Belinda Neal (Robertson, Australian Labor Party) Share this | Link to this | Hansard source

I rise in the House today to speak in support of the bill before us, the Tax Laws Amendment (Political Contributions and Gifts) Bill 2008. This bill amends three pieces of legislation, namely A New Tax System (Goods and Services Tax) Act 1999, the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997. The amendments contained in the current bill will remove from individual taxpayers the right to claim a tax deduction in respect of political party membership fees paid on or after 1 July 2008. This bill also denies—and this has been the main focus of debate—a tax deduction to both individual and corporate taxpayers in respect of contributions or gifts made on or after 1 July 2008 to political parties; members of parliament, including state, territory and federal members; members of local governing bodies, such as councils; and candidates, both party nominated and Independent, for political office. Employees or office holders may continue to claim tax deductions for those amounts incurred in earning tax assessable income—that is, the expenses of the candidates themselves are part of their normal tax deductions.

At the moment, a tax deduction is available in respect of contributions and gifts made to political parties registered under part XI of the Commonwealth Electoral Act 1918 or registered under relevant state or territory legislation, under subdivision 30-DA of ITAA97, the Income Tax Assessment Act 1997. The maximum deduction for both individuals and companies is $1,500 per annum.

Before 22 June 2006, tax deductions in respect of these amounts were limited to $100 per annum for contributions and gifts. Before this date, the deduction was only available in respect of gifts and contributions made to parties registered under the above Commonwealth act. This meant that contributions made to Independent candidates, state and territory political parties, members of state and territory parliaments, and all state and territory political candidates made before 22 June 2006 did not qualify for any tax deduction.

The policy of removing the tax deductibility of political gifts and contributions was first announced by the then Leader of the Opposition, the Hon. Kim Beazley, on 3 October 2006. On 2 March 2007, the then shadow minister for finance, the Hon. Lindsay Tanner, announced the denial of tax deductions for political gifts and contributions in relation to the views of this government. Identical provisions to those contained in the bill before the House today were included in schedule 1 of the Tax Laws Amendment (2008 Measures No. 1) Bill 2008. The measure was originally introduced into the parliament by this government on 13 February 2008. On 19 March this year the Senate resolved to refer these provisions to the Joint Standing Committee on Electoral Matters for inquiry and report by June 2009. The committee tabled its report on 16 June this year. Although the committee recommended that the measure be passed by the Senate unamended, the measure was negatived in the Senate on 26 June with the opposition of the coalition—which was quite shameful in my view.

It is clear from the brief history outlined above that the coalition has consistently opposed reform of the provisions governing tax deductibility for political contributions and gifts. It should be kept in mind by honourable members that the coalition parties have attempted three times, in fact, to increase the threshold on tax deductibility. They tried to increase it before the 1998 election but the matter lapsed. They tried to increase it after the 1998 election but were defeated in the Senate. But when the Senate was under Liberal control in 2006 they ultimately succeeded.

The Labor Party has a long history of trying to reform the tax deductibility threshold for political donations. It went to the last election with a clear policy and clear commitment to remove the tax deductibility of election donations. The Rudd Labor government is formally of the view, as am I, that the Australian public should not be compelled to subsidise political parties and candidates. Taxpayers across Australia already provide money for this purpose via the electoral funding provisions. They should not be burdened further by having to pay for tax deductions for those same political parties and candidates.

By stark contrast, when the coalition was in government in 2006, it was quick to use its Senate majority to increase deductions claimable from $100 to $1,500 for both individuals and companies. At the same time the coalition, when in government, expanded the scope of those political entities and parties to which tax deductibility for contributions to political parties could be made by individuals and companies. Thereafter, in addition to parties registered under the Commonwealth Electoral Act, tax-deductible contributions could also be made to a host of other political entities. These included Independent candidates, state and territory candidates, parties and members of parliament. This blatant attempt to bolster coalition coffers by appealing to big business saw those opposite abandon any semblance of responsible fiscal policy.

The coalition seems determined, in its pursuit of donation dollars, to make it as easy as possible for its business backers to maximise contributions to the coalition and to use the public purse to do so. The Liberal-National Party coalition has been concerned with one issue alone in this drawn-out debate over political donations, and that issue is the protection of its fundraising base. So determined was the coalition in 2006 to increase both the threshold and the scope of tax-deductible contributions that it abandoned many of the responsible safeguards that had been in place in this area. This has continued since 2006. It continues into the present sitting year and is in evidence again in regard to their stance on this bill.

The coalition’s refusal to pass the Tax Laws Amendment (2008 Measures No. 1) Bill 2008 in the Senate on 26 June this year was in direct contradiction to, and in defiance of, the recommendations of the Joint Standing Committee on Electoral Matters, published earlier in June 2008. The committee recommended that the bill should be passed unamended by the Senate. It should be remembered that it was the Senate that insisted on referring the measures to committee. So for the Liberal and National parties to then ignore the advice and guidance the Senate was so eager to receive from the committee on this matter seems not only irresponsible but a complete waste of the committee’s time, and, frankly, shows a disregard for proper parliamentary process. These actions, which ultimately caused the defeat of the Tax Laws Amendment (2008 Measures No. 1) Bill 2008, also show a level of contempt, as I have said, for the proper processes of parliament that should be of great concern to all members and senators.

What is also clear from this historical overview is that the coalition parties appear far more interested in the dollar value of donations than in maintaining a responsible approach to fiscal management or regard for the parliamentary process. Their 2006 changes to this area of policy illustrate clearly that the coalition has shown and continues to show scant regard for the responsible safeguards that once protected this area of legislation.

It must be admitted that fundraising for campaigning purposes has been a necessary and more or less accepted part of the political process in Australia for many years. Many people, both individuals and corporations, choose to donate to the political process generally with a preference for the party that they think will provide better leadership for the nation or the state. I am not suggesting, and the bill before us today does not contain, any unreasonable curbs or restrictions in this area. Donations to political parties, members and candidates can continue to be made. But a reasonable and equitable system of allowance for tax deductibility for political donations must contain sensible safeguards. These safeguards were provided in the Tax Laws Amendment (2008 Measures No. 1) Bill 2008 but, as we have seen, that bill was scuttled in the Senate by the Liberal and National parties. While this was a disappointing outcome for good governance and good policy, I am pleased to say that very similar safeguards are provided in the bill before the House today.

This commitment was originally made as part of Labor’s $3 billion savings plan, which was announced on 2 March 2007. The Tax Laws Amendment (Political Contributions and Gifts) Bill 2008 forms part of the Rudd Labor government’s response to inflationary pressures in the economy and is a contribution to our savings plan. Everyone in the community needs to share in the pain of that savings plan, including those in this chamber and in the other place who may need to provide further funds for their own campaigning.

This measure and other savings measures are an important component of our effort to put downward pressure on inflation and interest rates. The changes foreshadowed in the bill at hand will have a positive financial impact, delivering savings of just over $10 million per annum. Maintaining a high-tax deductibility threshold for political donations and contributions—as those members opposite want to do—concentrates political influence in the wealthier sectors of Australian society. Tax deductibility also has the potential to grant to those with the greatest capacity to donate a proportionally higher level of taxpayer funded subsidies.

By abolishing tax deductibility for political contributions, the Rudd Labor government removes any potential advantage that high-income donors may receive in making a tax-deductible contribution compared with the average man or woman on the street. If this government can achieve the goals of removing such inequities from our political system, while at the same time delivering a fiscally responsible package that will bring a positive return of more than $10 million per annum or more than $30 million over the next three years, then this is a truly creative initiative.

It may be noted that the bill also ensures that political parties, Independent members and Independent candidates will not lose access to certain goods and services tax concessions to which they may be entitled as a consequence of the removal of income tax deductibility for gifts or contributions. It is disappointing in the extreme that the Liberal and National parties have opposed this measure so vehemently in their own personal self-interest.

I note that the Greens supported the original bill in the Senate in June this year, with Senator Brown clearly stating that the party favoured ‘the abolition of tax deductibility for donations for political purposes’. The Family First Party too has signalled its support of a similar position. I hope that the Liberal and National parties will take note of the benefits that this measure brings to the system of political contributions and gifts, and reconsider their opposition to this bill. The coalition members of this House should remember that the Joint Standing Committee on Electoral Matters has already recommended that measures virtually identical to those presented to the House today be adopted without amendment by the Senate. The time has come for those members to heed that sensible advice and pass this measure. The Tax Laws Amendment (Political Contributions and Gifts) Bill 2008 will strengthen democracy, enhance equity and simplify the system of political donations. I commend the bill to the House.

Melissa Parke (Fremantle, Australian Labor Party) Share this | Link to this | Hansard source

I rise to support the Tax Laws Amendment (Political Contributions and Gifts) Bill 2008, which is being introduced after consideration by the Joint Standing Committee on Electoral Matters, and after being defeated in the Senate at the end of June. This legislation seeks to make good on an election commitment. It seeks to amend three pieces of tax legislation so that donations or gifts to political parties or to independent candidates and members are no longer tax deductible, and no longer receive GST treatments that apply to gift-deductible entities.

As such, this bill is one part of a wider legislative effort to substantially improve the way politics is played in Australia. At the last election, Labor made it clear that it would seek to make a range of changes to the ground rules of the political process. These changes can only be described as pro-democratic because they increase transparency in the political process, particularly where money is concerned; they increase the objective scrutiny of government advertising; and they reduce the value of incumbency. The changes, some legislative and some administrative, to the electoral rules and to the operational practice of government include: re-instating sensible disclosure thresholds for political donations; prohibiting foreign and anonymous donations to registered political parties, candidates and Senate groups; reducing the printing and communications allowances that are available to members and senators; adopting a Lobbying Code of Conduct and establishing a Register of Lobbyists; and releasing new guidelines to govern the content and oversight of Commonwealth government campaign advertising.

These guidelines spring from those developed by the Auditor-General in 1998, and refined by the Joint Parliamentary Committee of Public Accounts and Audit in 2000—the same guidelines that the Howard government studiously and, I think it is fair to say, scandalously refused to implement. The guidelines will ensure that a government cannot advertise as government policy what is in fact a proposed election policy, as happened with the tax advertising campaign in 1998, and they will ensure that all campaigns over $250,000 will be scrutinised by the Auditor-General.

Desperate and flagrant taxpayer funded self-promotion was one of the clearest signs that the Howard government had lost all hope and self-respect in the course of 2007. To place, in 2006, a record $213.2 million worth of government advertising was one thing—an increase of seven per cent on the previous record financial year advertising figure. But in 2007, to spend $368.8 million of Australian taxpayers’ money, an increase on the previous year of not seven per cent but 72 per cent—it also happened to be an election year—was breathtaking in its cynicism, maladministration and sheer waste.

A number of the changes I have described as forming part of the Rudd government’s pro-democratic agenda were contained in the Commonwealth Electoral Amendment (Political Donations and Other Measures) Bill that was introduced in the Senate in May of this year. To put the Tax Laws Amendment (Political Contributions and Gifts) Bill into context, I want to briefly mention a few things about that earlier, as yet unresolved, piece of legislation. The Commonwealth Electoral Amendment (Political Donations and Other Measures) Bill was referred by the Senate to the Joint Standing Committee on Electoral Matters which, at this stage, the opposition has required to report in all apparent haste by 30 June 2009. I understand that Senator Fielding has shown the common-sense to move that the joint standing committee report earlier than that. The two most significant aspects of that bill, which the opposition has sent to Coventry for its own reasons, are: (1) to reduce the political donations disclosure threshold from $10,900 back to $1,000; and (2) to prohibit foreign and anonymous political donations.

There was no principle behind the massive increase in the disclosure threshold when it was amended in 2006; there was only political self-interest. Money and democracy will always have an uneasy relationship because political influence is one of those things that we should not be able to buy. The power of each individual’s vote and of each citizen’s voice must be paramount and, in a perfect world, only the freely chosen aggregation of those votes or voices would be capable of creating something stronger than a single vote or voice. But the reality is that communication is not free and, therefore, campaigning costs money. The reality is that money affords certain people more political influence than others, and the only effective countervailing force is the requirement that such influence be there for all to see. Any measure that reduces the transparency of political funding is, for that reason, profoundly anti-democratic.

The prohibition against foreign donations speaks for itself. While I am absolutely the last person to take a Fortress Australia attitude in general terms, there is every good reason to rule out the influence on Australian domestic politics of foreign individuals, companies and political groups; and there is every good reason to require Australian political parties and candidates to rely upon what support, electoral and financial, they can draw from an Australian constituency.

It is now perhaps a constitutional anachronism that an Australian citizen who also happens to hold the citizenship of another nation cannot be elected as a representative in this national parliament. Section 44(i) of the Constitution currently operates to exclude from representative politics at the national level the estimated four million to five million Australians who are holders of dual citizenship on the basis that they are presumed to be subject to an ‘allegiance, obedience or adherence to a foreign power’.

Yet, as it stands, unlimited funds from abroad can be applied in support of an Australian political party or candidate without disclosure to the Australian public. It is a matter of record that in 2004 the Liberal Party received a donation to the tune of $1 million from the British peer Lord Ashcroft. The truth about this substantial treasure chest of political influence was not disclosed until 2006. Like so many things about the Liberal Party and the Howard government that might have been interesting to know at the time they occurred, this was yet another matter that only became clear once a federal election had safely come and gone.

This bill removes the tax deductibility of political gifts and donations. In so doing, it undoes an arrangement by which the Commonwealth and indeed Australia’s taxpayers were effectively underwriting or defraying the contributions that companies and individuals made to political parties and their candidates. It is estimated that the Commonwealth was conceding tax revenue in the order of $10 million per annum under the existing legislation. It is hard to see how that could be justified. We might ask why the taxpayer at large should defray the financial contributions of what is comparatively a very small number of individuals, not to mention companies or unions. We might ask why a pensioner or low-income earner who chooses to donate $100 to a candidate should pay the full $100 out of their limited means while someone who earns enough to put them in the highest income tax bracket would have the same contribution subsidised to the tune of $40 by the government. We might go further and ask: which side of politics would benefit most by subsidising the contributions of those at the highest end of the income scale?

The process through which charities and not-for-profit community organisations acquire deductible gift recipient status is an onerous one—and so it should be. The tax concession involved is not given lightly, and when DGR status is received it makes a big difference. I know that the Leeuwin Foundation, a sail training organisation based in Fremantle that works with disadvantaged and troubled kids, were over the moon when their application for DGR status was recently approved. It will of course help them to attract donations, which in turn will assist in the funding of their important and selfless community based work. I am sure that the Leeuwin folk would agree that political parties and candidates, however important they may be to the functioning of Australian parliamentary democracy, are not quite in the same boat—if you will pardon the pun.

The income tax and GST treatment amendments contained in this bill, in company with the raft of pro-democratic changes I have described and which this government is committed to making, will, in sum, make Australian democracy fairer and more transparent. This bill is another important part of the Rudd government’s pro-democratic program; it is another step in restoring integrity of process to both government and politics in this country. As I have said, this bill has the effect of repealing those aspects of the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997 which currently allow the tax deductibility of contributions and gifts to political parties and to independent candidates. It is worth noting that a monograph issued by the Democratic Audit of Australia in 2004 entitled Australian Electoral Systems: How Well Do They Serve Political Equality? noted with approval the fact that federal income tax deductibility was limited, at that point, to $100 per annum and was explicitly not available to corporations.

That changed—as did so many things—in the Howard government’s fourth term. Indeed, one can look at the period from 2005 to 2007 and make an argument that very few terms of government have seen so much unconscionable anti-democratic change. But democracy is resilient and it is resistant to anti-democratic change. The abuse of democratic structures, rules, laws and practices came back to haunt the Howard government. The unfettered bicameral power of the Howard government was its undoing. On 9 October 2004, with control of the House and the Senate, the Howard government might have thought that politics did not come any sweeter. But history will show that the Liberal Party drowned in honey.

It suits the opposition to run a line that the Rudd government is about symbolism instead of substance. It suits the opposition because the opposition do not have a positive agenda. It suits the opposition because, where they have abandoned principle, they can run a line that principles are only symbolic, that principles are hollow. Based on the incredibly strong response from my constituents in the electorate of Fremantle, I can say with confidence that, with the ratification of the Kyoto protocol, the apology to Indigenous Australians and the ending of the mandatory detention of asylum seekers, there is an overwhelming relief that an Australian government has rediscovered the clinching and foundational importance of acting on principle.

The change that this legislation effects, and the change represented by the other pro-democratic measures I have mentioned, are not to the political advantage of the Rudd government. Some of the provisions and measures they reverse were undoubtedly of political advantage to the Howard government. As I have already noted, a number of them were instituted in the final term of the Howard government when it had turned to burning the furniture against the cold wind of voter discontent. It would do anything, say anything and spend anything to defend its majority.

This government in its first term rests on half the margin that the previous government had, and this change is a change of substance. Like the other changes I have discussed, it is quite possibly to the disadvantage of this government because it involves unwinding a series of provisions that were nakedly designed to strengthen the position of the incumbent Howard government. It is a bill for which we cannot and do not expect much political mileage, but I am sure that those opposite, like Ron Clark lying on the track at the national championships in 1956 when he suddenly found John Landy there to help him up, will recognise that the Labor Party is a party with the courage of its convictions and that the Australian Labor Party has won government on the basis that there is no victory without honour. With this bill the Rudd government continues on its program of making positive and substantial changes to the framework and to the ground rules of politics in Australia.

David Bradbury (Lindsay, Australian Labor Party) Share this | Link to this | Hansard source

I rise in support of the Tax Laws Amendment (Political Contributions and Gifts) Bill 2008. I do so after having previously spoken on the former bill, the Tax Laws Amendment (2008 Measures No. 1) Bill 2008, of which these particular proposals largely constituted schedule 1. Back when that item was before the House, I note the proposals that are currently contained within this bill were largely the measures contained within schedule 1, although I do note that there are some additions in this particular bill. They relate to some of the concessions and definitional issues that need to be resolved so far as the GST is concerned. I welcome the fact that those proposals have come out of the consultation that occurred on the previous bill, because they were matters that had not been taken into account when the bill was previously before the House.

I would like to address some of the issues that have previously been raised in this debate, but I begin by making a very simple point: the measures that are contained within this bill are seeking to take away the tax deductibility that currently exists for political donations. It is important to note that there is a limitation on the extent to which deductions are available under the existing legislation. Notwithstanding that limitation, this bill seeks to remove the ability of donors to obtain the benefit of a tax deduction. That is a principle that was very clearly put before the Australian people before the last election. It is not a secret. It was not concealed from the public or from those on the other side, although I do note that it has become part of their modus operandi to block the election commitments that we made so they can try to stall our budget, particularly when it comes to some of the key revenue measures that were part of that budget.

I note that back on 2 March 2007 the then shadow finance minister, the member for Melbourne, issued a press release—‘Labor’s $3 billion savings plan’. I think we all appreciate that when an opposition releases a savings plan it is normally a document that is the subject of considerable scrutiny. If you have a look at the degree of scrutiny to which the Labor Party was subjected in all those years of opposition when it came to any financial plan or attempt to identify savings, it was always considerable. For those on the other side to say that this was not explicitly put before the Australian people is just plain wrong. It is an election commitment. We believe that it should be passed. I note that some on the other side keep suggesting that this should be considered as part of some broader reform. I welcome their commitment to broader reform, because there was no such commitment when they had the ability to do something about it in government. In fact, the only reforms that they ever introduced when they were in government were to extend the lurks when it came to these matters, to increase thresholds for tax deductibility and to increase thresholds when it came to disclosure. None of those things achieved any meaningful reform in support of the principles of democracy; on the contrary, they actually allowed donors to maintain some anonymity and also provided greater tax benefits to those who made a contribution.

I welcome the newfound commitment to reform in this area, but I simply say that the fact that it has taken more than a decade for those on the other side to come to the view that some of these things need to be reformed is not of itself a reason to block the delivery of an election commitment. We made this commitment. It is a clear commitment. There are revenue gains to be made out of this, and that is an important part of the overall budget strategy that we have. We want to make sure that we can deliver a significant budget surplus to take pressure off inflation and to deliver for the people whom we are elected to deliver for by ensuring that the only pressure on interest rates is downward. I take on board the commitment to greater reform, but that should not stop us from moving ahead with this particular proposal.

In relation to the issue of the equity of what is being proposed here, it has been said by some of the previous speakers on this side—and the point cannot be made often enough—that, when it comes to tax deductibility, any tax deductibility measure will inevitably provide a greater benefit to a higher income earner because the benefit of a tax deduction is essentially the government forgoing tax revenue from a particular item of expenditure.

With government forgoing that tax revenue, obviously those on a higher income, who are paying a higher level of tax, receive a greater subsidy than those who are on lower income levels. There are some tax exempt entities out there that would get no benefit, but let us look at those that might be on the lower levels. Take the 15c in the dollar level. I often hear from the other side that this measure will stop pensioners from putting their hands in their pockets and contributing to support a political party. If we have a look at the breakdown of the number of pensioners who are currently making a contribution in that sense, the analysis that is available seems to indicate that the bulk of money for funding campaigns is not coming from pensioners, in any event. So the benefit of this tax subsidy is only being provided to those who already have a considerable amount of money.

I must say that I was struck by the comments of the member for Stirling, who said that he was once a great supporter of raising lots of campaign funds and that this is something that was very dear to his heart but now he has seen the error of his ways and he would like to embrace a greater commitment to campaign finance reform. I certainly encourage that because I think we have a long way to go when it comes to these matters. But I would say with respect to the member for Stirling that most people on the other side did nothing to advance the interests of democracy. Let us go beyond the circumstances of this particular bill. We saw, particularly in relation to the increase in printing and postage allowances of members of parliament, the entrenching of the incumbents of the parliament. The measures that were undertaken by those on the other side when they were in government made it more and more difficult to have contestable elections.

We have already taken measures in that regard. They are important measures because, in the end, a balance needs to be struck between allowing an MP the resources that they need to communicate with their electorate to get the job done and ensuring that you are not just creating a taxpayer subsidy that allows someone to entrench themselves into a position that denies the contestability that democracy requires. So there is an enormous degree of hypocrisy in the bleeding that has come forward from those on the other side.

I find it extraordinary that we now hear that the new Leader of the Opposition is very much committed to campaign finance reform. I welcome it but I find it very strange, given his history in these matters. An article in the Daily Telegraph of 1 August 2007 has the headline ‘Mal’s party: Turnbull no toff but to join club costs $55,000.’ The article reads:

For most Australians $55,000 is a lottery win, but for the richest politician in Australia—Malcolm Turnbull—it’s the entry fee to his elite election fundraising club.

Just in case you thought you misheard that—$55,000. That, I think, is pretty close to the median household income in my electorate.

The Environment Minister has asked his well-heeled Eastern Suburbs to fork out between $5,500 and $55,000 for membership to the Wentworth Forum, a think-tank whose main aim is to get him re-elected.

And he’s even throwing a party at his harbourside mansion as part of the campaign, with a guest appearance from Prime Minister John Howard.

Mr Turnbull, a former merchant banker, said he needs the money because the Liberal Party is at a financial disadvantage to Labor, which he claims receives a “torrent of cash” from the unions.

I find it extraordinary that fundraising could be operating on that scale to begin with, and I think that that is something that needs to be addressed. To the extent that concerns raised by those on the other side go to the issue of trying to rein in some of the campaign fundraising that is occurring, I support that, and I think most people within this House would support that. But I think it is a bit rich to start receiving lectures in relation to these matters from those who were the master practitioners of this particular art.

Another article, in the Age and dated 7 October 2003, speculates about the capacity of the Liberal Party to raise funds after Malcolm Turnbull had moved on from his position as federal treasurer of the party. The article says:

Mr Turnbull strongly rejected such suggestions—

the suggestions were that he would no longer be raising funds for the party and that he had left the party in a less than desirable financial position—

describing them as “ nonsense”.

He said that last year he had raised more money than the Liberal Party had ever raised in a non-election year.

So we have a Leader of the Opposition who cut his teeth, earned his medals and rose up through the party by making an art form out of raising serious campaign finance. If those on the other side are serious about reforming the whole system, we embrace that. But I think that the Australian public will be very cynical, given the lack of action—and indeed if they look at the actions of those opposite in all those years when they were in government they are right to be cynical about the approach that is being taken by those on the other side.

I would like now to turn my attention to the issue of trade unions and the extent to which they are a part of this debate. There have been a number of very misleading statements made in the debate prior to this point. Some of them, I think genuinely, display a lack of understanding of how the current tax law provisions operate, but others I think are more deliberately disingenuous. The suggestion seems to be that, in denying tax deductibility in relation to political donations and given the fact that union dues that are paid by members of a union to their union are tax deductible and that unions in some way make contributions to various election campaigns that the Labor Party is involved with, somehow an indirect tax deduction is being made available for union dues that is not available elsewhere. I think it displays, firstly, a lack of understanding of how the tax law operates—and I see the former Assistant Treasurer in the House and I know he would be very much aware of these issues.

Section 8-1 of the Income Tax Assessment Act 1997 is one of those really significant provisions within what is a very large act. It is the general deductions provision. It essentially provides that, where expenditure is incurred in the course of undertaking activities that relate to the derivation of income—to the earning of income—a tax deduction is available. There are certain statutory exceptions, but that is the basic principle. In fact, it is under section 8-1 where the principle of tax deductibility of union dues finds its legislative source. It is not some special provision that was created. You have to understand the political contributions provisions that this bill seeks to repeal—the ones that give you that tax deduction—are a specific set of provisions. But section 8-1 is the general deductions provision that applies to all taxpayers. It states: ‘If you incur an expense and that expense is incurred in the course of producing an income you get a deduction.’ It is a universally acknowledged principle and that is why it is known as the general deductions principle. I want to read from tax ruling 2000/07, which states:

Periodic subscriptions paid by a person for membership of a trade, business or professional association are deductible under section 8-1 of the Act where the principal activities of the trade, business or professional association are relevant to the gaining or producing of assessable income by the member, or the carrying on of a business by the member for the purpose of gaining or producing assessable income. Therefore, where the principal activities of the association are negotiating and administering employment agreements, and/or providing professional development services, the subscription is an allowable deduction, provided that the member is earning assessable income from the relevant trade, business or profession.

Importantly, the tax ruling is an ATO statement of what the current law is. At paragraph 7, the ruling goes on:

Where the principal activities of the association relate to lobbying politicians or influencing public opinion on matters not related to the derivation of the members’ current assessable income earning activities … a deduction is not allowable under section 8-1 of the Act.

An important distinction is being drawn here. As it currently stands, the law states, ‘A union member who pays union dues that contribute to the provision of services for that member, and their fellow members, in advancing their pay and conditions, has an expense that is incurred in the course of producing their assessable income and therefore that fits within the universally accepted section 8-1, the general deductions provision.’ So it is general tax law at work. The same would apply if it were an employers association, and that is also an important point to remember.

There is no special concession being provided to trade unions, because the same concession is provided to all associations of that particular description. So the Law Society, for example, would fit into that category; employers associations would fit into that category. The special treatment that those on the other side claim is being afforded to trade unions is treatment that is generally available to any other organisation in that situation. This bill is only taking away the specific provisions that deal with the tax deduction relating to political contributions, and they are in division 30 of the act. By taking those provisions away, the existing tax deduction that is available will be removed and other deductions that might be available under the general deductions provision will continue to prevail.

So to come in and suggest that somehow the trade union movement is getting some special treatment is, as I said before, either being deliberately disingenuous or displaying a lack of knowledge of the provisions that we are dealing with here. I could go on at much greater length on that particular point, but I think the point has been made.

Finally, in conclusion, this is an important measure for a few reasons. Firstly, it was an election commitment, and we are a government committed to delivering on our election commitments, however unique that might sound. But it is also an important revenue measure. We are also a government committed to delivering a significant surplus that will take pressure off inflation, protect our economy against the global economic turbulence and, ultimately, ensure that the only pressure on interest rates is downward pressure. In addition to that, this measure will restore some equity to these particular provisions. It will ensure that the very wealthy, as well as the less wealthy, who contribute and make donations to particular political candidates do not get a tax windfall. It is a question of equity. It is also a question of ensuring that those who want to make a contribution to the political process in this way can do so, without the need for any additional public subsidy, given the fact that we already have a considerable regime of public funding of political elections in this country. On that basis, I commend the bill to the House.

Debate (on motion by Mr McMullan) adjourned.