Paul Fletcher (Bradfield, Liberal Party, Parliamentary Secretary to the Minister for Communications) Share this | Link to this | Hansard source

I am pleased to rise to speak on the Tax and Superannuation Laws Amendment (2014 Measures No. 7) Bill 2014, an important bill which will amend various taxation laws to implement a range of improvements to Australia's tax system. In the time that I have available to me this morning, I want to focus specifically on the amendments in this bill which give effect to the coalition's measure included in the 2014-15 budget to allow individuals the option of withdrawing superannuation contributions in excess of the non-concessional contributions cap made from 1 July 2013 and associated earnings, with these earnings to be taxed at the individual's marginal tax rate. I want to make three points in my contribution. Firstly, prior to the introduction of this bill, there has been a nasty problem in the tax system which has led some Australians to face marginal tax rates of up to 93 per cent; secondly, while the previous Labor government sought to address this problem, they did so in an inadequate way; and, thirdly, the Abbott government is acting to solve this problem.

Firstly, I will speak about the nature of this problem and the fact that, as the tax laws have stood, Australians could be exposed to extremely high rates of penalty tax in circumstances where they made an innocent and inadvertent mistake in the amount that they contributed to superannuation. As we know, there are limits on the amount that any Australian can contribute to superannuation so as to enjoy the benefits of concessional treatment—the concessional treatment, of course, being that moneys which are paid into a superannuation fund are taxed at the rate of 15 per cent rather than the individual's marginal tax rate. The policy reason underlying this concessional treatment is to encourage people to make provision for their own retirement through building up a significant superannuation balance which, in turn, means that they are not reliant or not entirely reliant on a government funded pension.

The important point is that the concessional tax treatment is only available up to the concessional contributions cap, which in 2014-15 is $30,000 for those under the age of 50 and $35,000 for those 50 and above, but in previous years, under the Rudd-Gillard-Rudd government, was $25,000. The position was that individuals were taxed on any superannuation contributions in excess of their cap at the top marginal tax rate. The combined effect of a number of provisions under the law as it previously stood was that the total tax that could be applied to some breaches was as high as 93 per cent. This was an exceptionally punitive rate of tax, and it could apply in circumstances where an Australian made an innocent error.

Let me describe a number of ways in which it was possible for people to innocently find themselves in the position where they were exposed to this very high tax rate. One scenario would be that a person was salary sacrificing a large amount of money into their superannuation fund and made a calculation error at to the amount that they were able to contribute without attracting the excess contributions tax. Another scenario was that an employer could make additional concessional contributions to the employee's superannuation fund in ignorance of other contributions made by the employee, and the combination of the two sets of contributions could potentially trigger the excess contributions tax. Another scenario was one where a person had a windfall and made an error by contributing too much of that to superannuation without realising the serious consequences that may follow.

Another scenario—and one that occurs not infrequently—is that Australians make a decision in terms of contributing to superannuation in reliance on advice from a financial adviser or an accountant and it is possible for people to receive bad advice. So, if you make a contribution which exceeds the limits and you end up, through a range of circumstances that I will describe shortly, being in the position of facing marginal tax as high as 93 per cent, you could find yourself in that position not because of any conscious decision you have made but because you acted in reliance on advice and it turned out that the advice was flawed.

The particular scenario where you could end up, under the law as it previously stood, facing a marginal tax rate as high as 93 per cent was that, if you made a contribution and you exceeded the cap—which, as I said, used to be $25,000—the position used to be that you were then exposed to the excess concessional contributions tax of 31.5 per cent. But if you were also making a non-concessional contribution—that is, a contribution made out of post-tax income—you also faced a limit, which in previous years was $150,000 or you could bring forward two additional years and in practical terms have a limit of three times $150,000. But, if you exceeded the non-concessional contribution, then any excess amount attracted a tax of 46.5 per cent.

When you put those two sets of provisions together, the position was that, in certain circumstances, Australians could be exposed to a marginal tax rate of up to 93 per cent on a superannuation contribution, because in some circumstances you would make a payment that exceeded the concessional contribution cap but also happened to tip you over your limit for non-concessional contributions. Once you were over that limit, you faced, as I have mentioned, potentially a marginal tax rate as high as 93 per cent. So it is a very poorly drafted set of provisions which visited upon Australians who made an innocent mistake extremely harsh and unfair consequences.

Throughout the period of the Rudd-Gillard-Rudd government, the coalition called on Labor to address this matter. Unfortunately, Labor made an inadequate and half-hearted attempt to deal with this problem. Let me spend a moment talking about the way that Labor responded. The first response was in 2010, when the then Labor government passed legislation which allowed the Commissioner of Taxation to exercise a discretion for the purposes of excess contributions tax before an assessment was issued. This was an inadequate response to this very serious problem.

Recognising the inadequacy of the response, in 2013 the Labor government had another go, introducing legislation which allowed individuals to withdraw any excess concessional contributions made from 1 July 2013 from their superannuation fund without penalty. So, in a year when the concessional contributions cap was $25,000, as it was for most of the years of the Rudd-Gillard-Rudd government, if you inadvertently put in $28,000, for example, this new law would have allowed you to remove the excess $3,000 without penalty, and instead you would have that amount subject to tax at your ordinary marginal tax rate. This was a partial solution to the problem I have described.

It was a partial solution because the law was not changed in relation to excess non-concessional contributions. It was changed in relation to concessional contributions but not in relation to non-concessional contributions, so the problem remained that, if you inadvertently made a non-concessional contribution and you went beyond the limits in doing so—and that could occur for any of the many innocent reasons that I have explained—there was and, prior to the passage of the bill before the House today, there remains no capacity to correct that problem.

This matter was dealt with in a report by the Inspector-General of Taxation in March 2014 entitled Review into the Australian Taxation Office's compliance approach to individual taxpayers—superannuation excess contributions tax. That report made a number of points. It observed that, while a smaller population of taxpayers exceeded the non-concessional contributions cap as opposed to the concessional contributions cap, the impact on those taxpayers was more severe. Further, the tax office statistics showed that, across all years, approximately half of taxpayers who exceeded their non-concessional contributions cap were within the lowest taxable income range. In other words, it is incorrect to assume that people who were caught by this measure were necessarily wealthy. The statistics show that around half of taxpayers were within the lowest taxable income range. For this reason, the report recommended that the government consider whether the current treatment of excess non-concessional contributions should be aligned with that of excess concessional contributions to minimise adverse impacts on affected taxpayers.

That brings me to the final point I want to make in my remarks this morning. The Abbott government are acting to solve this problem, and we are acting in a way which gives effect to the policy commitment that we took to the last election: that we would develop appropriate mechanisms to address all inadvertent breaches of the superannuation contribution caps where the error would result in a disproportionate penalty. The measure that is contained in the bill today was announced as part of the 2014-15 budget.

The amendments in this bill deliver on that commitment. The change that will be given effect to if this bill passes into law will allow people the option of withdrawing excess contributions and any associated earnings, and the earnings will be taxed at the individual's marginal tax rate. This measure will apply to non-concessional contributions made from 1 July 2013.

This is an important measure which gives Australians an opportunity to correct an inadvertent mistake and in turn to avoid the punitive aspects of the existing excess contributions tax regime. These changes will ensure that the treatment of excess concessional contributions and of excess non-concessional contributions is broadly consistent. So, unlike Labor's half-baked approach to this problem, the coalition is introducing a comprehensive solution. The amendments are expected to affect around 1,000 individuals in 2013-14. Those individuals will now be relieved of facing a very difficult problem—a problem which, frankly, resulted in a capricious and unfair response to what was in many cases an inadvertent error.

The measures in this bill deliver on the government's election commitment. We said we would develop an appropriate process which addresses inadvertent breaches of the contribution cap where the error would result in a disproportionate penalty. We said we would do that, and in this bill we are giving effect to that commitment. These amendments are consistent with our economic strategy to drive growth, to create jobs and to have a more flexible, dynamic and competitive economy. We have identified a serious design flaw in the tax system and, with the measures in the bill before the House this morning, we are acting to correct that design flaw.

Bernie Ripoll (Oxley, Australian Labor Party, Shadow Minister Assisting the Leader for Small Business) Share this | Link to this | Hansard source

It is a pleasure also to speak on this particular bill, the Tax and Superannuation Laws Amendment (2014 Measures No. 7) Bill 2014, because it goes to some very important issues around taxation and superannuation and continues the good work that Labor did in repairing some inadvertent clauses that meant that some people were being taxed at a higher rate than otherwise they should have been. It is good to see that work continued. While I will not deal with every schedule in the bill, there are a number that are very important. But it also gives me an opportunity to talk about the importance of superannuation and not only the government's record on superannuation but also Labor's record on superannuation.

It is curious for me and, I suspect, for many other people to see that the Abbott government is so concerned, as you might hear in some speeches, about fairness in superannuation and how unfair some elements might have been for certain individuals. But the reality is starkly different. The reality is that the Abbott government, in opposition, has always fought against superannuation and any increases for ordinary people to see their life savings grow larger and to become more independent in retirement. It also has taken a number of measures in government to ensure that that is the case—that people suffer direct, positive disadvantage.

You could not go beyond the superannuation guarantee to see that more starkly. The superannuation guarantee is currently at 9.5 per cent, albeit the government has opposed this at every step. The Abbott government, I have to say, has worked very hard in this particular area to make sure that the increase from nine to 12 per cent, which Labor started, is delayed for as long as possible. This is a great shame, because if we are going to talk about fairness and equity, and if we are going to talk about sustainability and ensuring that people are as independent as possible in retirement, then the superannuation guarantee is the best method that we have for ensuring that that happens, and an increase from nine per cent to 12 per cent is the way that we can continue to make sure that that actually happens. While we talk about sustainability, we should also consider sustainability in terms of people's independence in retirement. The Liberals announced their first delay of that increase from nine to 12 per cent as part of the original MRRT repeal bill, which means now that, as part of a deal with the Palmer United Party, the Liberals have made a third delay, meaning the full 12 per cent will not be reached until 1 July 2025—a long, long way away. Any good person looking at the superannuation system would look at the cost to individual people and what that means to their retirement savings and retirement future.

I have to say that of all the election promises broken—there are not really many that have been kept—the con job on superannuation would have to be one of the largest. The Prime Minister, Tony Abbott, has form in this area, and I dare say he has not changed his views even today. In 1995, this is what Tony Abbott said in Hansard:

Compulsory superannuation is one of the biggest con jobs ever foisted by government on the Australian people.

I would love to ask the Prime Minister whether he still believes that is the case—whether compulsory superannuation is one of the biggest con jobs ever foisted by government on the Australian people. But that was a long time ago, 1995. But as recently as March 2012 the Prime Minister, Tony Abbott, also said this at a press conference:

We have always as a Coalition been against compulsory superannuation increases …

So there you have it: the Prime Minister of Australia on the record. He does not support superannuation. He does not support the super guarantee. He does not support the increase of superannuation.

The litany of violence against this really great system, and people in retirement, continues, and it particularly continues through the low-income superannuation contribution, which has been axed as part of this government's cost-cutting measures. The low-income superannuation contribution is simply a contribution made on behalf of individuals with an adjusted taxable income of $37,000 per year or less—a very low or modest income by any measure. This represents an enormous number of Australians' working annual salary. In fact, it represents about 3.6 million Australians, two-thirds of whom are women. In this place, we often talk about the inequity of our superannuation system and the average balances. There is an enormous gap between what men retire on and what women retire on. One of the best ways to redress that gap—not to close it but to start to redress that gap—was the low-income superannuation contribution. Rather than being a gift or some sort of extra contribution on the part of government, it was really to return to those individuals tax paid on their behalf out of their fund, to redress the amount of tax that they had already paid. It is a small amount of money—the amount payable was up to $500—but it made a big, big difference. In fact, that difference is significant for people on very low incomes as a proportion of what they may retire on.

In fact, if you take it together with the pause in the superannuation guarantee, delayed till 2025, industry estimates that the combined negative impact on our national savings pool by 2025 will be $150 billion. That is the sort of money that is being ripped out of the system and ripped out of the retirement savings of so many low-income working Australians, who are doing their bit for the country but not being supported by their government.

I could not possibly speak on these bills about taxation and superannuation without looking at the impact that they have specifically on business. Despite all of the rhetoric and all of the words that you will hear from government—because that is all they are: their, 'Nudge, nudge, wink, wink, we're on your side,' with small business—this is an anti-business government. The Liberals are anti business. They are anti business not through their words but through their actions. They are anti business; they are anti superannuation; in fact, they are anti worker. I would like to see what they are pro. Pro-something would be really good, but they are just not. I know that is the held belief, the myth or what they tell people, but, 'Nudge, nudge, wink, wink, we're on your side,' just does not cut it for me.

I have a look at the record. What is the actual record of the government? What have they actually done, as opposed to what they say they either will do or might do? In 2014, just last year, the government budget made some very significant cuts to industry, to small business programs, to small business taxation assistance, to the CSIRO, to CRCs and also to a number of regulators. This is anti business. This is anti small business. It is anti big business. It is anti everybody. It is anti our economy. It is anti superannuation and it is anti workers. These are significant cuts; they are not trivial little things. These include various industry and small business programs totalling more than $845 million cut out.

The Liberals might say, 'We're cutting waste and we're putting in place efficiency cuts and all the rest of it,' but they are not just cutting; they are completely eliminating from the face of the Australian workplace and our economy organisations such as Commercialisation Australia—really important organisations that help innovate, grow our economy and create jobs. Commercialisation Australia has a very important role to play and is good value for money. How can you talk about on one hand growing the economy and being pro business but at the same time take from them one of the very instruments and vehicles that is used to create jobs and innovation. Commercialisation Australia—gone. The Innovation Investment Fund—gone. Australian Industry Participation—trying to make sure that in a globalised, competitive world with competitive markets Australian industry and business get a hand up, not a handout, and have an opportunity to participate on that global level—gone. Enterprise solutions; industry innovation councils that were doing fantastic jobs; Enterprise Connect—connecting small business with employment and business and growth opportunities—industry innovation precincts that help our young innovators to succeed and grow; textile, clothing and footwear small businesses that need our help to compete, innovate and stay competitive at a global level; and the building innovative capability organisation as well.

These are enormous cuts. There were $1 billion in cuts in investment, skills and training programs, including a litany of programs that have been cut. If there is one thing in particular that small business talked to me about—and I am sure they talked to government about it as well—it is that they actually want investment and assistance with skills and training programs not only for themselves but for their workforce, for people who need that assistance. If we are to believe the rhetoric from government about innovation, economic growth and the path to creating jobs and all of those things, hoorah, that is great, but how do you get there? You do it through investing in people, skills and training. You cannot talk about it and then just take all the money away and say, 'Do it yourself.' That is just not going to work.

So what have they cu? The national Workforce Development Fund. They have cut things like the National Partnership agreement on training places, alternative pathways programs, the Accelerated Australian Apprenticeships program, trade tools for apprentices—a whole heap of things that actually did deliver and work. This government does not see value for money. They know the price of everything but the value of nothing. They do not understand the value of people or of innovation. They talk the words; they just do not understand what they mean. They do not understand that, if you invest in someone or a business early, they grow and help the economy to grow, they employ people and in turn government is better off with better revenue and being better able to compete with our neighbours. But the government does not understand that. It cuts all that at every opportunity and says: 'Aren't we goo? We're saving money.' It is saving so much money that no-one will have a job soon. That is how far this government is going.

This government made a promise that it would create a million jobs. That was just a figure plucked out of the air; who knows how you get to a million? They just grabbed a figure from the air and said, 'A million sounds good, so we'll create a million jobs.' But, in reality, every single day the Tony Abbott government has been in office, jobs have gone backward. In fact, now unemployment, sadly, has reached 6.4 per cent. That is a really high rate. I think—I cannot recall exactly—that the last time it was that high Tony Abbott was employment minister or something like that.

Andrew Leigh (Fraser, Australian Labor Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

Sounds right!

Bernie Ripoll (Oxley, Australian Labor Party, Shadow Minister Assisting the Leader for Small Business) Share this | Link to this | Hansard source

Sounds right—and it is. But, sadly, he promised the reverse. He said: 'No, we're going to create jobs. There'll be more jobs.' There are not.

On top of this the Abbott government has cut $1 billion in support payments for, as I said, trade programs, trade tools and apprentices, but they went further. They thought: 'That's a fair bit of damage. We'll go out there and smash small business and business. But let's go further.' Tony Abbott and the Liberals believe that small business will just cop it on the chin and, nudge nudge, wink wink, we're on your side buddy, no worries at all, so what do they do? Tax loss carry-back. That is $1.3 billion worth of direct assistance to small business which basically said: 'We recognise that in tough global economic times there will be some businesses that could do with a bit of a repay on taxes they have already paid. If you find a particular year like last year or this year tough and you have already paid taxes in the past, we will allow you to claw some of that back.' That was a really good program and well supported by small business. How good and successful was that program under Labor? $1.3 billion successful. This government took it away. They look them in the eye and say: 'We're on your side. We're pro-something,' and then they just take the money off them.

Instant asset write-off was one of the most productive and efficient programs you could give to small business. You directly say to them: 'If you invest your money into equipment, into growing your business, the government will support you. We're not going to give it to you for free, but we'll give you an instant asset write-off rather than having to wait till further down the track at tax time. This was such a successful program that its value was $3.2 billion. Tony Abbott's Liberal government took that away. Again: nudge nudge, wink wink, small business we're on your side. That is the myth, but in fact they are antibusiness because they take that away from them.

Labor put in place half a billion dollars worth of special depreciation rules for motor vehicles, and the Liberals took it away. Everywhere I look on the record I just see the facts, and the facts tell me this: they are antibusiness, they are antisuperannuation, they are antiworker, they are anti trade apprentices, they are anti the auto industry. They do not want an auto industry in this country; it can just leave. That was the message loud and clear.

Labor, on the other hand, stands on its record. We support business, we support growth and we support jobs. (Time expired)

Ian Macfarlane (Groom, Liberal Party, Minister for Industry and Science) Share this | Link to this | Hansard source

I shall not bother responding to the previous speaker. There was so much misinformation in that speech that would take all of the 15 minutes allocated, and I have something far more positive to talk about. But I will just say that that diatribe lacked one thing. I am sure the member for Oxley is an extraordinarily generous person and when people ask him for things he gives them to them without even a second thought. That has been the problem with the Labor Party: every good idea got given a prize. Every bad idea got given a prize. In fact, every idea got given a prize, and that is why this country is staring at a debt of $667 billion. Not once in that previous speech did we hear the member for Oxley actually say how he was going to fund any of those programs. He has no money. He has no plan. And he is just throwing money at a problem, with some faint hope that the next generation will be able to pay it back. So I did sit there with a wry smile on my face. It is little wonder that every time the coalition comes to government we inherit a massive debt from the previous government, and of course this time around is no exception.

I come here today to speak of something far more positive and something really important to your home state, Deputy Speaker Goodenough, and to the home state of other members in this chamber. We are as a government addressing an issue, which again was promised but never delivered by the Labor Party—that is, an exploration and development incentive which will incentivise small exploration companies to go out and discover new deposits of minerals and the like. It will provide the opportunity for those to be developed. It will create jobs for Australians and will continue to reinforce the opportunities for the resource industry which we acknowledge are under pressure—and we do not try and blame the previous government for that; we got rid of some of the things they did, like the mining tax. But the general situation within the resource sector is largely because of a fall in commodity prices.

I come here today to speak to the debate on the second reading of the Tax and Superannuation Laws Amendment (2014 Measures No. 7) Bill 2014, the exploration development incentive. This bill amends the income tax law to implement a scheme to stimulate greenfields minerals exploration in Australia. This is done by allowing Australian resident shareholders in exploration companies to deduct the expense of eligible mining exploration activity against their own taxable income.

In simple English, that means that if you, the individual Australian, invest in a company that is conducting exploration, then you will get a flow-through benefit in terms of your taxable income; you are able to take some of the tax benefit that the company has and flow it back into your personal income tax situation.

The measure is badly needed to secure continued growth in the minerals industry in Australia and, as I said, it is long awaited. I confess that I had a few failures—not many—last time I was the minister for resources. This was one of them. I was unable to convince the Treasury at the time that this scheme was needed, but give me a second chance and I will not miss it. We have taken up this opportunity. It was a shame for the resources sector that, in the six years that intervened in my ministry, the Labor Party promised that they would introduce this measure but they never did. Instead they introduced a tax. And why are we not surprised by that? This was a new tax: 'Hello, here we come. A tax on the mining industry, a tax that deters investment, a tax that had a number of machinations—'

Andrew Leigh (Fraser, Australian Labor Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

You said you were going to be positive!

Ian Macfarlane (Groom, Liberal Party, Minister for Industry and Science) Share this | Link to this | Hansard source

I am being positive. The end of the story is positive. This was a tax which caused the mining industry a great deal of concern, and it took a coalition government to be elected to remove that tax. Unfortunately, it was almost too late. In fact, it was too late in terms of the budget position, because, as we know, not only did they introduce a tax which did its best to kill off investment in the mining industry in Australia, but of course that tax did not raise the money it spent.

That is typical of Labor. They introduce a tax; they spend all the money before they get it. And of course the tax did not raise anything like the money that they had predicted. Again, we should not be surprised by that. The end result was detrimental to not only the mining industry and the investment industry in Australia; it was also extraordinarily detrimental to the budget.

Over the past decade, our national prosperity has been sustained on the strength of a sector that has generated billions and billions of dollars in export revenue, and it accounts for about 10 per cent of our GDP and around 270,000 Australian jobs. The Bureau of Resources and Energy Economics, BREE, projects Australia's earnings from resources and energy commodities to increase at an average rate or seven per cent a year from 2013-14, to a total of $274 billion by 2018-19. While we owe much of our economic strength to exploiting our mineral riches, we cannot take the sector's continued prosperity and economic drive for granted.

The investment boom has tapered off—there is no doubt about that—and the industry is facing significant challenges, which again reinforces the value of rescinding the MRRT, the minerals resource rent tax. While the sector's estimated $157 billion contributed to the GDP was around 10 per cent in 2013-14, we expect exploration expenditure for the same period to decrease by around 12 per cent compared to 2012-13.

A 0.4 per cent increase in petroleum exploration expenditure was more than offset by a 32 per cent drop in mineral exploration. That reflects the confidence, or lack of confidence, that the industry has in terms of commodity prices and where they may be going.

Our government, the Abbott government, is determined that the impetus in our exploration industry is restored. The exploration development incentive, known as the EDI, delivers a commitment made before the last election—and, true to our word, that is a commitment delivered. We made that commitment because we acknowledge that the future prosperity of the mining sector in the Australian economy is dependent on our ability to make more mineral discoveries and new mineral discoveries. It is entirely reasonable for the government to address the barriers to private sector investment in one of the country's most important sectors. A strong resource exploration sector is a key to economic growth—that is a given. It is a key to stronger regions, which is crucially important to people on this side of the House but doubly important to someone who grew up in regional Australia, still lives in regional Australia and represents regional Australia with a passion. And of course the resource sector is a key to stronger regional employment, and that is what puts people into towns in rural areas, such as we have seen particularly to the west of Toowoomba, where I currently live, and to the south of Boondooma, where I grew up.

We are seeing that area repopulated by the resource sector. As the farming industry became more and more efficient and required less and less labour, towns were literally dying on their feet. But with the growth in the resource sector, particularly in the area between Toowoomba and Roma—and particularly with coal-seam gas—we have seen new families come to the district and we have seen young people stay in the district and go on not only to work in the industry but to work as professionals with degrees from universities, staking their claim to being long-term residents of the region.

To have a resource sector that continues to expand in Australia we need the junior mineral exploration sector to generate greenfield exploration activity in Australia. This is the R&D of the industry; this is what they do best. The small exploration companies go out and find these resources and then either joint-venture or, more often, are taken over by larger companies which then develop them.

The junior mineral exploration sector in Australia has been struggling, as I said, for two main reasons. The junior companies face a tax disadvantage relative to larger mining and exploration companies. They face a significant time lag between the expenditure—that is, the money they are putting out—and deducting those costs from eventually assessing earnings. And so, unlike a large company, which is already in production and which can deduct its exploration costs against its income, smaller exploration companies do not have that advantage. And, of course, in an increasingly tight capital market, this risk—in what is already a high-risk investment—is resulting in difficulty in attracting capital needed to conduct the exploration. We need to address that.

There was a time not long ago when resources stocks dominated the IPO statistics. However, analysis undertaken by the business advisory and accounting group, HLB Mann Judd, found that falling commodity prices and reduced investor sentiment impacted negatively on the resource company IPOs in 2013. We should not be surprised by that: they had six years of being battered by a Labor government. But also—as I said—the commodity fall has certainly impacted on confidence. HLB Mann Judd said that the low volumes reflected the difficult conditions that the sector faces, and this continues a downward trend that has been evident for several years—in fact, more than a decade.

In 2012 the number of small IPOs was over 50 per cent lower than in 2011, and capital raising fell by more than 63 per cent on 2011 levels. We as a government recognise the potential of the overall sustainability of the broader resource sector as capital becomes difficult to raise and greenfield exploration suffers as a result. The Exploration Development Incentive proposed under this amendment will be available to junior mineral explorers incurring eligible greenfield exploration expenditure in Australia. Greenfield exploration that will be eligible for the tax offset will be limited to onshore minerals exploration. For the purposes of the EDI, the term 'greenfield' relates to exploration and prospecting in an area that does not contain mineral resources with a level of confidence of inferred or greater as assessed under the Joint Ore Reserves Committee Code—or JORC Code as it is known. An 'inferred mineral resource' is a resource where the quality and grade are estimated on the basis of limited geological evidence in sampling.

In simple English: this initiative is aimed at finding new resources for new jobs in Australia. It is not aimed at proving up resources that already exist or which we can be reasonably assured exist. Perhaps one of the great examples of greenfield exploration is BHP Billiton's Olympic Dam mine in South Australia, which was discovered in the 1970s by Western Mining Corporation. It is now considered one of the world's largest mineral deposits.

The EDI will not apply to exploration for quarry materials; or petroleum exploration, including exploration for natural gas, coal-seam gas or shale oil; or for geothermal energy resources. The EDI is capped at $100 million. The cap will apply through an ex-post modulation process—something I have used before in another part of my industry portfolio. Participating companies will notify the ATO of the lesser of the exploration expenditures and the tax loss for the financial year. In terms of those who will be eligible to claim a tax benefit under this legislation: a greenfields mineral explorer is an entity or an affiliate entity that has not carried out any mining operations in the relevant year.

The EDI is not without precedent. One of the issues that we faced is that other countries—particularly Canada—have had flow-through share schemes for some time which have been incredibly successful. In Canada we have seen that scheme raise over $5 billion for exploration since 2006. Our goal with this scheme is that once this initial fund is used we are in a position to assess how we can improve the scheme and how it can continue so that we can emulate the fantastic success of the Mineral Exploration Tax Credit program in Canada.

The Canadians do have a great eye for opportunity. We are, of course, fierce competitors and the best of friends. In fact, this table was given to this parliament by Canada. But that does not mean we just sit in awe of them. We want to emulate and improve on their scheme, and we want to see industry bodies consider the EDI to be a long-term investment strategy for the Australian mineral sector. And they are optimistic that the scheme will work. They have been part of us working up the proposal, and as we continue to do that we will ensure that opportunities are there for all Australian exploration companies and that, of course, we create more jobs for Australians.

Andrew Leigh (Fraser, Australian Labor Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

I rise to speak on the Tax and Superannuation Laws Amendment (2014 Measures No. 7) Bill 2014 and move:

That all words after “That” be omitted with a view to substituting the following words:

“whilst not declining to give the bill a second reading, the House condemns the government’s unfair tax policy, that threatens to widen the gap between the rich and the rest after a generation of rising inequality.”

This bill makes seven changes to tax laws. The first schedule puts in place an ongoing fix to the issue of excess non-concessional superannuation contributions. The previous Labor government enacted similar measures on a temporary basis in 2012 and 2013. The Inspector-General of Taxation recommended a change of this nature.

The second schedule is a non-controversial machinery of government change which moves the tax investigative and complaint-handling functions of the Commonwealth Ombudsman to the Inspector-General of Taxation and merges that function with the Inspector-General's existing function of conducting systemic reviews. That ensures that the Inspector-General of Taxation has the power to take up individual cases as well as systemic matters.

Schedule 3 codifies a long-standing administrative practice of exempting certain compensation payments from capital gains tax. Schedule 4 ensures that people affected by superannuation fund mergers are not made worse off, and the previous Labor government announced an intention to enact a similar measure. Schedule 5 provides a more consistent basis for the tax office to share information regarding the proceeds of crime. Schedule 7 is an omnibus schedule of non-controversial mechanical tax measures.

Schedule 6, to which the previous speaker referred, puts in place a capped and caveated program with the aim of boosting minerals exploration. This is a worthy goal as the member for Brand noted in his speech on this bill last night. At the end of the Labor government, there was an estimated $230-billion pipeline of committed capital investment, and direct employment in resource operations across the country was at 250,000 people. Employment in the mining sector has now fallen to under 230,000 people and exploration is beginning to dry up.

The question that the member for Brand raised last night was whether a scheme of this kind will have the desired impact. All of us in the House share the government's goal of boosting minerals explanation but a flow-through share scheme similar to this has been enacted and repealed at certain points in Australian history. It was enacted in the late 1950s and curtailed in 1973. A scheme introduced in the late 1970s by the Fraser government wound up in 1985 because it was being used for tax avoidance and because inquiries found that it contributed little towards mineral exploration.

As the member for Brand noted:

I cannot emphasise enough my personal belief that these explorations activities are not driven by the taxation regime. They are driven by a belief that there are minerals out there to be found and there are customers out there that need has minerals, and they are driven by great belief in our mission that our explorers have to do the jobs as well as they can do them and as safely as they can do them.

Minerals exploration is supported not only by tax arrangements but also by terrific organisations such as Geoscience Australia, which has provided key work which has underpinned minerals and resource exploration in Australia in the past. Those of us on this side of the House will watch with interest how this mechanism works noting that it is an expensive mechanism at a cost of around $100 million and a system which is both capped and caveated. We will watch with interest to see whether it achieves the desired goal of boosting resource exploration.

My second reading amendment went to the issue of inequality. I do want to say something about inequality because, whenever we speak about tax in this place, it is important to recognise the broad context in which we are having these debates. Ours is a nation where over the last generation the top one per cent have doubled their income share and the top 0.1 per cent have tripled their income share. Earnings data from the Bureau of Statistics employee earnings and hours survey showed that for those at the 10th decile, the bottom 10 per cent, their real earnings gained from 1975 to 2014 was $7,000 or 23 per cent. For those in the top tenth of the distribution, their real earnings gain over the same period was $47,000 or 72 per cent. Earnings have risen three times as fast at the top of the distribution as at the bottom of the distribution.

When we speak about superannuation in this place, it is vital to recognise that the Abbott government, upon coming to office, made the decision to raise superannuation taxes for the three million Australians earning less than $37,000 a year—two thirds of them women—while cutting superannuation taxes on the 16,000 Australians with more than $2 million in their superannuation accounts. Those are the priorities of those opposite.

Economic inequality may have risen but egalitarianism remains fundamental to Australian national identity. Ours is a nation where, as the early settlers like to say, 'Jack is as good as his master—or maybe better.' As one 19th-century commentator put it: 'In England, the average man feels he is an inferior; in America that he is a superior; in Australia he feels as an equal. That is indeed delightful.' Mark Twain saw it; Anthony Trollope saw it; DH Lawrence saw it. It was not a dream and we did not make it up.

Egalitarianism is a regular feature of speeches by my Labor colleagues. Michelle Rowland summed up the appeal to immigrants of Australia as a nation that is 'prosperous, free and instinctively egalitarian'. Bill Shorten noted that ours is a country where the welfare of the weakest and the welfare of the most powerful are 'inseparably bound together'. Andrew Giles warned that we must not 'return Australia to a gilded age of inequality, whereby if you are not born into wealth, the game of life is rigged against you'. Senator Penny Wong noted 'a critical ingredient for a fairer society is equality of opportunity'. Brendan O'Connor pointed out:

The idea that inequality is the price of growth, that prosperity and equality are alternatives, is … not borne out by a calm examination of the evidence.

Others have noted the intergenerational consequences of inequality. Pat Conroy said:

I have a one-year-old daughter, and I want her to grow up in a society that is fair and equitable, where she has the best chance of advancing, based on her hard effort and her intelligence—not on the size of the bank balance supporting her.

Jim Chalmers succinctly pointed out that 'inequality in one generation breeds inequality in the next'. Tanya Plibersek drew attention to the global ramifications of inequality:

There is the simple idea that we should, where possible, work to eliminate some of the most dire forms of inequality that exist in our world. This speaks to something larger than a mere policy difference. We see a role for government in tackling inequality, whether it be at home or abroad.

Inequality need not just be an issue of the Left. I searched in vain for a single comment of this kind from one of my colleagues on the right of politics. It was not always that way. A century ago, Republican President Theodore Roosevelt told an audience in Kansas:

The absence of effective … restraint upon unfair money-getting has tended to create a small class of enormously wealthy and economically powerful men, whose chief object is to hold and increase their power.

In June 2000 The Australian newspaper published a week-long series on inequality. Its lead editor, Paul Kelly, argued that 'inequality in Australia today is a serious social issue'. A decade and a half on, with inequality higher still, there is little evidence that those on the right take inequality seriously. Prime Minister Abbott's view is:

… in the end, we have to be a productive and competitive society and greater inequality might be inevitable.

His hand-picked business adviser, Maurice Newman, believes that we should not talk about inequality because 'words such as equality and egalitarian have become a refuge for bad policy'. Christopher Pyne said baldly, 'I do not believe there is an equity problem in Australia.' In response to NATSEM modelling showing that his budget made poor single parents 11 per cent worse off and rich singles better off, Treasurer Joe Hockey described his critics as 'engaging in 1970s class warfare' and 'old-style socialism'. Every time I hear someone on the right criticising talk of inequality as class warfare, I think of Warren Buffett's response. He said:

There's class warfare, all right, but it's my class, the rich class, that's making war, and we're winning.

We need a deeper conversation about inequality. I say to my coalition colleagues: if you would like to engage in a serious evidence-based debate about inequality, just name the time and place. With Australian inequality as high as it has been in three-quarters of a century, we cannot afford to have the nation's conservatives shouting slogans. We need them engaged in a discussion about how much inequality our social fabric can bear.

In the time available to me I want to respond to some of the comments made by the Assistant Treasurer in question time. The Assistant Treasurer has shown a new-found concern with the facts and with economic commentators and parliamentarians knowing and depicting the facts accurately. What surprises me is that he has not called his boss on this. The government says that the economy is headed in the right direction but, when the Reserve Bank made its views about economic growth clear, it was clear that growth was continuing at a below trend pace 'with domestic demand growth overall quite weak'. Unemployment is worse than it was at the peak of the global financial crisis. The total number of hours worked per month has scarcely changed since December 2011, despite three years of population growth.

If the Assistant Treasurer is interested in facts, he might question whether this government really is headed in the right direction. With confidence down, unemployment up, growth down and serious problems across the economy now is the time to ask whether we are headed in the right direction. Yet this is a government that withholds facts or misstates them. In the last budget, Treasury prepared the family impact statement as usual, but it was then withheld from the budget so Australians could not see how the budget affected families. The Charter of Budget Honesty brought down by Peter Costello requires the government bring down an Intergenerational report every five years, but the Treasurer is currently in breach of the Charter of Budget Honesty. He has broken that law. There are no sanctions contained in the law, but the Treasurer is in breach of the Charter of Budget Honesty.

He gets facts wrong across the board. He says that fuel excise is a 'progressive tax' when the evidence shows that it is regressive. He says that the poorest Australians 'do not have cars', but in fact the majority of people in the bottom decile, as his own data shows, have cars. He says his own electorate of North Sydney has 'one of the highest bulk-billing rates in Australia' when in fact the stats show that it has one of the very lowest in all of Sydney.

He said that typical Australians pay nearly half their income in tax. That is a corker. When the Treasurer says that you are working July, August, September, October, November and December just for the government, he is not talking about the typical Australian. The average income tax rate sits at around 19 per cent, so the Treasurer is out by more than a factor of two. If we include all taxes then Australia's tax-to-GDP ratio is about one-third, not a half. Who pays half of their income in income tax? I did some numbers on this. It turns out it is somebody earning $10 million a year. Their average tax rate ticks over 48 per cent. So, yes, maybe for people with eight-figure incomes the Treasurer is right. I suggest he spend a little less time in boardrooms with harbour views and more time with the 98 per cent of Australians who are not in the top tax bracket.

The Treasurer is at war with the facts and is attempting to hide the facts. Australia now has a situation where universities do not know what fees they are allowed to charge, students enrolled do not know what fees they will be asked to pay, doctors do not know what will happen to their incomes, electricity generators do not know what will happen with the renewable energy target and big business do not know whether they will be hit with a 1½ per cent paid parental leave levy for an unfair Paid Parental Leave scheme the government said they will not proceed with. Confidence in Australia is falling and this government is at the heart of that problem.

Ian Goodenough (Moore, Liberal Party) Share this | Link to this | Hansard source

Is the amendment seconded?

Alannah Mactiernan (Perth, Australian Labor Party) Share this | Link to this | Hansard source

I second the amendment.

Scott Buchholz (Wright, Liberal Party) Share this | Link to this | Hansard source

It gives me great pleasure to stand here in the House and give an overview of, and speak to, the Tax and Superannuation Laws Amendment (2014 Measures No. 7) Bill 2014. The bill has its complexities. It has seven schedules to it. Schedule 1 provides for fairer taxation of excess, non-concessional superannuation contributions. Schedule 2 transfers to the Inspector-General of Taxation the tax investigation and complaint-handling function of the Commonwealth Ombudsman. Schedule 3 talks about CGT exemptions for compensation and insurance. Schedule 4 provides certainty for superannuation fund mergers, which are happening in the marketplace as we speak. Schedule 5 speaks to the disclosure of tax information relating to proceeds-of-crime orders. Schedule 6 speaks about the exploration and development initiatives that this government is putting in place. Schedule 7 deals with miscellaneous amendments.

The public who are listening to these proceedings do not have the same regard for debates on tax and superannuation legislation as they do for question time. There is no theatre around it. But this is where we do the heavy lifting in this House. The outcomes of these debates influence the direction of our markets. These debates—and, hopefully, the victories we will have—give certainty to sectors of the market who are looking to the superannuation space for certainty for their funds into the future.

Schedule 1 deals with the fairer taxation of excess, non-concessional superannuation contributions. This government has introduced fairness to the taxation of excess, non-concessional superannuation contributions—after-tax contributions made by an individual. We believe the current treatment of breaches of the non-concessional contributions cap can be punitive and need to be made fairer. The overall tax rate that has applied to some breaches has been as high as 93 per cent, which is alarming. We are honouring our election commitment to make sure inadvertent breaches of the non-concessional contributions cap do not occur and thus do not receive a disproportionate penalty. We are delivering on our commitments at the election. There is an expectation from the Australian public that we tidy up some of these areas, and these bills are the vehicle for those amendments to be put.

Most breaches of the non-concessional superannuation contributions caps are inadvertent and can be due to events that are out of the taxpayer's control. The changes the government is introducing will allow people the option to withdraw these excess contributions and any associated earnings, with the earnings taxed at the individual's marginal tax rate. The measure applies to the non-concessional contributions made from 1 July 2013. The measures provide Australians with the opportunity to correct their mistakes and avoid the most punitive aspects of the excess contributions tax regime. It will ensure that the treatment of excess concessional and non-concessional contributions is broadly consistent. This bill tightens up the wording so that there is greater clarity for mums and dads and those brokers or agents who are giving advice, which will hopefully take away the ambiguity that exists at the moment. The government consulted widely on these measures, and our approach balances compliance costs against measures to discourage aggressive tax planning strategies. Everyone looks for loopholes. So if we can make legislation more understandable, more transparent, we will not then have a growth industry driving outcomes we do not want. This measure is expected to affect around 1,000 individuals to 2013-14, resulting in average tax saving of around $15,000.

Schedule 2 of the bill transfers the tax investigation function of the Commonwealth Ombudsman to the Inspector-General of Taxation. That is not in itself controversial, but I will take you through some of the reasoning for it. The schedule transfers from the Commonwealth Ombudsman to the Inspector-General of Taxation the complaint-handling function and the general tax revenue function relating to individuals. Inspectors will now have a single, specialised scrutiny agent for handling both individual tax complaints and systemic tax reviews. All investigations and complaint-handling powers and functions relating to taxation administration by tax officials will now be handled by the Inspector-General of Taxation. Centralising these functions will purely provide efficiencies in that department.

The role of external scrutiny is to provide independent assurance that ATO services are well managed and fit for purpose and that public money is being used properly. The current external scrutiny systems for the Australian Taxation Office include the Commonwealth Ombudsman, the Inspector-General of Taxation, the Auditor-General, the Board of Taxation, the Administrative Appeals Tribunal, the courts and the parliament. So in no way is this a dilution of anyone's right to make a complaint; there are many vehicles for that. This is just about trying to streamline the complaints department so that customers of the Australian Taxation Office are able to get quicker and accurate resolution of their issues. The transfer of tax complaints to the Inspector-General of Taxation will also enable earlier flagging of emerging issues that require more general review, and this ensures better customer outcomes for both individual complaints and the government.

We note that Labor at one stage wanted to close down the Office of the Inspector-General of Taxation. That was a commitment during their 2007 election campaign. To their credit, they dropped it in the following year. At that time the then Assistant Treasurer said, 'The Inspector-General of Taxation plays an important role in ensuring high standards of tax administration for Australian taxpayers'—and we believe that statement to be sound. Subsequently, in 2013, he acknowledged that the Inspector-General of Taxation 'has an important role to play in the functioning of our tax system by providing independent oversight of the Australian Taxation Office and helps to underpin community confidence in the taxpayer system'. So from the commentary in this place and other places, there is wide-held support for that office. We would expect Labor support. The new arrangements are scheduled to commence on—

Graham Perrett (Moreton, Australian Labor Party) Share this | Link to this | Hansard source

That's generous of you, Scotty!

Scott Buchholz (Wright, Liberal Party) Share this | Link to this | Hansard source

I diverted from my speech because I come to this House in the spirit of bipartisanship. On schedule 3, the capital gains tax exemption for compensation and insurance: this schedule provides certainty about the operations of the capital gains tax law, which in itself can be complex. In brief, the schedule confirms the existing administrative treatment of the capital gains tax exemptions relating to life insurance and compensation, providing greater certainty for taxpayers, businesses and superannuation funds. There is a large grey area there and these funds are becoming full of capital, and it is imperative that as a government we provide clear and transparent vehicles of legislation so that there is a clear path, taking away ambiguousness.

The measures in the schedule were announced by Labor in their 2011-12 and 2012-13 budgets. The schedule addresses complexities in the law that affect trustees and beneficiaries where a trustee receives compensation or damages for loss or injury to beneficiaries. The policy intent is that neither the trustee nor the beneficiary should be subject to capital gains tax where compensation is received by the trustee in respect of a claim made for injury suffered by a beneficiary of the trust. That, in itself, is the summary of schedule 3. Similarly, there is a CGT exemption for taxpayers such as trustees who hold life insurance policies and annuity instruments for beneficiaries.

The schedule also clarifies that where the trustee of a superannuation fund holds a total and permanent disability policy for a member, the fund trustee will not be subject to capital gains tax nor be taxed on revenue account. The government is legislating the measures and providing certainty around complex issues of interpretation of the capital gains tax legislation.

The government has consulted widely with stakeholders. Minor amendments were made following consultations to ensure that the legislation achieves its intended purposes—that is, to deliver certainty for taxpayers, businesses and superannuation funds. This measure is estimated to have a small but unquantifiable cost to revenue over the forward estimates period.

Schedule 4 provides certainty for superannuation fund mergers. Again, in my opening commentary, I said that these mergers are taking place in the market as we speak. This measure makes it clear that a tax integrity rule will not be triggered when a member's super benefits are involuntarily transferred from one super fund to another as a result of a merger between two funds which is outside the member's control.

A rule known as the proportioning rule requires the proportion of the tax-free and taxable components of a member's interest in a fund to be retained on transfer of the interest. The super industry has been seeking certainty because applying the proportioning rule in a merger transaction could, in some circumstances, have left some members in a worse tax position than if the merger had not gone ahead. It is not the intention or the will of this government to disadvantage members. The schedule will ensure that the application of the proportioning rule does not disadvantage the interest of the member whose interest is being transferred involuntarily, say on a merger of funds.

The government is getting on with its legislative program. This measure is one of Labor's announced but unenacted measures that was inherited on our coming to government so I see no hurdles. When this bill is put to the House, it should have bipartisan support for the immense amount of good it will do throughout the industry.

Schedule 5 speaks to disclosing tax information relating to proceeds of crime orders. This measure amends the tax law to clarify the Australian Tax Office's ability to share protected taxpayer information with Commonwealth, state and territory law enforcement agencies concerning proceeds of crime orders.

Differences between the Commonwealth's unexplained wealth orders and state and territory unexplained wealth schemes has led to uncertainty for law enforcement agencies about whether they can use protected information shared by the ATO for the purpose of a proceeds of crime order. The most notable example of the differences between state and territory and Commonwealth unexplained wealth orders is where a state or territory law does not require a person to have committed a criminal offence for an order to be made. This measure clarifies that all orders relating to unexplained wealth that may be made under a state or territory law will be included in the definition of a proceeds of crime order, regardless of whether there are differences between the state or territory and Commonwealth schemes.

A person's tax information may be of central importance to investigations, law proceedings and enforcement concerning the proceeds of crime. In most cases, a state or territory law enforcement agency would request protected information from the ATO in order to make a proceeds of crime order. However, the ATO is prevented from sharing a person's tax information with authorised law enforcement agencies in order to support or enforce a proceeds of crime order that already exists. This measure will remove any doubt about the ATO's ability to share protected information, which is the ambiguous area of that bill. The new arrangement will come into place upon royal assent.

In the time remaining to me, on the government's exploration expenditure incentive: the government has delivered on its election commitment to introduce an incentive to undertake exploration for mineral resources. The mining sector has long sought a form of incentive that recognises the long lead times between investment, exploration and production. There are some tax measures we will put in place to assist that sector. Labor introduced the minerals resource rent tax, which failed to produce anything like the levels of revenue Labor predicted in its first year. In the 2012-13 reporting period, the mining tax raised a couple of hundred million dollars, or just five per cent of the amount it was intended to.

Graham Perrett (Moreton, Australian Labor Party) Share this | Link to this | Hansard source

A couple of hundred million shouldn't be thrown away. Could help the budget!

Scott Buchholz (Wright, Liberal Party) Share this | Link to this | Hansard source

I take the interjection from the good member from the other side. The mining tax revenue raised was not Labor's high point. Only Labor could come up with a tax, spend the money and have the tax raise little or no money—less than five per cent of its forecast revenue. It was not Labor's finest hour in the parliament.

Schedule 7 is on miscellaneous amendments. This is rats-and-mice stuff. Predominantly, tax law amendments, and tax and superannuation laws are not sexy, but they important to the country. I commend the bill to the House.

Graham Perrett (Moreton, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak on the Tax and Superannuation Laws Amendment (2014 Measures No. 7) Bill 2014. Before I do, I congratulate the member for Wright on his promotion to whip. I am sure he will do a good job. I hope it will not keep him from turning up to touch football on Tuesday mornings but I do congratulate him.

Russell Broadbent (McMillan, Liberal Party) Share this | Link to this | Hansard source

It would be safer for him if he did not turn up to touch football on Tuesday mornings!

Graham Perrett (Moreton, Australian Labor Party) Share this | Link to this | Hansard source

Thank you for that guidance, Mr Deputy Speaker. The bill before the House has seven schedules. I am only going to focus on one of the schedules but I will just quickly go through the seven schedules.

Schedule 1 amends the Income Tax Assessment Act 1997 and Taxation Administration Act 1953 to change the taxation treatment of excess non-concessional superannuation contributions, and that is going to be the part of the legislation I will focus on, so I will return to that.

Schedule 2 amends the Inspector-General of Taxation Act 2003 to transfer the tax investigation and complaint-handling function of the Commonwealth Ombudsman to the Inspector-General of Taxation, and merge that function with the Inspector-General of Taxation's existing function of conducting systemic reviews.

Schedule 3 amends the Income Tax Assessment Act to provide an exemption from capital gains tax for certain trustees and beneficiaries, and for certain compensation and insurance payments.

Schedule 4 amends the income tax legislation to provide that individuals whose superannuation benefits are involuntarily transferred from one superannuation plan to another are not disadvantaged by being unable to bring forward accumulated tax losses. This schedule also amends tax laws to remove the need for a rollover benefit statement to be provided to an individual whose superannuation benefits are involuntarily transferred.

Schedule 5 amends tax laws to allow taxation officers to record or disclose protected information to support or enforce a proceeds of crime order.

Schedule 6 amends tax legislation to provide a tax incentive to encourage investment in small mineral exploration companies undertaking greenfields mineral exploration in Australia. For constitutional reasons, the Excess Exploration Credit Tax Bill 2014 provides for the imposition of the excess exploration credits tax. All of this legislation is supported on both sides of the chamber—by the opposition.

Schedule 6 in terms of the excess exploration credits tax, for anyone interested in this topic, I would refer to the speech delivered late last night by the member for Brand, Gary Gray. This is a good initiative that, hopefully, will ensure that there are significant amounts of exploration done over the next little while. We have some mines, particularly in Queensland, that are nearing the end of their life and, obviously, it is a long time between exploration, development and export of these resources.

Schedule 7 makes a number of miscellaneous amendments to various taxes and superannuation laws that I will not go into in any great detail.

I return to schedule 1, dealing with superannuation. Superannuation in Australia is, I think, one of the Labor Party's great achievements. It has been able to transform the way Australians approach their retirement. I will just give a little history of superannuation. Going back to March 1973, the Whitlam government established a national superannuation committee to look into the possibility of a national superannuation scheme—that was way back in March 1973. By February 1974, it is interesting to note that the superannuation coverage had reached 29 per cent of employed people—just to put it in context.

The Fraser government, when that report was delivered to them, rejected the committee's recommendations to establish a partially contributory universal pension system with an earnings related supplement. They said no. At the time, or by February 1974, 53 per cent of employed people were covered by superannuation so that increased from 29 to 53 per cent.

Then the Hawke-Keating governments established a mandatory superannuation scheme through the superannuation guarantee, which was a legislated minimum employer contribution to superannuation which covered most employees. They also did some other things, including increasing the taxation applied to certain superannuation lump sums—that came in in July 1983—introducing a tax on superannuation contributions and a reduction in tax on benefits from 1 July 1988.

The superannuation coverage increased from 53 per cent to 71 per cent by November 1991—so 53 per cent when they started through to 71 per cent—and the pool of accumulated superannuation savings was around $146 billion at the end of 1991, which is equivalent to 38 per cent of GDP.

The Keating government introduced legislation to support the superannuation guarantee in parliament in 1992 with the rate to progressively increase from three per cent for small employers and four per cent where the employers' base year payroll was above $1 million from July 1992 to reach nine per cent by July 2002. This was certainly my first interaction with superannuation as an employee. I remember those discussions and the wage increases forgone by employees in that process.

Superannuation coverage increased from 71 per cent in November 1991 to 81 per cent of employed people by November 1995; and the pool of accumulated superannuation savings rose from around $146 billion at the time Paul Keating became Prime Minister to around $238 billion in early 1996—equivalent to 46 per cent of GDP.

Under the Howard government, the Howard government's first budget in 1996 saw the introduction of the superannuation surcharge for higher income earners—a measure that was later abolished; I will acknowledge that. Their other significant policy was the increase to superannuation preservation from age 55 to 60 on a phased-in basis. They also introduced the superannuation co-contribution arrangements and that superannuation assets had to be divided between parties in a marriage breakdown, which is much of the work of family lawyers nowadays because of so much wealth that has gone into superannuation.

The superannuation coverage increased for all employees from 90 per cent in November 1995 to 93 per cent by August 2002; and the superannuation pool rose from around $238 billion in March 1996 when the Howard government came in to $1.2 trillion at the end of 2007, which is equivalent to 110 per cent of Australia's GDP.

Then, under the Rudd government, one change that I am particularly proud of, as a member of that government, was the removal of same-sex discrimination from acts governing Commonwealth superannuation schemes. From memory, that was supported by both sides of the parliament and it was great to see that moment of bipartisanship in terms of making those changes. Under the Gillard government we saw the pool of accumulated super increase from $1.2 trillion in June 2010 to $1.6 trillion in June 2013—obviously not a significant change but there was something called the global financial crisis which created a lot of heartache and stress for people who had retired. Under the Abbott government we saw the delay in the increase in the superannuation guarantee to 12 per cent by two years and also the abolition of the low-income superannuation contribution.

The pool of accumulated super increased from $1.7 trillion to $1.9 trillion in September last year, which is equivalent to 117 per cent of the GDP—surely a great success story for both sides of the parliament in terms of making sure that Australians will be set up for their retirement. Obviously as members of parliament we do cop a bit of stick about our superannuation arrangements. There are two types of MPs and senators: those who were elected before 9 October 2004 and those who were elected after. Of the 226 MPs and senators, 72 per cent were elected after that date and they are on an accumulation scheme; those elected before have a slightly different arrangement. Whilst they do not have the numbers on the floor of the House of Reps or the Senate, they do have the numbers in the executive, so it might be a while before we see any changes there.

The proposed changes to superannuation in this legislation are mainly to do with the concessional tax treatment of superannuation contributions. These are limited by caps on concessional contributions—which are essentially those contributions made by employers that are taxed at 15 per cent—and non-concessional contributions, which are basically the contributions from after-tax income. Caps on the amount of concessional and non-concessional superannuation contributions were introduced by the Howard government under their 'simpler super' changes. Up until the 2012-13 financial year, a tax was applied on contributions in excess of the caps. As the member for Wright touched on, whenever there are opportunities for people to take advantage of our financial system that is what happens, and governments respond to those taking advantage. I am not suggesting there is anything illegal going on; people are minimising their tax payments. Super is set up to provide for people in retirement but if people are arranging their circumstances to avoid paying tax, governments have to be aware of that.

The falling concessional contributions cap from 2009 contributed to increasing numbers of taxpayers becoming liable to excess contributions tax, with over 52,000 excess contributions tax assessments issued by the ATO in the 2009-10 financial year; whereas in the previous year there had been around 18,000. The Gillard government responded to this by having a once-only option for people to have excess concessional contributions taken out of their superannuation fund and assessed as income at their marginal tax rate. Obviously with the marginal tax rates no-one would be paying at the 15 per cent. These changes were supported by both sides of parliament.

In the 2014-15 budget, the government announced that individuals would have the option of withdrawing superannuation contributions in excess of the non-concessional contributions cap made from 1 July 2013 and any associated earnings, with these earnings to be taxed at the individual's marginal tax rate.

The changes in this legislation are fundamentally fair—I certainly have not received too much feedback from my electorate about them—and are supported by both sides of the chamber. The number of taxpayers who breach the non-concessional cap is relatively small. There have been 1,940 assessments issued for breaches and 709 assessments issued in relation to breaches of the concessional as well as the non-concessional cap. Interestingly, the amounts by which individuals breach these caps are generally small, with the median amount being $5,876. Interestingly again, it is not the higher income earners who are penalised; most of the breaches of the non-concessional caps have been made by taxpayers who had taxable income of less than $50,000.

In conclusion, the changes proposed by schedule 1 affect only a relatively small number of taxpayers and many of them do not have relatively high incomes. The proposed changes weaken the existing deterrents for taxpayers who exceed non-concessional caps but there will continue to be a limit on annual contributions into tax-preferred superannuation. Combined with the rise in the non-concessional cap to $180,000 from 2014-15, it is likely that only small numbers of taxpayers will be affected by the changed arrangements in the medium term. The legislation is supported by the opposition. I could spend more time talking about the flow-through shares initiative, and the excess exploration credits tax is a great initiative as well. I hope that it will do its bit to ensure that the mining jobs of the future are being created at the appropriate time. I commend the legislation to the House.

Tony Smith (Casey, Liberal Party) Share this | Link to this | Hansard source

It is a pleasure to speak on the Tax and Superannuation Law Amendment (2014 Measures No. 7) Bill 2014. It is a regular bill that comes before the House and, as previous speakers have said, it has seven schedules. I will focus my remarks on five of those schedules. Schedule 7, being the last schedule, deals as it always does with technical amendments and fixes that are required constantly to our tax and superannuation laws. Schedule 6 deals with the exploration development initiative and that is a major initiative in this bill. I will not address that issue, for reasons of time, but I am very confident that my friend and colleague the member for O'Connor, who is following me in this debate, will address that matter in great detail.

The first five schedules deal with some important legislative issues, and I will briefly deal with schedules 2, 3, 4 and 5. Schedule 2 transfers, importantly, the complaints handling and general tax review functions for individuals from the Commonwealth Ombudsman to the Inspector-General of Taxation. As the then parliamentary secretary to the Treasurer, the member for Moncrieff, made clear at the end of last year when he introduced this legislation, the Inspector-General of Taxation, being the independent statutory office that reviews systemic tax administration issues and reports to the government with recommendations for improvement for the benefit of all taxpayers, will now be the body for taxpayers. These changes, which were announced in the last budget and are being legislated in this bill, will provide taxpayers with a single specialised scrutiny agency for the handling of both individual tax complaints and systemic tax reviews. That is an important step forward.

Schedule 3 deals with capital gains tax exemption for compensation and insurance. In brief, the schedule confirms the existing administrative arrangements. As is the case with so many schedules in these bills, it gives certainty where a grey area has arisen. Schedule 4 again provides certainty for superannuation fund mergers, to make it clear that a tax integrity rule will not be triggered when a member's super benefits are involuntarily transferred from one fund to another as a result of a merger between the funds. As some previous speakers this morning have outlined, schedule 5 is a measure that amends the law to clarify the ATO's ability to share protected taxpayer information with Commonwealth, state and territory law enforcement agencies concerning proceeds of crime orders. Again, this schedule is designed to remove any doubt about the ATO's ability to share protected information with law enforcement agencies.

In conclusion I will turn to schedule 1, which deals with the fairer taxation of excess non-concessional contributions. I will not go as far as the previous speaker, the member for Moreton—to give a long history of superannuation in Australia; I will seek to confine myself to the subject of this schedule. I will, however, make one comment on the member for Moreton's contribution. In his long history of superannuation in Australia, he mentioned the superannuation surcharge that was introduced by the former Howard government. There is an interesting anecdote on superannuation. When that surcharge was introduced by the Howard government, Labor opposed its introduction and, when it was abolished by the Howard government, Labor opposed its abolition, which is a bit of a window into how Labor has approached some of the superannuation issues in recent years—and schedule 1 is a case in point. This is a critical schedule to correct some of Labor's failure that was very obvious during the last parliament.

Schedule 1 will introduce some fairness to the taxation of excess non-concessional contributions—contributions that are made from an individual's after-tax money. As the then parliamentary secretary made clear back in the first week of December last year, the bill will introduce some much needed fairness. Indeed, through the last parliament we repeatedly called on Labor to do something and we pledged that, if they did not, we would upon government. This schedule does just that. It is important to give some tax fairness to those who inadvertently breach those caps. The current treatment of non-concessional contribution caps can be punitive. The overall tax rate that has applied to some of the breaches has been as high as 93 per cent. So the change that the government is introducing through this schedule to the bill will allow people the option of withdrawing these excess contributions and any associated earnings, with the earnings taxed at the individual's marginal tax rate.

Other speakers have gone into great detail about the purpose and the benefits of this particular schedule. I am very glad that we are legislating this now. It was a glaring problem that, unfortunately, Labor did nothing about during the last parliament. But it is being rectified in this parliament. I noticed the member for Moreton says that it has bipartisan support. That is good to hear, but it should have been something that was fixed a few years back. I will leave my remarks at that. I know the member for O'Connor is keen to follow me with his contribution, particularly on schedule 6 of this bill.

Rick Wilson (O'Connor, Liberal Party) Share this | Link to this | Hansard source

The member for Casey is exactly right: today I rise to speak about the Tax and Superannuation Laws Amendment Bill (2014 Measures No. 7) Bill 2014 but with particular emphasis on the Exploration Development Incentive. People who have been in the mining and resource industries for many years know that mining is cyclical and that with the ups comes the downs. All levels of government know the importance of the industry, and the federal government is working hard to show its support. We have already eliminated two major threats to the industry—the carbon tax and the mineral resource rent tax.

The Exploration Development Incentive is of great importance to my electorate and is yet another measure the federal government is putting in place to assist the exploration, mining and resources industries to get back on track. I am proud that Kalgoorlie, one of Australia's premier mining centres, is a big economic driver in my electorate. In 1893, when Irishman Paddy Hannan struck gold in Kalgoorlie, Kalgoorlie was born by the fortune-seekers from across the country descending on the region. Over the next 120 years, the mining of gold, along with other metals such as nickel, has been a major industry and today employs about one-quarter of Kalgoorlie's workforce and generates a significant proportion of its income.

The Super Pit, the biggest open pit mine in Australia, is located right next to the town and has been operated by Kalgoorlie Consolidated Gold Mines since 1989. At 3.6 kilometres long, 1.6 kilometres wide and a depth of more than 600 metres, the Super Pit is as deep as Uluru is high and about the same circumference. The Super Pit produces up to 850,000 ounces of gold every year. But, as great as the Super Pit is for the Goldfields' economy, the current reserve has a finite life, as all current deposits do. This is an important point when looking at the future of the region's economy and also Australia's.

While greenfields exploration expenditure has remained relatively stable in real terms over recent years, it has fallen as a proportion of total exploration from 40 per cent to 33 per cent over the last decade. In December 2014, the Australian Bureau of Statistics reported that quarterly exploration expenditure had halved in the two years to September 2014, with metres drilled down by more than a third over the same period. Tax incentives for small mining companies to undertake exploration is not a new concept. They applied during the 1960s and 1970s and were one of the factors that produced the various mining booms of that era. These incentives were later repealed.

The Henry tax review recommended that, if earlier access to tax benefits from exploration expenses is to be provided, it should take the form of a refundable tax offset at the company level for exploration expenses incurred by Australian small-listed exploration companies, with the offset set at the company income tax rate. The mining sector has long sought a form of incentive that recognises the long lead times between investment, exploration and production. Small exploration companies often must wait many years before tax losses from exploration expenses can be utilised. Many will never generate sufficient income to utilise their losses.

Last year, the Minister for Industry, the Hon. Ian Macfarlane, chose Kalgoorlie to regionally launch the Exploration Development Incentive scheme. Starting on 1 July 2014, the EDI is a $100 million incentive allowing investors in junior companies to deduct a proportion of exploration expenditure against their taxable income. The introduction of the EDI shows the government recognises that mining is a capital-intensive business. Mining is a high-risk business, particularly when companies are starting up their exploration. Most exploration happens to be unsuccessful, but that is not a reason not to do it. It has even been likened to gambling—you could spend a lot of money, with no guarantee of finding any new deposits. But the geological knowledge from that exploration is invaluable and will be available for other exploration efforts to work with. The company may not make any money with it, but it will contribute to more efficient and targeted prospecting in the future.

The EDI will create better incentives and more opportunities for businesses and individuals to succeed. It will strengthen the pipeline to ensure that future mining activity continues to underpin the growth of the Australian economy, allowing investors to deduct a proportion of mining exploration expenditure against their taxable income. While in Kalgoorlie, Minister Macfarlane reiterated:

Exploration is a precursor to development and production and exports. If you're not doing the exploration work then the future looks grim.

Greenfields exploration involves discovering new deposits in new geographical locations rather than areas surrounding known ore deposits. The discovery of new deposits is important for the future supply of resources, as existing deposits will eventually be depleted. Greenfields exploration is high risk, but it can provide large rewards if a new deposit is discovered. At the moment, we are facing the reality of a 10-year low in greenfields exploration, and although there are some drillers who remain pessimistic about the EDI and think it is not enough, in reality the $100 million will generate $300 million worth of capital for exploration. If we have long-running operations looking at closing in the next five to 10 years, we need to be finding the new deposits now so that the industry will keep running for another 100 years.

The purpose of these amendments is to encourage investment in Australian junior mineral exploration companies through the creation of a new form of tax credits to be known as the Exploration Development Incentive Credits. These credits arise from the amount of exploration expenditure that is unable to be claimed as a tax deduction by these companies. Junior companies can currently raise their exploration funding either from the stock market or via agreements with senior mining companies or other investors; they do not have internal sources of investment capital on which to draw. While junior companies are relatively small in size, they undertake a significant proportion of petroleum and other minerals exploration, often undertaking activity on behalf of larger companies. Typically, exploration costs far exceed the profits, if any, generated by junior mineral exploration companies. Such losses are very rarely utilised, as these companies rarely make sufficient profits to fully utilise all of their accrued losses as tax deductions.

The South Australian Chamber of Mines and Energy Chief Executive, Jason Kuchel, said:

Many people do not realise that the junior sector is critical to resource development, being the "engine room" needed to find the mineral resources upon which the economy is so dependant.

Senior mining companies are subject to a number of important limitations, which effectively prevent them from issuing EDIs. Only a greenfields mineral explorer can issue EDIs. A greenfields mineral explorer is identified as having: greenfields minerals expenditure for the relevant income year; both a constitutional corporation and a disclosing entity for Corporations Law purposes; and    neither itself, nor 'any other entity that is connected with or is an affiliate of the entity' extracted minerals for the purpose of producing assessable income. The amounts must be spent in relation to exploration activity: only within mainland Australia—where expenditure incurred in relation to offshore exploration for any mineral cannot give rise to an EDI; where the exploration company holds a mining, quarrying or prospecting right; and where the area under exploration has not been identified as containing an 'inferred' resource.

The tax offsets provided through the incentives are capped at $100 million over three years. The cap manages the cost to the budget and protects it from fluctuations in greenfields exploration expenditur When the EDI was announced, Chief Executive of the Chamber of Minerals and Energy of Western Australia Reg Howard-Smith said:

CME has been calling for incentives, such as a mining exploration tax credit, to boost the critical minerals exploration sector.

…   …   …

We have seen the competitiveness of Australia as an attractive place for exploration expenditure decline with research showing Australia's share of global exploration has reduced from 21% in 2002 down to only 12% in 2012.

…   …   …

Exploration is the lifeblood of future industry. With sensible and encouraging policy initiatives such as the Exploration Development Incentive, there are positive signs for establishing the future pipeline of projects.

There have been two other major wins for the resources sector since this government's election. In July 2014, we repealed the carbon tax, saving Australia's minerals industry $1.2 billion a year when the price of emissions permits, the impact on diesel fuel and higher energy charges are included. The carbon tax alone would have cost mining companies an additional 6c per litre on diesel, increasing operational costs significantly.

The Australian Mines and Metals Association were emphatic in its support of the carbon tax repeal. AMMA chief executive Steve Knott said:

Repealing the carbon tax removes one of two ideologically driven, flawed taxes imposed by the former government that have added unnecessary costs and risk to investing and doing business in Australia.

In September 2014, we repealed the mineral resources rent tax, which damaged international investor confidence in Australia, particularly in the energy and resources sector. The repeal of the MRRT and its associated expenditure will not only improve the budget bottom line but also save millions of dollars in compliance costs for small, medium and large entities.

After the repeal of the MRRT, Chief Executive of the Minerals Council Brendan Pearson congratulated the Senate for being able to find common ground. He said:

In just four sitting weeks, the new Senate has repealed the carbon and mining taxes thus demonstrating that with policy intent and goodwill the Australian Parliament can remove the blockages to stronger and more durable economic growth.

Rio Tinto chief executive Sam Walsh said he strongly supported the repeal of the tax. He said:

This will be a positive step for investment and good for jobs in the mining sector.

The MRRT was never necessary as Australians were already sharing in the benefits of the mining boom through the high company tax payments, royalties and community spending.

Fortescue Metals Group chief executive Nev Power said the repeal would encourage Fortescue to continue contributing to Australian society in other ways. He said:

The repeal of the MRRT is a sign that Australia is open for business and serious about encouraging mining development and investment.

But there are still threats to the resources industry, including the WA state government's current review of mining royalties, specifically the review on the gold royalty. Gold mining is an industry that has sustained Western Australia since the late 1800s. In WA alone, the gold mining industry employs approximately 20,000 people. The gold sector pays more than $300 million in taxes and royalties to the government of Western Australia which helps build our roads, schools, hospitals and police stations. Any increase could put jobs and, ultimately, communities at risk. Any rate royalty increase will have a significant impact in the region.

According to a report by Deloitte for the Gold Royalties Response Group, over the past six years the average cost of gold production for WA gold mines has doubled from $511 an ounce to at least $1,100 an ounce. As production costs have risen, companies have had to shed staff. Doray Minerals Managing Director Allan Kelly has claimed the industry cannot bear any additional costs. He said:

WA gold miners continue to face tough operating conditions. Any increases in royalties will see mines close and jobs lost. More than 4,000 direct jobs in gold were lost last year as a result of miners being forced to downsize and the reality is that any additional costs will result in more job losses and seriously damage our industry.

Mr Kelly rejected any suggestion that phasing in a royalty increase over a number of years would be an acceptable outcome for the gold industry. He said:

This would simply mean death by a thousand cuts for gold miners. Such a move would damage investor confidence and erode any positive sentiment in the sector.

We cannot keep hammering our productive industries. I will oppose any move that places more pressure on the gold industry. I urge the Western Australian government to seriously consider the impact any changes to gold royalties would have on the viability of small- to medium-mining operations in my electorate.

But back to the bill currently before the House. Another organisation to see the benefit of the EDI is the Minerals Council of Australia. In December last year Dr John Kunkel, Deputy Chief Executive of the Minerals Council of Australia, released a statement in which he said:

The Excess Exploration Credit Tax Bill 2014 recognises the need to reinvigorate Australia's exploration effort.

…   …   …

The EDI is a timely and practical commitment to the future of the Australian minerals industry with small Australian exploration companies facing real challenges securing capital. Available to junior companies with no taxable income and to their investors, the EDI addresses the situation whereby junior explorers are unable to access the immediate deduction for exploration expenditure. Importantly, it will allow explorers to leverage additional investment in their companies and to retain existing shareholdings.

…   …   …

The EDI will make exploration investment in Australia more attractive and it deserves universal parliamentary support.

Dr Kunkel is completely right: even if an exploration program, financed in part by the issue of EDIs, should not find any deposit, the geological knowledge from that program will be available for other exploration efforts to work with. As such, any EDIs issued will still have a positive outcome even if no actual economic discovery is made, as it will contribute to more efficient and targeted prospecting in the future. The incentive recognises that the future prosperity of the mining sector and the Australian economy is dependent on our ability to make new mineral discoveries.

Along with repealing the carbon tax and MRRT, the EDI is about ensuring that we regain and maintain the momentum of discovery and ensure that we have a rich and prosperous way forward. I would like to thank and acknowledge the member for Brand, who last night indicated the opposition's support for this legislation, and welcome the bipartisan position on this vitally important boost to the exploration industry. To anyone eligible in my electorate, I cannot stress enough how important it is for you make the most of the EDI. There is a long way to go before we can say we are anywhere near the top of the cycle, but at a federal level at least, we are doing everything we can to make sure that comes sooner rather than later. I commend this bill to the House.

George Christensen (Dawson, National Party) Share this | Link to this | Hansard source

I rise to speak on the Tax and Superannuation Laws Amendment (2014 Measures No. 7) Bill 2014. This bill contains a number of amendments to fix technical and drafting defects, repeal redundant provisions and address some of the unintended consequences of the current tax and superannuation laws. But the part of this bill that has the biggest impact on my electorate and on the nation relates to schedule 6, as the member for O'Connor has been talking about: the exploration development incentive. The Excess Exploration Credit Tax Bill 2014 seeks to provide an incentive to encourage investment in small mineral exploration companies undertaking greenfields mineral exploration in Australia.

Consideration of this legislation and its value to my electorate and to the national economy comes down to some simple propositions: do you believe in the resource industry or do you not believe in the resource industry; do you appreciate just how many dollars the resource industry puts into this economy and how reliant we are on revenue from mining to provide the services that we enjoy; and do you understand the number of jobs that come from the resource industry, directly and indirectly? I can assure you people in my electorate know too well the importance of the resource industry. They saw firsthand what happened when Australia played to its strengths, with our abundant resources delivering jobs in regional centres—and funding cushy lifestyles for inner city socialists in the capital cities. They saw firsthand what happened when those same inner city socialists launched a class war on the country's biggest industry.

I mention this because it is that class war—a socialist fight against people working hard for a decent living—that will attack this legislation here today. It is that class war—a fight against any company or industry that has the temerity to make money while employing thousands of people—that will decry any industry incentive as 'corporate welfare'. Yet, strangely, those bleating about 'corporate welfare' are the same people who insist that we pour billions of dollars into industries that would never, ever survive on their own—all in the name of worshipping the false climate gods. Yes, there are those who do not believe in the resource sector, who do not appreciate the value and the importance of the sector to the economy. There are those who will attack the sector in any way they can because their political ideology dictates that all mining must be shut down. They exist predominantly in the Australian Greens, and the Greens are aided and abetted by the Labor Party, the party who presided over the most destructive government our country has seen and led an attack—directed by the Greens—on the No. 1 income earner for this country, the mining industry.

Rather than playing to our strengths and providing incentives for the development of this critical industry, as this legislation seeks to do, Labor and the Greens wanted to tax it to death. They refused to recognise the contribution that resources made to the coffers of this nation but thought $11 billion could easily be bled from what they called 'superprofits'. While their mining tax was a total disaster for the budget, given that it raised a tiny fraction of the cost of the schemes that the Labor Party linked to it and spent in advance, it did have a big impact on the industry in terms of sovereign risk. Large mining companies, with operations all over the world, looked at the then Labor government and what they were doing and their attitude towards mining—namely, to stop it from making a profit—and they reassessed their priorities in the global environment. What the Labor Party did was give those miners a very good reason to operate in another country, to employ citizens of another country and to create tax revenue for a government in another country. That made their Green mates happy because that would mean fewer businesses making that dirty thing called money and more people on the dole queue and under government control. The Labor era pushed the miners away. But that era is over.

We now have before us legislation that does the opposite. It is all about attracting miners to this country and providing an incentive to create wealth for all Australians. The incentive provided under this legislation is capped at $100 million over the next three years, which will manage the cost to the budget and protect it from fluctuations in expenditure for greenfields mining exploration. The Association of Mining and Exploration Companies said the Abbott government's exploration incentive scheme would:

… encourage much needed investment in greenfields exploration which is at historic lows. It will also create jobs for exploration support services such as drilling contractors and geoscientists.

…   …   …

"Greenfields exploration is essential to make new discoveries that will become the mines of tomorrow to generate jobs and Government revenue streams.

Feedback from the industry also reports that junior explorers in Australia struggle to raise capital for exploration. As a result, exploration for new mineral discoveries has reached a 10-year low. Is it any wonder? We had Labor and the Greens doing everything that they could to shut them down for seven years. The previous Labor-Greens government demonstrated by their actions that they did not believe in the resources industry. They did not appreciate the value and understand the importance of the industry, unless, of course, it could help them get elected. Labor could put up the pretence of believing in the industry for an election campaign. In 2007, I have got to note, they committed to a scheme similar to this legislation. But, once elected, they became the Greens' whipping boy and nothing was done. They were happy to get paddled, '50 shades of green' style, but nothing was done. In 2010, the Labor Party once again committed to a scheme similar to the legislation that we debate today. But, once elected, again they became the Greens' whipping boy—'50 shades of green'—and nothing was done. It is no wonder at all that exploration for new mineral discoveries is at a 10-year low.

Now they are in opposition, Labor have demonstrated their anticoal stance. The ABC reported—and it is online—that the Leader of the Opposition, Bill Shorten, 'doesn't see much of a future for the coal industry'. The shadow environment minister, Mark Butler, told the ABC that he wanted the coal industry phased out. These are the statements of a party that does not believe in resources. In contrast, we have the Prime Minister, on a visit to the mining region of Central Queensland in October last year, saying this:

This is a sign of hope and confidence in the future of the coal industry. It's a great industry and we've had a great partnership with Japan in the coal industry. Coal is essential for the prosperity of Australia. Coal is essential for the prosperity of the world. Energy is what sustains prosperity and coal is the world's principal energy source and it will be for many decades to come.

But the Prime Minister, Australia, and the people who want jobs and prosperity have an uphill battle, because, even today, we have a Labor government in Queensland—returned there with the assistance of the Greens and their PR arm, GetUp!—that is determined to stop the resource industry in its tracks. The Galilee Basin, in Queensland, has the potential to unleash enormous wealth for Australians and to bring tens of thousands of jobs to Queensland. But Queensland Labor promised to take away the incentive for building the vital infrastructure linking key mines, such as the Carmichael mine, with the port at Abbot Point in my electorate of Dawson. What is more, they have promised to delay the necessary port expansion by not allowing dredge spoil to be disposed of on a suitable site located on land.

Labor and the Greens did not want disposal of this dredge spoil at sea, so we went all in to find a land based solution—yet they still attack it. They say it will destroy the so-called internationally significant Caley Valley wetlands or, as the locals know it, the Kaili Valley wetlands. These are wetlands that were man-made. The locals will tell you that gun clubs back in the 1950s actually diverted water courses and turned a dry area into a wetland for the primary purpose of duck hunting. That is how that wetland came into creation. But Labor and the Greens use it as an excuse. In stopping or, at least, delaying the Abbot Point and Carmichael mine rail infrastructure, Labor and the Greens are putting at risk thousands of jobs and billions of dollars in government revenue and are denying millions of desperate, poor people across the world access to what they need —and that is energy.

Millions of people in India remain without electricity, and the cheapest and easiest means of bringing these people out of energy poverty is coal. Australia produces some of the best and cleanest coal in the world. If we had any compassion for the world's poorest people, we would be encouraging exploration and the development of new mines to help supply the cheapest form of electricity available to those people.

The University of Queensland's Energy Poverty Research Group says:

Modern, clean and efficient energy services are crucial for human well-being and facilitating social and economic development. Energy poverty denies billions of people in the developing world access to modern energy services.

A report produced by a wide group of international agencies led by the World Bank recently reported that about 1.2 billion people—nearly as many as the entire population of India—still live without access to electricity, while 2.8 billion people rely on wood, crop waste, dung, and other biomass to cook and heat their homes. The World Bank said that, unless the world addresses the widespread problem of energy poverty, other efforts at economic development are likely to fall short.

If we fail to encourage the resources sector through legislation such as this, we will fail to address the urgent need of billions of people living in energy poverty. If we allow the Queensland Labor government and the extreme Greens to shut down our own economic prosperity through our resources sector, we will confine millions of people to poverty.

India and China are moving very quickly to deliver electricity to more people, but they cannot keep up with demand. India has extended the reach of its grid to an average of 24 million more people each year—and they have not done it with solar panels—and yet 306 million people in India remain without electricity. In China, 612 million people—nearly twice the population of the United States—do not have clean fuel for cooking and heating. If they do not have clean fuel for cooking and heating, they are forced to resort to other means. According to an article by National Geographic in 2013, about 3½ million people, mainly women and children, die each year from respiratory illness due to harmful indoor air pollution from wood and biomass cooking stoves. Last night I watched a video about this energy poverty. It featured a Nepalese family and a baby that was dying. You could see it dying in this video from respiratory disease caused directly by this stuff. That is what the Greens do. That is the result of the Greens campaign against coal.

The solution to this enormous problem is at hand. We have the resources here in this country to produce reliable, affordable energy—and India, for instance, wants to buy it from us. Even though worldwide wind power has grown at an average rate of 25 per cent and solar energy at a rate of 11.4 per cent since 1990, those two forms of renewable energy—along with geothermal, waste and marine energy—contribute barely one per cent to global energy consumption.

If the Greens and Labor believe in equality, in helping the world's poor and in ending suffering then they must believe our resources sector—with the cleanest and most environmentally friendly coal in the world—can alleviate energy poverty throughout the third world . We can bring these people up to the standards that we enjoy today. The Greens must believe in providing encouragement and incentives to those who can help bring millions of people out of poverty and let those poor people of the world enjoy a tiny fraction of the benefits enjoyed by those who sit in their leafy inner city suburbs of Melbourne and Sydney, those latte-sipping socialists who condemn proposals like this and think that mining is dirty. I have to tell you that it is not. Mining is actually humanitarian. Mining supports jobs in regional Australia, in electorates like mine.

I support this bill. I strongly support the mining exploration tax credit. It is a very welcome scheme that will go some way to rebooting the mining sector in this country. I look forward to junior miners taking advantage of this throughout the Bowen Basin and perhaps even the Galilee Basin and getting jobs back up and running throughout Central Queensland. I am glad to hear that this has the support of those opposite, but they really need to start talking up resources. They need to start talking about the positives of resources rather than constantly trying to demonise them. Coal provides jobs. Coal provides power. Coal can alleviate energy poverty throughout the Third World. I support the bill.

Josh Frydenberg (Kooyong, Liberal Party, Assistant Treasurer) Share this | Link to this | Hansard source

Firstly, I would like to thank those members on both sides of the House who have contributed to this debate. I welcome the opposition's decision not to oppose the bill. Schedule 1 makes the superannuation tax laws fairer. It is a measure that delivers on an election commitment. When individuals exceed their non-concessional contribution, they need no longer be subject to the highly punitive excess contribution tax regime. It will enable individuals to save for their retirement with more confidence.

Schedule 2 transfers the Commonwealth Ombudsman's investigative and complaint-handling function relating to tax law to the Inspector-General of Taxation. The transfer will concentrate scarce tax expertise in a single agency, enabling more efficient use of that expertise and improved customer focus. The changes will also simplify the scrutiny landscape.

Schedule 3 makes minor amendments to the taxation laws to ensure the proper functioning of capital gains tax provisions in relation to life insurance policies. The intention is that compensation and damages received by trustees and beneficiaries—for example, for a workplace injury—are not subject to capital gains tax. This schedule puts into legislation another of Labor's 92 announced but unenacted measures left to us on coming to government.

Schedule 4 clarifies the capital gains tax treatment of assets when one superannuation fund merges with another. This schedule will legislate yet another of Labor's announced but unenacted measures. Schedule 5 clarifies the ATO's ability to share information with Commonwealth, state and territory law enforcement agencies seeking proceeds of crime orders. Schedule 6 and the Excess Exploration Credit Tax Bill 2014 provide for the introduction of an exploration development incentive to encourage investment in small mineral exploration companies undertaking greenfield exploration in Australia. The coalition is delivering on another election commitment.

Schedule 7 makes a number of amendments across the tax law to provide certainty to taxpayers. They make sure the law operates as intended by correcting technical or drafting defects, removing anomalies and addressing unintended outcomes. I commend this bill to the House.

Craig Kelly (Hughes, Liberal Party) Share this | Link to this | Hansard source

The original question was that this bill be now read a second time. To this the honourable member for Fraser has moved as an amendment that all words after ‘That’ be omitted with a view to substituting other words. Therefore, the immediate question is that the amendment be agreed to.

Question negatived.

Original question agreed to.

Bill read a second time.

Message from the Governor-General recommending appropriation announced.