Chris Bowen (Prospect, Australian Labor Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

The Tax Laws Amendment (2007 Budget Measures) Bill 2007 implements two measures announced in the 2007-08 budget, both of which enjoy the Labor Party’s support. Part 1 of schedule 1 to this bill amends the Income Tax Assessment Act 1936 to increase the dependent spouse tax offset from $1,655 to $2,100 from 1 July 2007. The separate net income at which the rebate is completely phased out will increase from $6,901 to $8,681.

The full dependent spouse tax offset is available to a resident taxpayer who contributes to the maintenance of a low-income spouse. The dependent spouse rebate was introduced in 1975 as one of the new rebates for dependants to replace the old income tax allowances for the maintenance of dependants. Taxpayers are eligible to claim a dependent spouse tax offset if they maintain a spouse on either a married or a de facto basis and the taxpayer claiming the offset or the spouse is not entitled to family tax benefit B. The full offset is only available where the taxpayer has a spouse who earns very little or no income, as the tax offset is reduced by $1 for every $4 by which the dependent spouse’s separate net income exceeds $282. The income of the higher income earner is not taken into account.

The dependent spouse tax offset is currently indexed each year by reference to the consumer price index. Labor supports this proposal to provide a more significant tax offset to taxpayers supporting a low-income spouse than would be provided for under the normal CPI adjustment. The dependent spouse rebate is one of a number of rebates provided to taxpayers who support a dependant. Others include the invalid relative rebate and a rebate for taxpayers who support a parent or parent-in-law. The invalid relative rebate is provided to taxpayers who support a child who receives a disability support pension or a special needs disability support pension or who is certified by a medical practitioner as having an inability to work. The parent tax offset is provided to taxpayers who support a parent or parent-in-law. These offsets and other offsets are increased by this bill in line with CPI increases. They are indexed each year.

Part 2 of schedule 1 to the bill amends the Medicare Levy Act 1986 to increase the Medicare levy low-income thresholds for individuals and families. The dependent child/student component of the family threshold will also be increased. The increases are in line with movements in the consumer price index. It will increase the Medicare levy low-income threshold for pensioners below age pension age so that they do not have a Medicare levy liability where they do not have an income tax liability and it will increase the Medicare levy surcharge low-income threshold in line with movements in the CPI. These increases occur every year and are announced in the budget.

The Medicare Levy Act provides that no Medicare levy is payable for low-income individuals and families where taxable income or combined family taxable income does not exceed the stated threshold levels. The family income threshold increases by a set amount per child. The Medicare levy shades in at a rate of 10c in the dollar where the taxable income or combined family taxable income exceeds the threshold amounts. The bill increases the low-income thresholds for individuals and families for the 2006-07 income year in line with movements in the consumer price index. The individual threshold is to be increased from $16,284 to $16,740. The level of the family income threshold is to be increased from $27,478 to $28,247. The family income threshold is to be increased by a further $2,594 instead of the previous figure of $2,523 for each dependent child or student.

The schedule also increases the threshold for pensioners below pension age for the 2006-07 income year and subsequent income years. The increase ensures that pensioners do not have a Medicare liability where they face no income tax liability. That is sensible and, of course, has the opposition’s support. The threshold amount for pensioners who are under the age pension age is to be increased from $19,583 to $21,637. The phase-in limits are also increased. The phase-in limit for individuals is increased from $17,604 to $19,694. The phase-in limit for pensioners who are under age pension age is increased from $21,170 to $25,455. References to the individual low-income threshold amount of $16,284 in the Medicare levy surcharge provisions in respect of the surcharge payable on taxable income are also being increased to $16,740. Labor supports this proposal to provide assistance to low-income earners by exempting them from paying the Medicare levy.

The opposition has no criticism of this bill. We support each of the clauses. We particularly support the increase in the dependent spouse rebate, which is higher than inflation would indicate, as a suitable recognition of the burdens on low- and middle-income earners, particularly those who are sustaining a non-working partner. We support that measure, as we support the other measures which are annual increases in line with inflation.

Gary Hardgrave (Moreton, Liberal Party) Share this | Link to this | Hansard source

I thank the member for Prospect for his support on behalf of the opposition of these measures in the Tax Laws Amendment (2007 Budget Measures) Bill 2007. There is no doubt that this year’s budget is all about paying forward a dividend on the government’s strong economic management over the past decade. It is important that, as the Treasurer says, we lock in the gains, do the hard yards, put in the effort in the way in which Australians from many backgrounds and with many different beliefs and experiences have cooperated in such a constructive and proactive way to make a difference for themselves and their families. The rub-off in our society is most pronounced.

It is worth noting that the way this government has introduced the family-friendly measures in this legislation sends a signal to people on the margins. The Welfare to Work reforms have been very much about coercing and coopting people who perhaps because of taxation imposts have believed it is cheaper for them to stay at home rather than go out to work. As the member for Prospect said, this legislation goes beyond making CPI adjustments, which the member for Melbourne in an earlier debate alleged. The government is saying: ‘We want to put your money where our mouth is. If you are on the margins of decision making and under pressure to get back into the workplace, the rewards will be there.’

The government, in dealing with working and non-working family members, understanding the impact of the number of children in a family and adjusting the tax scales according to those differences, recognise that a one-size-fits-all approach does not work and that we simply cannot say that every family has 2.4 kids—we would all like that but the figure is about 1.7 kids per family—and make our laws based on that average. There are plenty of families in my electorate with six or seven kids. Refugee families love receiving the bonuses the government have paid in the past. One Sudanese woman told me that she had seven kids and that she had never before had $4,200 in the bank. This legislation does not seek to impose a one-size-fits-all approach; it recognises the range of differences in each family.

This bill does several things. First, it introduces the dependent spouse tax offset. It addresses the threshold amounts and the phase-in limits, to use the technical jargon that we hire accountants to work their way through. It also deals with families and pensioners who are under the age pension age limit and increases the threshold below which a family member is not required to pay a surcharge on any taxable income. The government is increasing that threshold so that low-income earners do not pay the Medicare levy. The bill does that in part by increasing the threshold from $16,284 to $16,740. Based on the income you, Mr Deputy Speaker, and I earn—and we do earn it—that may seem a modest amount. However, it will make a difference in low-income households.

The level of the family income threshold, which is referred to in various subsections, is being increased from $27,478 to $28,247. The threshold is to be increased by a further $2,594, instead of the previously stated figure, for each dependent child or student. For some large families, this measure may lead to quite a substantial lift in their income threshold and a reduction in the levy payable, if their family income is within a particular range. For individual taxpayers, no levy is payable if their taxable income does not exceed $16,740. For a pensioner, the threshold is $21,637. Obviously, we are making sure that pensioners, and people who earn bits of income while in receipt of a pension, will not pay the Medicare levy out of that income. With respect to families with large numbers of children, if there are six children, no levy is payable if the family income does not exceed $48,811. For families with two children, the threshold is $33,435.

It is worth noting that the government is not trying to impose a one-size-fits-all measure. It understands that there are a variety of family sizes in this country. Equally, the phase-in—or phase-out, depending on how you look at it—aspect means that a reduced levy applies to those on incomes between $16,741 and $19,694. For individual taxpayers, an ordinary rate of levy is payable once they get past that amount of $19,694. For a large family, one with, say, six children, the ordinary rate of levy is not paid until they reach an income level of $51,542 or, in the case of a more moderate sized family, one with two children, $39,335—up from $35,159.

I make the point yet again that we are not adopting a one-size-fits-all approach. We understand that individual families and the decisions they make can be built around some of these cost pressures. Hand-in-glove with that, as a result of the extra personal tax cuts announced in the budget, there is an $11,000 effective tax-free threshold for low-income earners through the low-income tax offset.

All in all, the range of measures contained in this bill, and those contained in the budget as a whole, ensure that people are paying less tax. The dependent spouse tax offset increases from $1,655, with effect from 1 July, to $2,100. It is an offset that is available to resident taxpayers who contribute to the maintenance of a resident spouse whose separate net income does not exceed $282. For those who make the decision to stay at home and raise children, this will provide a greater sharing of the tax responsibility across both spouses. The measure will increase the level of separate net income at which the tax offset is completely phased out from $6,901 to $8,681. This provides further assistance for people who enter the workforce on a part-time basis. They will not have to be afraid that a dollar earned will somehow be robbed by way of a dollar taxed, or that they will literally be working just for the taxman.

The government is putting the money where its mouth is on these issues. We are saying to people who are prepared to take up the challenge and engage themselves back in the workforce, ‘We will back you as well through the taxation measures that we are introducing.’

I want to speak for a moment about the Medicare levy. As we all know, the Medicare levy does not fully pay for Medicare services in this country. The Medicare levy is a contribution by taxpayers. This legislation increases the income threshold before people have to pay the Medicare levy—$16,740 for individuals and $28,247 for families. This year, with additional government expenditure factored in on top of the Medicare levy, taken in the form of tax by those who are earning a wage or income, we will see a lot more work being done for Australians, particularly those with lower incomes.

I refer to the additional $378 million for greater access to private dental services. Patients under a GP treatment plan can receive up to $2,125 per year in Medicare rebates. If there is a health related problem as a consequence of poor dental work, they are able to seek support through the Medicare system for that work to be done.

I often remark that the Queensland government run their own free dental service, but generally the waiting list is five, six, seven or eight years long before you get access to it. A number of people have come to me over the years who are upset about the fact that, even though there is a dental service at the PA hospital and at the QEII hospital, it takes forever to get access to it. They talk about the genuine hurt that they have felt over the years.

I know there has been a lot of pressure on the government to look at ways of putting a dental scheme in place. I think we have hit the mark in this regard, because this measure will prioritise those with the greatest need, based on their health requirements, and puts those people first in the queue. It will allow them to avoid what seems, to my mind, to be a very lethargic state-run system in Queensland. It is a system that is often held up in this place as an example of the way in which a national dental health plan could work, but I say to members from other states: don’t look at the Queensland dental health system as an example of what you would want Australia wide. There is nothing that you could sink your teeth into. It has a lot of genuine problems and it seems that it is always those who are in the greatest pain who are the last to get through the door. It seems that you have to know somebody. That certainly has been my experience over the last decade.

From my point of view, using the Medicare rebate in this way to allow GPs to arbitrate exactly who should get priority when it comes to dental health services for lower income people makes good sense. I am pleased that those who will be advanced by the measures contained in this legislation, who will be making a contribution to Medicare—indeed, those who will not be making a contribution, as in paying the full levy, parts of the levy or even no levy—will be the sorts of people who will be able, if they have no other means and the GP signs off on it, to get access to that.

As well, we want the state governments to match the $103 million type 2 diabetes program. It is not so much that we are saying that we will only do half. When you have a hospital system that is operated by state governments and a private hospital system that is mainly subsidised through things such as the up-to-40 per cent rebate on private health insurance by the Australian government, it is really important to have a buy-in. You challenge the states to buy in, and they take ownership of the program and its success. Nothing will guarantee a passion and commitment towards the success of a program more than buying in to that program. In that regard, we want the states to match the $103 million type 2 diabetes program, and I am sure they will because it is important. We will run after the Treasurer tomorrow—perhaps, around the building—because it is important that we consider type 2 diabetes.

Craig Emerson (Rankin, Australian Labor Party, Shadow Minister for Service Economy, Small Business and Independent Contractors) Share this | Link to this | Hansard source

Run over the top of it.

Gary Hardgrave (Moreton, Liberal Party) Share this | Link to this | Hansard source

If the member for Rankin wants to go to the top of the building to throw up his hands like Rocky Balboa, I will see him there.

Craig Emerson (Rankin, Australian Labor Party, Shadow Minister for Service Economy, Small Business and Independent Contractors) Share this | Link to this | Hansard source

One-armed push-ups.

Gary Hardgrave (Moreton, Liberal Party) Share this | Link to this | Hansard source

One-armed push-ups are your speciality; we will spread the word through the streets of Woodridge about that. We are just a bit worried that if the Labor Party get into office, we know where their other hands will be: in everyone’s hip-pocket, taking more tax off them. That is the only thing I will say.

Of course, there is the $486 million increase in research medical grants. Some of the best and brightest researchers, like Dr Ian Frazer, research and find ideas and solutions that will make a difference. I know that the work being done at Griffith University in looking at Toohey Forest and some of the natural fauna and flora, particularly the flora that grows there, and in looking for medical solutions has come as a result of some of the medical research grants made in the past. There is $228 million to extend osteoporosis medicines on the PBS, and an additional $150 million to combat illicit drugs, including ice. Also, there is $150 million to improve nutrition and encourage healthier lifestyles, including the Active After-school Communities Program. I simply make all those points in the context of this legislation. Taxpayers need to know that they are being used as the vehicle for the raising of the funds which, through proper economic management, are redirected into programs which continue to make a difference in so many ways.

The ongoing effort of good, strong economic management has delivered two million additional jobs since 1996, wages up by over 20 per cent, low and stable inflation and a doubling of household wealth. But, through these measures today, we are saying to those at the lower end of the income stream, ‘We’re going to continue to take the pressure off you to allow you a chance to find your way so that you can build for your own future.’ The tax cuts included in this measure show that this is the fifth year in a row that we have cut tax. We now have a budget surplus of $10.6 billion but we are not swimming in a swimming pool filled with money—those opposite like the Scrooge McDuck cartoons—we are investing in the future. We are giving an unprecedented boost to education funding that will make a difference to universities such as Griffith University, and there is greater childcare assistance, $19.1 billion in AusLink 2 transport programs and more investment in health and chronic illness; essentially, we are protecting and securing our nation.

The measures here, though, are about the equity on that journey and about saying to those at the lower end of the income stream, ‘As you make your decisions to perhaps go off welfare or perhaps go from being a single-income household to a dual-income household, your journey will be well supported by the creation of a lower tax environment.’ I commend the bill to the House.

Craig Emerson (Rankin, Australian Labor Party, Shadow Minister for Service Economy, Small Business and Independent Contractors) Share this | Link to this | Hansard source

The Tax Laws Amendment (2007 Budget Measures) Bill 2007 implements two measures that were announced in the recent budget. I am pleased to confirm that both of these measures will receive Labor’s support. The bill amends the Income Tax Act to increase the dependent spouse offset from $1,655 to $2,100 from 1 July 2007. The separate net income at which the rebate is completely phased out will increase from $6,901 to $8,681. The full dependent spouse tax offset is available to a resident taxpayer who contributes to the maintenance of a low-income spouse, and, overwhelmingly, this is therefore an equity measure.

Taxpayers are eligible to claim a dependent spouse tax offset if they maintain a spouse, whether married or de facto, and the taxpayer claiming the offset or the spouse is not entitled to family tax benefit part B. The full offset is available only where the taxpayer has a spouse who earned very little or no income, as the tax offset is reduced by $1 for every $4 by which the dependent spouse’s separate net income exceeds $282. It all sounds complicated, but these thresholds are routinely adjusted because, with the movement in the general price index, the value of these concessions would otherwise be eroded over time.

In relation to the dependent spouse offset, the income of the higher income earner in the household is not taken into account. The dependent spouse tax offset is currently indexed each year by reference to the consumer price index. The reason we are debating this legislation today is that those adjustments were announced in the budget, as they usually are, and we need some enabling legislation, which we have. Labor supports this proposal to provide more significant tax offset to taxpayers supporting a low-income spouse.

The second part to the first schedule of the bill amends the Medicare Levy Act 1986 to increase the Medicare levy low-income thresholds for individuals and families. Again, this is an equity measure. The dependent child or student component of the family threshold will also be increased. The increases are in line with movements in the consumer price index, and that is why we get this high level of specificity in the dollar amounts involved in moving from one threshold to another. The bill also increases the Medicare levy low-income threshold for pensioners below age pension age so that they do not have a Medicare levy liability where they do not have an income tax liability. We know there are lots of pensioners in Australia who are not age pensioners, so this legislation covers them too.

The bill increases the Medicare levy surcharge low-income threshold in line with movements in the consumer price index. The increases occur every year and are announced in the budget. The Medicare Levy Act provides that no Medicare levy is payable for low-income individuals and families where taxable income or combined family taxable income does not exceed specified threshold amounts. The family income threshold increases by a set amount per child. The Medicare levy shades in at a rate of 10c in the dollar where the taxable income or combined family taxable income exceeds the threshold amount, otherwise you would have very steep effective marginal tax rates over, admittedly, a narrow income range. To avoid those very high effective marginal tax rates, the Medicare levy shades in at that rate of 10c in the dollar. Otherwise, if you move from one particular income level just below the threshold and went over it by $1, you would get hit with the full Medicare levy. How important that is in practice would be a matter for empirical investigation, I guess. But it would not be pretty to be confronted with the situation where, if you earn one extra dollar, you lose much more than that through being liable for the full Medicare levy. That is why it phases in at this rate of 10c in the dollar.

The bill increases the low-income thresholds for individuals and families for the 2006-07 income year in line with movements in the consumer price index. The individual threshold is to be increased from $16,284 to $16,740. The level of the family income threshold is to be increased from $27,478 to $28,247. The family income threshold is to be increased by a further $2,594 instead of the previous amount of $2,523 for each dependent child or student. The schedule also increases the threshold amount for pensioners below age pension age for the current financial year and subsequent income years. The increase ensures that these pensioners do not have a Medicare levy liability where they face no income tax liability.

The threshold amount for pensioners who are under age pension age is to be increased from $19,583 to $21,637, and the phase-in limits are also increased. I could go into the details of that, but I do not want to bore those who are listening with further high levels of detail. The point is that these adjustments are almost automatic. They are announced in each budget and are then legislated. They are being legislated today in this particular bill. I suppose an alternative would be to legislate for automatic adjustments so that we did not need to come into parliament and make these adjustments in the way that we do. But that is a matter for the government of the day. It is something that might be worth contemplating. I do not have a strong commitment to that thought, but it is a thought I would like to throw on the table or, more accurately, the dispatch box.

Labor supports this proposal to provide assistance to low-income earners by exempting them from paying the Medicare levy. It is worth pondering for a moment why we have a Medicare levy. We have a Medicare levy because we have had Labor governments in the past. If we had not had Labor governments, there would be no Medicare levy. The pre-Whitlam and post-Whitlam eras were characterised by coalition governments and there was no universal health insurance. In fact, the Whitlam government introduced Medibank and the incoming Fraser government that later became the Fraser-Howard government went about systematically destroying universal health insurance coverage in this country. In that time, between 1975 and 1983, there were seven different coalition health policies in seven years, all directed at ensuring there was no universal health insurance coverage in this country. As a consequence of that, when the Hawke Labor government was elected in 1983 there were two million Australians without health insurance coverage. Just contemplate that. Under the Fraser-Howard government, two million Australians were out in the cold and very vulnerable to the consequences of becoming ill and having to go to hospital without any coverage such as that provided by Medibank beforehand and by Medicare under the incoming Hawke government. That is why we have a Medicare levy. The Medicare levy was designed to collect, in a progressive manner from taxpayers, a contribution to the overall costs of health care in this country. That is why these adjustments are being made today. The concept was that if the income tax system was progressive then the Medicare levy itself would be progressive, but only if we adjusted the thresholds at which the Medicare levy became payable in accordance with changes in the cost of living as measured by the consumer price index.

Previous speakers from the coalition have said that the budget includes some measures to deal with dental care. To the extent that it includes some measures to deal with dental problems in our country it is welcome. But why not reinstate the Commonwealth dental scheme? The Keating government implemented the Commonwealth dental scheme and one of the first decisions of the incoming Howard government was to scrap it. In a most slippery explanation of the government’s scrapping of that scheme, the current health minister said that it had expired with the effluxion of time; it just ran out. If a program just runs out, you would not find in the budget papers the savings from the expiry of the program; it just expires with the effluxion of time. In fact, the government booked the savings from scrapping of the Commonwealth dental scheme in its budget but said it just died; it expired with the effluxion of time. It wanted to have it both ways. Either you scrap it and face up to the community and say, ‘It is true that we don’t care that much about the dental health of low-income earners and pensioners and therefore we have scrapped this scheme,’ or you say, ‘It just expired with the effluxion of time and therefore we do not book the savings.’ But this government wanted the best of both worlds.

Labor has said time and time again that it would reinstate the Commonwealth dental scheme. The waiting lists are horrendous. Somewhere in the order of 500,000 needy Australians are waiting to get their teeth fixed. In Logan Hospital, which covers most of my electorate, the waiting lists are very long. It was the Beattie government that stepped into the breach created by the abolition of the Commonwealth dental scheme and increased funding for dental care at Logan Hospital. But there is a great hole there—pardon the pun—because the Commonwealth vacated the field. We have just heard the Parliamentary Secretary to the Minister for Industry, Tourism and Resources, who is at the table, say that it just expired. So here we are yet again to this day repeating the minister’s completely false statement that this program simply expired in 1997, yet they booked the savings. He is well-briefed. The propaganda machine is well and truly grinding on, although they have had to change a name—Work Choices—as they dare not say it. The propaganda machine is grinding on but we are not to mention that name anymore. This propaganda machine has got government ministers, parliamentary secretaries and backbenchers all briefed that this program just ran out, but you cannot book the savings at the same time.

There are a range of other tax measures in the budget which I will refer to today. I give credit where credit is due, because some of those tax measures are quite worth while and constitute some element of an overall reform package, but not the totality of a comprehensive reform package. In this budget the government increased the low-income tax offset from $600 to $750. It used to be, in the budget before last, $235. So in two budgets the government has increased that low-income tax offset from $235 to $750. The effect of that is that low-income earners have an effective tax-free threshold now of $11,000 rather than $6,000. Why is that important? The answer is that over that range, from $6,000 to $11,000, important decisions can be made, and are made, in relation to whether a low-income earner takes on extra work, perhaps moving from a casual job to a more permanent job, and therefore earns extra income. The benefit of increasing the low-income tax offset is that that tax-free threshold will be available all the way up to $11,000. So in the range between $6,000 and $11,000, 15c is stripped off what is called the effective marginal tax rate—that is, those low-income earners are able to keep 15c in the dollar more than they otherwise would have been able to do had the low-income tax offset been set at the pre-existing rate of $235.

We give credit for this policy because it is Labor policy. The shadow Treasurer and former shadow minister for family services, the member for Lilley, has been arguing for this policy for as long as I can remember—certainly for the last five or six years—because it is he who has led the debate on the need to reduce high effective marginal tax rates to improve the incentive to move from welfare to work. So credit goes to the shadow Treasurer and credit goes to the government for picking up the shadow Treasurer’s suggestions. We do give credit where credit is due.

There is another good, positive measure in the budget that has similar incentive effects—that is, the threshold for the 30c rate is pushed out from $25,000 to $30,000 a year. Again, this is an important area for work incentives. It is around the area of the minimum wage. We know that one of the problems with the minimum wage is that there is a lot of interaction around that income level between the income tax and social security systems yielding in some cases very high effective marginal tax rates, depending on the number of children you might have and your eligibility for family tax benefit and other benefits. All of that means that, by shifting the threshold of $25,000 to $30,000, again, the 30c rate cuts in later, at $30,000 instead of $25,000, taking 15c off the effective marginal tax rate over that income range. Why is that important? The answer is that those income earners get to keep 15c more in the dollar for every extra dollar they earn. That therefore improves work incentives. That is another positive measure. I would point out that both of those measures I also recommended in my book Vital Signs, Vibrant Society, although I readily acknowledge that the member for Lilley had been arguing for such measures for some time.

The government is likely to get an improvement in workforce participation by improving those incentives, but there are a group of Australians for whom the incentives remain completely perverse. I am referring to single mothers. The government has announced and is now in the process of implementing so-called welfare to work reforms. In fact, they are welfare to welfare reforms. This is one of the worst pieces of public policy that you can imagine. Single mothers whose youngest children are turning eight are, as we speak, being dropped down from the higher sole parent pension, called the parenting payment, to the unemployment benefit, called Newstart. So they will lose a substantial amount of money per week and they will have a lower income threshold before they start losing that benefit. They will lose their education supplement. It is obscene that single mums who try to improve their workforce capabilities by lifting their skills, whether it be through vocational education or going back to school, will lose this pensioner education supplement.

All the incentives go absolutely the wrong way. All the incentives go the way of moving not from welfare to work but from welfare to welfare. There is one way of avoiding that drop in payments and the loss of those incentives and that is to have another baby. It is a free country and mothers should be able to have babies when they want to, but is this really a matter of great public policy design? The government has set up incentives whereby poor single mums who are struggling financially will be put in a situation where benefits are stripped off them and they will have one clear course of action remaining. That is to have another baby and put the problem off for another six to eight years and pick up a baby bonus, which is soon to become $5,000. That is why I cannot for the life of me understand how any government could come up with such a scheme.

The government announced a review and there seemed to be hope because people were pointing these things out. Ann Harding from the National Centre for Social and Economic Modelling, whom the Prime Minister often quotes, pointed out these perverse incentives. The government reviewed them and did not change any of the fundamentals. That problem is still there. I have given credit where credit is due in this budget, but I urge the government in the time that it has remaining to have a fresh look at the welfare to work arrangement for single mothers because it is really welfare to welfare and it should be scrapped.

Roger Price (Chifley, Australian Labor Party) Share this | Link to this | Hansard source

The Tax Laws Amendment (2007 Budget Measures) Bill 2007 implements two measures announced in the recent budget and both are supported by the opposition. The bill proposes to increase the dependent spouse tax offset and the Medicare levy surcharge low-income thresholds. The dependent spouse tax offset was, until recently, commonly referred to as the dependent spouse rebate. It has been a feature of the tax system for many decades. It was designed to provide a reduction in income tax for a person who is supporting a dependent spouse and therefore does not have the benefit of a second tax-free threshold within the family. Prior to 2000, the rebate was available at a ‘with child’ rate to taxpayers supporting a dependent spouse where there were dependent children in the family. With the introduction of the family tax benefit part B—FTBB—in 2000, the with child rate of rebate ceased to be available where FTBB was paid. It now has relevance only for the calculation of zone tax offset and overseas forces tax offset. As a result of this change in 2000, the increased offset provided by this bill will mainly benefit couples without dependent children. This bill increases the dependent spouse rebate from $1,655 to $2,100 from 1 July for taxpayers who contribute to the maintenance of a low-income spouse.

This bill also increases the Medicare low-income thresholds for individuals, families and pensioners below aged pension age in line with movements in the consumer price index to ensure that low-income families and individuals are exempt from paying the levy. Labor supports this proposal to provide a more significant tax offset to taxpayers supporting a low-income spouse. The separate net income at which the rebate is completely phased out will increase from $6,901 to $8,681. The full dependent spouse tax offset is available to a resident taxpayer who contributes to the maintenance of a low-income spouse. Taxpayers are eligible to claim a dependent spouse tax offset if they maintain a spouse—married or de facto—and the taxpayer claiming the offset or the spouse are not entitled to FTB part B. The full offset is only available where the taxpayer has a spouse who earned very little or no income as the tax offset is reduced by $1 for every $4 by which the dependent spouse’s separate net income exceeds $282. The income of the higher earner is not taken into account.

The dependent spouse tax offset is currently indexed each year by reference to the consumer price index. The Medicare levy is set at 1.5 per cent of taxable income. However, there are a series of exemptions for low-income earners and pensioners. People with a taxable income below the relevant threshold do not pay the levy. Once their income exceeds the threshold, they pay a levy equivalent to 10 per cent of the amount by which their income exceeds the levy until the amount reaches 1.5 per cent of their total taxable income. The thresholds vary for individuals, families and pensioners. Those for individuals and families are increased from time to time in line with movement in the consumer price index. The threshold for pensioners is set at a level that ensures that they pay no levy until they are liable for income tax.

Part 2 of schedule 1 of the bill amends the Medicare Levy Act to increase the Medicare levy low-income threshold for individuals and families. The dependent child/student component of the family threshold will also be increased. The increases are in line with movements in the consumer price index. Part 2 of schedule 1 also increases the Medicare levy low-income threshold for pensioners below aged pension age so that they do not have a Medicare levy liability where they do not have an income tax liability, and increases the Medicare levy surcharge low-income threshold in line with movements in the CPI. These increases occur every year and are announced in the budget.

The Medicare Levy Act provides that no Medicare levy is payable for low-income individuals and families where income or combined family taxable income does not exceed stated threshold amounts. The family income threshold increases by a set amount per child. The Medicare levy shades in at a rate of 10c in the dollar where the taxable income or combined family taxable income exceeds the threshold amounts. The individual threshold is to be increased from $16,284 to $16,740. The family income threshold is increased from $27,478 to $28,247. The family income threshold is to be increased by a further $2,594 instead of the previous figure of $2,523 for each dependent child or student.

This schedule also increases the threshold amount for pensioners below aged pension age for the 2006-07 income year and subsequent income years. The increase ensures that such pensioners do not have a Medicare levy liability where they face no income tax liability. The threshold amount for pensioners who are under aged pension age is to be increased from $19,583 to $21,637.

The phase-in limits are also increased. The phase-in limit for individuals increases from $17,604 to $19,694. The phase-in limit for pensioners who are under aged pension age is increased from $21,170 to $25,455. References to the individual low-income threshold amount of $16,284 in the Medicare levy surcharge provisions in respect of the surcharge payable on taxable income are also being increased to $16,740. Labor supports this proposal to provide assistance to low-income earners by exempting them from paying the Medicare levy.

I did want to comment on some of the remarks made by the honourable member for Rankin that we need to have a really good look at Welfare to Work changes and the disincentives that are already within the system. As I have already said, the measures in the bill are supported by the opposition. The acid test for me, because I have met them in my electorate, is single mums who want to go back to work. When they do go back to work they have great difficulty in finding child-care places, but, even when they do overcome that hurdle, the net advantage—that is, any additional dollars that they may have—is minuscule. I support what we are doing with this bill—and I welcome even further changes—but it will not, I regret to say, give them that financial incentive to go back to work. We should be able to say to people, ‘If you go to work you will be financially better off than if you are at home and on welfare.’ Unfortunately, that has not been the case. We often disparage these women, but the reality is that they would prefer to go to work. Our credentials in society come through what we do. Often the very first question we ask someone when we meet them for the first time is, ‘What you do?’ People like to say, ‘I’m a proud mum, but I have got a job—I’m working here.’

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

‘I’m a member of parliament.’

Roger Price (Chifley, Australian Labor Party) Share this | Link to this | Hansard source

Even some of us, as the honourable member for New England points out, are prepared to own up to being members of parliament—he most honourably and I churlishly would own up to being members of parliament. But that is how our credentials are judged. I think a lot more work needs to be done to overcome some of those significant disincentives for people to return to work, especially when they want to do so themselves, quite voluntarily.

Some of these measures, of course, refer to the Medicare levy. I regret to say that one of the things that really made a big impact in my electorate was the closing of the Mount Druitt Medicare office. They did it under the pretext that, within 10 kilometres, you could go to Penrith or to Blacktown. Of course, the government might say, ‘It’s only your electors that are concerned about it.’ But now, with the changes to the electoral boundaries in Lindsay, there will be plenty of people in North St Marys, in St Marys, in Oxley Park, in South St Marys and in Colyton who are going to be in the electorate of Lindsay and would have gone to Mount Druitt when that office was open. The overwhelming majority of those people would have gone to Mount Druitt. I am very keen to have that Mount Druitt Medicare office reopened. If we are able to achieve it after the next election, I rest confident in the knowledge that not only are people in my electorate going to appreciate it but also people in the electorate of Lindsay due to the changed boundaries. I hope we are able to achieve it. We will have a great opening ceremony, and I will be happy to provide the bottle of champagne. Unfortunately, we are a long way away from that. A lot of people were seriously disadvantaged by its closure.

I am talking about the Medicare levy, and, of course, there were some important measures announced in the budget in relation to dental health. I welcome the additional dental positions that were established; I think that is a good thing. But again, one of the things that caused sadness in my electorate was this government’s decision to close down the pensioner dental health program. Governments get criticised from time to time for what they do and how effectively the programs run. This was a very good, effective program, and there is no doubt that the states also have a public dental health program.

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

I would remind the honourable member of the subject matter of this bill. Perhaps that material might be better raised in his speech on the appropriation bills. While we are having a wide-ranging debate here, he might come back to the subject of the bill.

Roger Price (Chifley, Australian Labor Party) Share this | Link to this | Hansard source

Thank you very much, Madam Deputy Speaker; I appreciate your advice. I was making the point that this bill makes changes to the Medicare levy. One of the announcements in the budget was a new program where money out of the Medicare levy can be paid for dental health. That is a good thing. It is a breakthrough. It is the first time the government has recognised a federal responsibility towards dental health. But the tragedy is—and I am sure the honourable member for New England would agree with me—that for people to take advantage of this new program announced in the budget, funded out of the Medicare levy, they have to have a chronic illness. You cannot access the program because you have bad teeth or you need dentures or you need all of your teeth removed; you actually have to have an ancillary chronic illness. How many Australians are going to benefit from that? In a program that I was referring to—

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

There’s no teeth in the policy!

Roger Price (Chifley, Australian Labor Party) Share this | Link to this | Hansard source

As the honourable member for New England has pointed out—I had not thought about it—there are no teeth in the policy. It does not bite enough, in my view. But seriously, 600,000 of our fellow Australians were able to take advantage of the previous program, which Labor is committed to reintroducing. Whilst I support the changes to the Medicare levy, I also welcome the federal government crossing over, for the first time, to recognise it has some responsibility for dental health. But I want to point out that we have a very long way to go in relation to that.

One of the real difficulties faced by a lot of my constituents, who are going to perhaps benefit from the measures I have outlined, is that they are paying mortgages. They are feeling the pinch. I remind the House that, at the last election, the promise was made that interest rates would be kept low—

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

I must remind the member that we are not having a debate on interest rates; we are having a debate on—

Roger Price (Chifley, Australian Labor Party) Share this | Link to this | Hansard source

On taxation.

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

the Medicare levy issues.

Roger Price (Chifley, Australian Labor Party) Share this | Link to this | Hansard source

I thank you, Madam Deputy Speaker. I thought we were having a debate about the tax laws—

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

The dependent spouse rebate and others, yes.

Roger Price (Chifley, Australian Labor Party) Share this | Link to this | Hansard source

Yes, the Tax Laws Amendment (2007 Budget Measures) Bill 2007, which talks about the impact of some changes in the budget to families—to single families, to families with a dependent spouse, to families that are serving the country overseas. I just want to make the point, Madam Deputy Speaker, that whilst these measures for those families are welcome, and I support them, their outlook is not altogether rosy. I think this is a factor that even the Prime Minister may have recently commented on. They suffer some difficulties. For example, these measures are aimed at low-income earners who are doing it tough—and I am very proud of the fact that I have got a lot of good, decent people in my electorate who are not on fabulous money and will benefit from some of these measures.

I talked about dental health and the announcements in the budget that impact on low-income earners. In fact, there have been some really disturbing statistics released recently that indicate that low-income earners in particular, but Australians generally, are not following up their medical care. They will go to the doctor and get a prescription, but they do not get the prescription filled. Why? They cannot afford it. I think that ought to be of concern. Thirty-four per cent of Australians have not had a prescription filled, have skipped a recommended medical test or treatment or follow-up of a medical problem or have not seen a doctor because of costs. In Canada the figure is 26 per cent. In the UK it is 13 per cent. The federal government needs to tackle that issue. As welcome as these changes to Medicare are, we cannot have Australians not being able to afford appropriate health care. We are supporting the passage of this bill; we just wish it had gone further.

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

I appreciate that this is a fairly wide-ranging debate, as you have mentioned, Madam Deputy Speaker. I support the Tax Laws Amendment (2007 Budget Measures) Bill 2007 and cognate bills before the House and I endorse some of the remarks that were made by the member for Chifley in relation to the Medicare levy and the dental care arrangements that have been put in place by the government. I commend the government on the new university places at the Charles Sturt Dental School in Orange. I think they are a very positive move forward. But I wish the government had looked more closely at the Medicare arrangements for accessing dental care. It is obvious to most of us that our teeth are part of our body and they should be treated as such by those people accessing care for their dental problems—and I do not mean cosmetic problems. The government has, to a certain degree, recognised that, if people with chronic problems and certification by their doctor are not treated for their oral health, it will lead to other complications and they will be need to be treated under the Medicare arrangements. That is a good move, but if they were not treated they would enter into the health-care system and the Medicare arrangements would be triggered anyway. I urge the government, particularly after the good economic management that has been conducted over a number of years and in light of the sums of money that have been accumulated, to look closely in the future at the relationship between Medicare, the Medicare levy and dental care.

I seek a little licence, Madam Deputy Speaker, to commend a constituent of mine, Mrs Ruth Mathews, who for some time has been conducting a campaign to get the government to look at the Medicare levy, which this legislation does, with a view to increasing it if needed so that dental care can be provided to all and covered under the Medicare provisions. She has gathered thousands of signatures for her petition, which will be presented to the parliament. I commend her as a citizen for the work that she is doing and for her use of the parliamentary processes.

The Tax Laws Amendment (2007 Budget Measures) Bill 2007 identifies a range of measures in relation to dependent spouses. It will increase the Medicare levy threshold, and I agree with the intent of that arrangement. Taxation generally, and the use of taxation policy, is about sending a range of messages to the broader community. It is a very important part of government policy because it delivers signals which may be an incentive for the community to do something. I noticed, for instance, that the superannuation arrangements put in place certain incentives for people to look after themselves long term, and I think those measures in the budget should be applauded.

Taxpayers are sent other messages that I think are complicated, complex and sometimes bewildering. In this bill, for instance, there is a clear message being sent to taxpayers, particularly with regard to low-income earners and the thresholds relating to Medicare. But if one looks closely at some of the other measures where taxation policy is being used it becomes a little more complicated. The taxation message that current policy is sending to the community, particularly to those who are looking to invest in renewable fuels—and I know, Madam Deputy Speaker, that you take a particular interest in renewable fuels and the climate debate—is that by 2011 those who are investing in renewable fuels will be taxed under the excise arrangements. I use that as a very good example of the wrong message being sent. We have a policy message being sent almost daily by government and opposition about climate change, sustainability, renewable energy sources et cetera—

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

I will be consistent with the honourable member and say that this debate is, as he properly referred to it at the beginning, about spouse rebates and like issues. Climate change can very adequately be dealt with in his appropriation speech. So we might come back to the subject matter of the bill.

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

I take on board your comments, Madam Deputy Speaker, but I point out that in his speech the Minister for Revenue and Assistant Treasurer, who is in the chamber at the moment, referred to thresholds. Obviously the world is on a precipice at the moment, and policy directions will determine some of the longer term thresholds that embrace the wider community. I think it is important, as the minister did in his quite lengthy introductory speech, to send a very clear message to those people who are going to be recipients of Medicare assistance and the various thresholds involved—

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

I am very clear about the subject matter of the bill.

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

Yes, Madam Deputy Speaker. I think that the broader messages that are being sent in relation to renewable fuel policy, and particularly the water taxation issue, are quite clearly different to the rhetoric that is being delivered by government. They are thresholds that government should be looking very seriously at. For a government—and the minister in the chamber is partly responsible for this particular policy initiative—to compensate water users for the loss of entitlement, then apply taxation policy to those very water users and then expect other water users to embrace, for instance, a grand plan for the Murray-Darling means, there are mixed messages in the signals that are being delivered.

As this legislation is about budget measures I think it is very important that we do, as the minister has here, very clearly state what the objective is and put in place the policy that sends that message. The point I am making is that there are mixed messages coming from some of the other policy areas. I urge the minister at the table, who introduced this legislation, to look at the clear message that comes from what he has done here—which I commend—and at what he should be doing in relation to some of the other areas, particularly in terms of the water taxation arrangements. I think it is an abomination that people who are giving up a resource for the greater good, so that others in our community can live a more prosperous existence in the long term, could go into a compensation arrangement and then find that the government of the day is going to assess the receipt of that compensation as income in the year of receipt, with up to 40 per cent of that money hence being returned to government coffers. That is crossing a threshold that should not be crossed. I think that is something that this government should have a very clear look at.

I have intimated my views on fuel taxation as well. We have this odd message being sent, with the government saying on the one hand that they want to send a clear message. They are doing that with this particular bill, and they are doing it with superannuation, in my view, but they are not doing it with some of these key threshold issues of sustainable energy, sustainable climate, sustainable water systems et cetera. I urge the minister who is here today to address these issues. I conclude my remarks and support the legislation before the House.

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

in reply—Can I start by thanking those members who have contributed to this very important debate. The first part of the Tax Laws Amendment (2007 Budget Measures) Bill 2007 increases the dependent spouse tax offset from $1,655 to $2,100, with effect from 1 July 2007. This change also allows a dependent spouse to earn more income before the offset phases out, increasing the separate net income at which the tax offset completely phases out from $6,901 to $8,681.

The second part of this bill increases the Medicare levy low-income thresholds for individuals and families in line with increases in the consumer price index. The low-income thresholds in the Medicare levy surcharge provisions are similarly increased. These changes ensure that low-income individuals and families will continue to be exempt from the Medicare levy or surcharge. The Medicare levy low-income threshold for pensioners below age-pension age is also increased to ensure that, where these pensioners do not have a tax liability, they will not have a Medicare levy liability. The amendments to the Medicare levy low-income thresholds apply to the 2006-07 income year and later income years.

The measures in this bill continue to build on the strength of the Australian economy. They are really what the government is about in terms of running a strong economy, from returning dividends to Australian families and to Australian small business in particular to making sure that the government continues sound economic management in this country so that we can have young people and mature-age workers returning to the workplace, providing a brighter future not just for them but for our country as well.

What this government will never do is go back to the days of Labor. Labor let the trade unions run this country, and the ultimate mess that the economy ended up in was a disgrace not just for them but for the Labor leadership as well. At the moment the very clear message to the Australian people is that, if there is a change of government in this country, there will be a change in the way in which the economy is managed. People from Queensland, in particular, know that one of the greatest threats to the Australian economy is the member for Lilley. The shadow Treasurer is known best by people in our own state of Queensland. They know his disastrous record of contributing to economic debates in this country. They know that Wayne Swan would be a wrecker of the Australian economy. That is a very salient message at this point in time.

This government has been and continues to be about listening to the Australian people. This is the way in which we deliver good economic outcomes. What do we mean when we talk about good economic outcomes? We mean that we want to run the economy well so that we can continue to lower taxes, so that we can continue to drive down unemployment and so that we can continue to put more money into the families of Australia and into small businesses to create an atmosphere where people can, for years to come, as they have over the last decade, enjoy life in the way in which they have become accustomed. The greatest threat if there were a change of government in this country would be the reality of a return to union domination. We know that, in the eighties and in previous times when Labor has been in government, it provided a situation where the union bosses and the union hacks dominated economic policy, which resulted in bad economic outcomes.

How do we know that Labor would pose a great threat to the Australian economy? Not just because of their past track record, where Australian families were paying 17 per cent and small businesses were paying 20 per cent interest rates—people know; they suffered during that time. But how do we know that Labor would wreck the Australian economy into the future, given the opportunity again? We know that because they have facilitated the return of even more union bosses to the front bench after this election. If Labor were elected we would be in the position where 70 or 80 per cent of the people sitting around a Labor government cabinet table making decisions on the national economy would be those people. We know, from times past, and from comments present, that the Labor Party, and the union bosses in particular, do make economic decisions not in the best interests of this country but in their personal best interests. Labor cannot be trusted with the economy today, as they have not been able to be trusted with the economy in past times in government. I want to take the opportunity to thank all of those again who have participated in this debate. I commend the bill to the House.

Question agreed to.

Bill read a second time.