priority placement for Centrelink families must be provided. This means:

The Contractor must ensure that a standard term of community enrolment includes a month notice to vacate requirement;

…     …         …

The Contractor must invoke the one month notice to vacate requirement if the placement is required by a Centrelink family ...

We subsequently had the government running for its life on this one because it meant that your child could have been in the same childcare centre for three years and, if your childcare centre was part of the successful tender, your child could be thrown out with one month’s notice for the child of a Centrelink employee. How inconvenient and stressful for the parents of the children and how terrible for those children who are used to attending one childcare centre. What of the disruption to the child’s learning process when they are unceremoniously uprooted and told to go and find another place to go to child care?

There was also a clause that required ‘the ability for Centrelink employees to salary package their childcare fees without Centrelink incurring a fringe benefits tax liability’. I just do not understand—and I cannot find anyone who can explain to me—how Centrelink can tender out the provision of its child care at the same time as meeting the requirements for child care to be fringe benefits tax exempt. Unless they lease, they are moving into existing centres all around the country. Unless they become the organisation taking the financial risk for what would have to be hundreds, if not thousands, of childcare centres around the country, I do not see how, under current fringe benefits tax laws, this is even legal.

The tender also said that childcare fees would be fixed by the government for five years. Don’t Australian parents just dream of that? At a time when the cost of child care is rising at four or even five times the rate of CPI increase, guaranteed-price child care for five years! It is like the film where they say, ‘Tell ’em they’re dreaming.’

Tony Windsor (New England, Independent) Share this | Link to this | Hansard source

The Castle. Best film ever made.

Tanya Plibersek (Sydney, Australian Labor Party, Shadow Minister for Childcare) Share this | Link to this | Hansard source

The Castle. The tender also says:

Centrelink requires the delivery of an employer-provided child care program that will satisfy both present and future needs of employees, in all of our locations ...

That would be terrific for parents living in suburbs where there are childcare centres with 600 people on the waiting list. The tender also says that the contractor must be able to provide long day care, outside school hours care and occasional care ‘in all locations, as required’ and that child care must be provided on public holidays and outside business hours. It is great if you can get it. It is certainly something that I would like to see. If work based child care like that is available, I would like to see it available much more broadly than just to the select few who work for the government.

People say, ‘Isn’t it a good start to have this sort of child care available for people who work for government?’ Yes. The trouble is that the fringe benefits tax regime, as it exists at the moment, would actually stop employers who want to do this—who want to offer it to their staff—from doing so. If we could offer this sort of childcare arrangement to other employees, we would go a long way to solving the childcare shortages in this country—and the issue of cost as well. The trouble is that we have a tax system that will not let it happen.

Recently I have been asking ministers questions about the sort of childcare assistance that they give to their employees, including how many of their employees are able to salary sacrifice. The answers are quite interesting. Some agencies have childcare centres on site. Of course, these are taxpayer funded. Examples are the Australian Bureau of Statistics and the Department of Finance and Administration. The Department of Agriculture, Fisheries and Forestry sponsor a vacation care program. The usual situation is that Commonwealth public servants have preferential access, followed by ACT public servants.

It is great—it is terrific; it is fantastic—that these people have access to child care. It should be supported. But how can the government in conscience say that the only people who deserve this sort of support are its own employees? How can it in conscience say that people who work for other organisations—particularly small and medium-sized organisations—do not deserve support to meet their responsibility as parents that this sort of work based child care offers?

Is it possible to change the tax system so that this sort of support is more broadly available? Yes, it is. The best way to do it is the way that Labor announced in our Care for Kids blueprint. We have said that you could get rid of the business premises rule for fringe benefits tax and that, if we had rules that said that if an employer genuinely invests in expanding the supply of child care or improving the quality of care in a centre—it could be an existing centre or a centre that they combine with other employers to build—we would allow the same fringe benefits tax exempt treatment of that child care as is allowed in these deals for public servants.

We want to see more child care and better child care. We want to see work based child care for public servants. But we also want to see much more work based and work sponsored child care for other Australian workers. Our plan allows fringe benefits tax exemption on all eligible employer provided child care, and it allows employers to claim business tax deductions. We have said that we would also expand the limit from children aged up to six to children aged up to 15.

It is quite mad that, for parents who have a problem with finding and paying for vacation care, that actually overshadows the whole year. There are plenty of parents who spend a good part of the year working out how they can cover 12 or 14 weeks of school holidays with four or possibly eight weeks of family leave. That is, if two parents never take leave at the same time, they might be lucky enough to get eight weeks of leave between them. How do you cover that time? We have said that employer investment in helping with vacation care is also something that should attract fringe benefits tax exemption where it is done appropriately.

It is not beyond our capabilities to provide decent, work based or work sponsored child care for a much greater number of Australian employees. It is terrific where it happens in the public sector, but we really need to look beyond just the public sector, to make this available to a far greater number of employees. I know the employers want to do it if they get the help and support of the Australian government, as the chair of the work and family inquiry has asked for, as the member for Lindsay has asked for and as many government and Labor backbenchers have asked for in the past.

Tony Windsor (New England, Independent) Share this | Link to this | Hansard source

I was interested to hear the member for Sydney make some comments in relation to that great film The Castle. In terms of some of the comments I would like to make about fairness of tax treatment in the Tax Laws Amendment (2006 Measures No. 5) Bill 2006, I thought some of the issues raised in that film were pertinent, particularly in relation to the term ‘just terms’. Those who have seen the film would be aware that Bud Tingwell acted as a QC representing a family who were going to have their home, or their castle, removed because of the expansion of an airport facility. The airport company was using some sort of legislative process which allowed them to compulsorily acquire their land without just terms. The film came to the conclusion that one’s home is one’s castle and there would be a legitimate claim for ‘just terms’ compensation if one’s home were taken away under those circumstances.

The reason I mentioned that—and I say at the outset that I am in support of the legislation—is that I would like to take the opportunity, as have some others, to talk about the broader taxation arrangements that have been put in place. In respect of the just terms provisions that I have just mentioned, which the film The Castle reminded me of, I take the parliament back to an answer that the Prime Minister gave last week in question time to a question that I asked him in relation to groundwater entitlement holders and the taxation treatment that they would be allowed in terms of the Achieving Sustainable Groundwater structural adjustment fund that was put in place.

I know that the parliamentary secretary at the table is very familiar with this issue, and I would imagine that she would be quite sympathetic to some of her water entitlement holders. But for members of the House who are not aware, some years ago the Commonwealth, states and groundwater users put together a package amounting to $150 million to help compensate for the loss of groundwater entitlements, which the state government—the New South Wales government, in this case—had deemed to be applicable to reach sustainable use of a natural resource. Having done that, and the groundwater users having agreed to the package, it was assumed—quite wrongly by them, in hindsight—that the compensation package would be made available to them in total.

Over ensuing months it was found that the Australian Taxation Office would be deeming the receipt of compensation arrangements from Commonwealth and state governments as assessable income in the year of receipt rather than assessing them as the loss of a capital asset and treating them under the capital gains tax umbrella. That came as a great shock to many of the irrigators because, in a three-way split of $150 million, it meant that of the one-third shareholding of the compensation package the Commonwealth could receive most of its money back via income taxation receipts. I am pleased to see the Minister for Revenue and Assistant Treasurer coming into the chamber, because he has had something to do with this particular issue. In his summing-up, he may like to address some of the correspondence that he has been privy to.

In going back to the answer that the Prime Minister gave last week, I thank the Prime Minister because I think he made a very genuine attempt in a fairly complicated issue to come to grips with the concerns of the groundwater holders across the six valleys in New South Wales. I will quote the Prime Minister because I think that, in respect of the ‘just terms’ or property rights issue that I referred to earlier, the Prime Minister made a very important point and I share it with the House. In his reply to my question relating to the taxation treatment of compensation for the loss of groundwater entitlements for the greater good and the sustainability of the natural resource for the environment et cetera, the Prime Minister said:

It is my view that these payments are in the nature of compensation for the withdrawal of the previously conferred water right.

I myself do not believe that you can regard these payments as being in the character of income.

That was a significant breakthrough and I thank the Prime Minister for his words in relation to that particular issue.

It is the first time that the Prime Minister or any minister in this House has actually used the words ‘compensation for the withdrawal of a previously conferred water right’ in the same sentence. That is, in my view, the first time that the leader of the government has recognised a property right. If you look at the history of the property rights issue, particularly in relation to water—and I do not think anybody argues that we do not have to bring our natural resources into some degree of balance and sustainability—and if you travel back to 1995, when the competition policy arrangements were first put in place, there were two major tenets that underwrote the arrangements and the agreement between the Commonwealth and the states. As part of those arrangements the Commonwealth and the states agreed that money would not flow in terms of competition tranche payments to the states unless those various arrangements were put in place.

In the case of the water reform process, there were two things that were basic to the process commencing. One was that a properly constituted market in water licences be established. There are some fuzzy bits on the edges but essentially that has happened. The other thing was that a recognised property right be established between the Commonwealth and the states before any flow of money in terms of tranche payments would flow to the states. We have gone through over 10 years and taxpayers’ money—money that has been earned through the income tax process and other taxation arrangements—has flowed from the Commonwealth to the states. That has applied for 10 years and yet property rights have not been recognised until last week, when the Prime Minister used the term ‘compensation’—not ‘structural adjustment’, not ‘financial assistance’—for the withdrawal of a previously conferred water right. I compliment the Prime Minister for doing so.

I am pleased that Minister Dutton is here because, having said that, the Prime Minister did go on in his answer to my question to deflect blame, in my view quite wrongly, onto the New South Wales government. I am not defending the New South Wales government here; I think their behaviour has been absolutely atrocious in relation to their treatment of natural resource users in that state. However, the Prime Minister went on to deflect blame, saying:

The New South Wales government thus far have represented to us—the federal government—that they want the payment treated as income because, apparently, they are fearful of a precedent being established whereby such payments are seen as truly they are, and that is as compensation for the withdrawal of a previously conferred water right.

I believe that the Prime Minister was completely honest in his answer last week in the knowledge that he had of the issue. I am not criticising the Prime Minister. I do not think he was adequately briefed on the paper trail between Commonwealth and state government on this particular issue, bearing in mind that the Commonwealth and the states were equal partners in relation to the package that was put up to cover the six groundwater valleys that are going to be impacted. I made the point that I thought the Prime Minister should check the communication flow.

In the meantime there has been some response from the state minister, the Hon. Ian Macdonald, to the Prime Minister’s words in question time last week. The Hon. Ian Macdonald has taken some degree of offence. I would like to read his response in the New South Wales parliament. The Hon. Ian Macdonald said:

The Achieving Sustainable Groundwater Entitlements Program is a joint program co-funded by the New South Wales and Australian governments. It aims to assist in minimising the impact of reductions in groundwater entitlements on regional communities. That is correct: it is funded jointly by the New South Wales and Australian governments. It was always agreed that the New South Wales Government would cover a third of the impact, the Commonwealth would cover a third and irrigators would meet the remaining third. From the outset, the irrigators flagged with John Anderson, who was then Deputy Prime Minister, that there could be a problem if the payments were taxed. Indeed, my predecessor, Craig Knowles—

I would say that Craig Knowles, who is not in the New South Wales government now—and I think John Anderson would agree with me on this—was a good minister and was actually trying to come to grips with this. Unfortunately, he is not there now. Maybe if he had remained, this problem would not have arisen.

Indeed, my predecessor, Craig Knowles, wrote to the former Deputy Prime Minister in 2004, requesting reconsideration of the Commonwealth’s proposed tax treatment.

Now to be clear, the Commonwealth and not New South Wales, is responsible for the Australian Tax Office and its rulings. This is not a new issue. Indeed, when the Federal Government and honourable members opposite—

this is Ian Macdonald speaking in the upper house of the New South Wales parliament—

chose to deregulate the dairy industry they decided to treat those payments as taxable income as well. The Prime Minister has known about this issue for at least two years and has done nothing. But yesterday, the Prime Minister had the hide to say the following in Federal Parliament:

The problem here is the way in which the payments are currently structured by the New South Wales Government.

Then he goes on to try to sheet home blame, and there are various communications between Malcolm Turnbull, the minister for water and others. He goes on to say that there was nothing confusing about letters that had been received:

... it was just another in the series of representations made by me, the Premier and others. Neither the Prime Minister nor the Treasurer responded. The Assistant Treasurer, Mr Dutton, responded by saying:

Under the income tax law, a grant received in relation to carrying on a business is assessable income. Therefore, where the financial assistance is provided by governments to industry, as is the case for this package—

this is the package I am talking about—

the payments will generally—

generally—

be treated as assessable income for tax purposes.

To sheet that home even further, Mr Dutton stated later:

The treatment of the assistance payments is ultimately a matter for determination by the Australian Taxation Office.

He did not say it was a matter for determination by the New South Wales Government. Peter Dutton is clear about this—unfortunately the Prime Minister is not.

I am pleased to see the Parliamentary Secretary to the Prime Minister who has responsibility for water is here as well. Just in case the parliamentary secretary did not hear what I said earlier, I believe that the Prime Minister gave an honest assessment of what he believed to be the case last week in answering my question. The state minister has taken him to task and has said that the Prime Minister, by deflecting blame onto the state government, is not correct in doing so.

This is a very important issue, not just for those water entitlement holders but for the way in which taxation treatment is going to be carried out into the future in relation to natural resource management adjustment policies. I call on the Prime Minister today, and the parliamentary secretary for water, to release the documents, the paper trail, relating to this issue—the discussions between the Commonwealth and the states on the establishment of what I still think is a good program, this joint Commonwealth-state irrigators adjustment package, compensation package, for a conferred water right, as the Prime Minister described it last week. I call on them to release all documents pertaining to those discussions, because the irrigators, members of this House and other chambers, and, most importantly, the general public, need to know how the tax office is going to treat the removal of a property right or—I spoke about the film The Castle earlier—the way in which just terms will be delivered to people who lose an entitlement that they have been issued in the past. As the Prime Minister said, it is a conferred water right, properly conferred by a state government, not the Commonwealth—I am not taking issue with the Commonwealth in relation to that. People need to know the way in which the tax office is going to treat those payments into the future. It is very important for natural water resource management.

I congratulate the government. You have seen a problem with the overallocation of a resource and have tried to come to grips with that problem. We have seen this in the timber industry, we have seen it in the water industry and no doubt we will see it in a whole range of industries: for the greater good we have to remove some usage of a resource that is not sustainable at that level of extraction or usage. I am not arguing about that. But it is the message that we are sending to those people who are going to be impacted on by the change. People have been brought into a compensation arrangement fully assuming that the money would flow to them for the loss of a capital asset. They then find that the Australian Taxation Office may have a bite of it. Then there is a dispute between the Commonwealth and the states about the writing of the offer document for acceptance of the compensation. The Prime Minister is saying, and others have said, that the wording of that document will be the way in which the tax office will make a ruling on this matter. We have a similar issue with the removal of timber entitlements from the Brigalow bioregion. We have also had an issue in the fishing industry that is similar. The tax office is treating it differently.

The point I am making is that we need to have a very clear determination so that, when we have a removal of an asset for the greater good of the community or for environmental purposes, those who are going to be impacted upon know exactly what the rules are. Because this issue has gone on for so long—it is over 10 years since property rights were written into the competition policy agreements between the Commonwealth and the states—we really do require all those documents pertaining to the discussions between the Commonwealth and the New South Wales government on this issue to be released for examination. The Prime Minister is saying that the New South Wales government is at fault because of the wording of the offer document, and the New South Wales government is saying that the Prime Minister does not understand the reality and the various messages and communications and meetings that have taken place. I am privy to some of those meetings, but I think it is time that the air was cleared and those documents were released.

It is quite embarrassing for the government, with the Minister for Finance and Administration having written a letter to the New South Wales government, the parliamentary secretary for water having made other communications, the former Deputy Prime Minister having made further communications at other times, and many others, including the Treasurer, having made certain arrangements; and now the Prime Minister is put into a position—inadvertently, I believe, because he has not been given the full information on the issue—where he has made a statement that he may find difficult to back up. If he can back it up, let him do so by way of release of the documents. If that means the New South Wales government is embarrassed, so be it. (Time expired)

Mrs Bronwyn Bishop (Mackellar, Liberal Party) Share this | Link to this | Hansard source

Before I call the Minister for Revenue and Assistant Treasurer, I note that the debate on this bill has been very wide ranging and I think I have been quite tolerant of the speech of the honourable member who has just concluded. It would have been nice if he had mentioned some of the substance of the bill during the point that he wished to make. I call the minister.

Peter Dutton (Dickson, Liberal Party, Minister for Revenue and Assistant Treasurer) Share this | Link to this | Hansard source

in reply—A point well made, Madam Deputy Speaker. I would like to thank all those members who have taken part in the debate on the Tax Laws Amendment (2006 Measures No. 5) Bill 2006. I would like to start by addressing some of the concerns that were raised in the second reading amendment moved by the member for Hunter. He raised issues surrounding James Hardie. I say in response that the government strongly believes that James Hardie should honour its obligation to fully compensate asbestos victims in the same way that other companies with asbestos obligations have been willing to meet those responsibilities. None of the other companies that have paid their liabilities in full used a trust or did it through a charitable fund. To exempt the fund from income tax in these circumstances would be inequitable, as this would place the fund in a more favourable tax position relative to other companies with similar compensation liabilities who did the right thing, and it would reward a company that tried to move its assets offshore. Intervention of the kind proposed by the opposition is completely unnecessary. James Hardie has publicly announced that it and the ATO are currently in discussions about how James Hardie can fit within the current tax laws.

The treatment of James Hardie is consistent with the treatment accorded to other corporations that meet their asbestos liabilities claims. James Hardie is not being singled out for special tax treatment. James Hardie, like CSR and BHP Billiton, is a commercial enterprise and its own actions have determined its tax liabilities. Unlike CSR and BHP Billiton, James Hardie has purposefully undertaken a restructure in order to protect its assets. The member for Hunter is dead wrong in his statements that the current tax treatment will penalise victims. In fact, the current tax treatment accorded to the fund does not penalise asbestos victims at all.

It is important to recognise that the tax issues that have been raised will impact only on James Hardie and not on the entitlements of asbestos victims. The decision of the ATO that that fund as proposed is not eligible for charitable status means that the earnings of the fund will be subject to tax. This will not alter the amount of compensation paid to individual victims. It will, though, alter the amount that James Hardie will be required to contribute to the fund to meet the compensation claims. The government believes very strongly that Labor should be encouraging James Hardie to fulfil its obligations to asbestos victims rather than helping James Hardie get preferential tax treatment.

The second issue raised by the member for Hunter was in relation to company loss recoupment rules. I would like to respond as follows. The opposition’s amendment refers to the creation of uncertainty in relation to company loss recoupment rules. In fact, the government has continued to improve certainty for business through changes to the loss recoupment rules which were passed by the parliament in December 2005. The changes made as part of the Tax Laws Amendment (Loss Recoupment Rules and Other Measures) Act 2005 followed a period of lengthy consultation with business groups about ways in which the loss recoupment rules could be improved. Amendments were made to the continuity of ownership test to make it easier for larger companies to trace ultimate ownership of their shares. This provides savings in compliance and administrative costs for large businesses and greater certainty in their ability to legitimately benefit from past losses. These changes were welcomed by businesses, and the government is continuing to consult on the loss recoupment rules and will refine them further if there is a genuine need to do so.

Aside from these specific taxation measures, the government continues to support business through its sound economic management. Corporate profits continue to remain high and business investment has been strong. These measures provide evidence that the government’s policies are working and we will continue to ensure that this remains the case.

The member for Hunter and the member for Blaxland asked a question in relation to who will benefit from the change in the definition of ‘remote’ for FBT purposes. The amendment will benefit those employers in locations isolated from populated areas by a body of water, such as those in tourism related businesses. These changes recognise that it is generally more difficult and inconvenient to travel by water than by land.

This bill is in keeping with the government’s commitment to business to remove unnecessary regulation. The bill makes a number of changes that will reduce compliance costs for Australian taxpayers. Schedule 1 implements a number of fringe benefits tax changes. In particular, it gives effect to two fringe benefits tax recommendations from the report of the task force on reducing the regulatory burdens on business, Rethinking regulation. The first increases the minor benefits exemption threshold from less than $100 to less than $300. This change will reduce compliance and record-keeping costs for businesses that infrequently provide low-value benefits to employees. The bill also increases the reportable fringe benefits threshold from more than $1,000 to more than $2,000. This will reduce compliance costs and keep-record keeping costs low by removing the need for businesses to report fringe benefits for employees who receive no more than $2,000 worth of benefits.

Schedule 1 also increases from $500 to $1,000 the reduction of taxable value that applies to in-house fringe benefits and airline transport fringe benefits. In addition, this schedule extends the definition of ‘remote’ for the purposes of fringe benefits tax concessions where the shortest practicable route involves travel by water. This is in recognition of the special circumstances of employees who work in locations isolated from populated areas by a body of water.

The bill also provides GST concessions to people under the government’s new Military Compensation Scheme. Schedule 2 will ensure that supplies of drugs, medicines and other pharmaceutical items are GST free when supplied as pharmaceutical benefits under the Military Compensation Scheme. In addition, the GST-free car concession is extended to include people whose service in the Defence Force or in any other force of Her Majesty has resulted in them receiving or being eligible to receive the special rate of disability pension under the Military Compensation Scheme.

Schedule 3 represents another instalment of the government’s continuing reform of the personal income tax system. It removes the part-year tax-free threshold for taxpayers who cease to be engaged in full-time education for the first time. Under the current law, taxpayers who cease full-time education for the first time are not eligible for the full tax-free threshold of $6,000. Rather, they are entitled to a reduced tax-free threshold that depends on the number of months that they are not studying, as well as on their income during the time that they are studying. This measure extends the full tax-free threshold of $6,000 to these taxpayers. The amendments simplify the law and indeed reduce compliance costs. I thank all of those members who have participated in this very worthwhile debate and I commend the bill to the House.

Mrs Bronwyn Bishop (Mackellar, Liberal Party) Share this | Link to this | Hansard source

The question now is that the words proposed to be omitted stand part of the question.

Question agreed to.

Original question agreed to.

Bill read a second time.