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

I move the following amendment to the bill:

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

"while not declining to give the bill a second reading, the House calls on the Government to make Australia's capital gains tax and negative gearing regimes fairer and more sustainable."

Labor's position is to support the Tax Laws Amendment (Small Business Restructure Roll-over) Bill 2016, but this is a bill about economic leadership, and we need to speak directly about that issue today. The Prime Minister has now been in parliament for almost 12 years and the Treasurer for almost nine years. And after 5½ months of their double act of economic leadership we saw last week the 'emperor's new clothes' moment for the Treasurer, Scott Morrison. We saw that he is unable, given 46 minutes at the Press Club, with Australia's leading economic journalists arrayed before him, to put forth a single idea of his own. Not a single idea has been taken up by this government that contributes in a significant way to boosting growth or equity in Australia. Everything is always on the table, and you are reminded of that Yogi Berra line: 'When you come to a fork in the road, take it', because there is not a fork that this Treasurer and this Prime Minister have not taken. They even had a chance today. We moved a motion to suspend standing orders so that the Treasurer and his counterpart, Chris Bowen, could be given 46 minutes each to talk in this House about their ideas. Did the Treasurer take it up? No. Yet again, he squibbed the opportunity, running away like one of his mythical creatures, off to talk about political numbers—which is all he really cares about, all he is really confident about.

This bill is a modest reform, but let's not pretend that it in any way constitutes economic leadership. Labor will support it because it allows small business to restructure with greater ease. But it would be remiss, in talking about the issues of fair taxation, to not deal with the question of capital gains tax discount and negative gearing. We know that Australia has uniquely generous tax arrangements when it comes to negative gearing and the capital gains tax discount. We know that those policies have worked together to make housing increasingly unaffordable for young Australians. Price to income ratios have approximately doubled over the past two decades. We have seen the share of young Australians owning their own home fall by 25 percentage points in a generation. For low-income young Australians, rates of homeownership have halved. And we now have Sydney as the second most unaffordable city in the world when measured by price to income ratios, behind only Hong Kong, and Melbourne as the fourth most unaffordable city in the world.

Yet, faced with these unassailable facts, the Treasurer does not talk about acting on negative gearing and capital gains tax to make sure that all Australians can afford their own home. No. Instead, he behaves like the Property Council executive he once was—much more interested in protecting tax distortions and loopholes than in good policy.

The list of people who have supported doing something about negative gearing and the capital gains tax discount spans Australia and spans politics. Former Treasurer Hockey said on 21 October 2015:

… negative gearing should be skewed towards new housing so that there is an incentive to add to the housing stock rather than an incentive to speculate on existing property.

There he is, presaging our policy. Jeff Kennett, the former Liberal premier, said:

I'm very disappointed at the way in which my side of politics are arguing against what I think—

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

Mr Deputy Speaker, a point of order: I draw the member's attention to relevance. This bill is the Small Business Restructure Roll-over Bill—

Ross Vasta (Bonner, Liberal Party) Share this | Link to this | Hansard source

I thank the honourable member for Hughes, but I call the honourable member for Fraser.

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

I understand why those opposite do not want to hear Jeff Kennett's words: because they are pretty sharp. He says:

I'm very disappointed at the way in which my side of politics are arguing against what I think is an eminently supportable concept put forward by the Labor Party in terms of negative gearing.

John Daley from the Grattan Institute has talked about negative gearing as being:

… a policy that ultimately reduces home ownership, costs the Commonwealth a lot of money in terms of foregone tax revenue and is very unfair

Chris Richardson has said, 'Congratulations to the opposition.' We have heard positive words about tackling negative gearing and the capital gains tax discount from Cassandra Goldie of ACOSS and from National Shelter. Jillian Broadbent, a former Reserve Bank director, has been quoted as saying:

… a disproportionate amount of individuals savings that go into the housing sector

Warwick McKibbin, former RBA director, said:

The question is do you want to avoid the problem now or do you want to wait until the thing just bursts?

And in the government's own financial system inquiry, brought down in November 2014, under the heading 'Major tax distortions', it has included:

The tax treatment of investor housing, in particular, tends to encourage leveraged and speculative investment in housing.

Indeed, the Prime Minister himself acknowledged, when he wrote about tax in 2005, that Australia's negative gearing settings are among the most generous in the world.

The Property Council of Australia has an ad campaign out today, which talks about a 'housing supply crisis' in Australia. Well, if you believe there is a housing supply crisis in Australia, why would you continue to support a policy where 93 per cent of negative gearing is on the existing stock and only seven per cent on the new stock? Ken Morrison and Scott Morrison need to acknowledge that only one in seven home buyers are first home buyers. And with median prices pushing above $1 million in Sydney and above $700,000 in Melbourne, they need to recognise that a whole generation of young Australians risk being shut out of the housing market if we do not move to measures which are fairer and which boost supply.

Last year house prices grew five times faster than wages. We do not expect that house prices would fall under our policy—house prices continue to rise in plenty of other countries which do not have Australia's negative gearing and capital gains tax settings—but what we do expect is that it might be possible for wage growth and house price growth to be a little closer together. Negative gearing disproportionately benefits the best off. High-income earners, such as lawyers, surgeons and anaesthetists, gain benefits in the thousands of dollars. Lower income earners, such as teachers, nurses and police, earn average benefits in the order of a few hundred dollars. You will hear these misleading statistics about the taxable income of negative gearers—in other words, what their income position is after they have taken advantage of negative gearing. Those statistics, if you believe them, would suggest that 64,000 Australians are negative gearing on incomes of zero or negative incomes, which does raise an eyebrow as to why the bank would lend them the money in the first place.

The fact is, we know that 70 per cent of the benefits of capital gains taxed concessions go to the top tenth. We know that these are tax distortions that burn a hole in the budget. The capital gains subsidy cost $4.2 billion in 2014 and is projected to double to $8.6 billion in 2019. The government's own financial systems inquiry has acknowledged that this is a tax distortion that needs to be tackled. Labor's capital gains tax concession and negative gearing package will add $32 billion to the budget bottom line over the course of the next decade, bringing the total of Labor saves to around $100 billion.

In an environment in which Australians are crying out for the economic leadership that they were promised when Tony Abbott was topped by Malcolm Turnbull, we have, instead, the Labor Party leading the economic debate. Labor will halve the capital gains tax discount for assets purchased after 1 July next year. That will reduce the capital gains tax discount from 50 per cent to 25 per cent. It will not affect small businesses, it will not affect investments made by superannuation funds and, by grandfathering existing assets, we ensure confidence and certainty to small businesses and to investors. Labor's plan incentivises the construction of new housing, so for small businesses that are involved in architecture and landscaping, who are tradies, the flow-on effects will be significant. It has been estimated that around 40 workers are involved in the construction of a new home, many of them will be small businesses. So by standing against Labor's policy on negative gearing and the capital gains tax discount, this government is standing against an opportunity for small businesses in the construction sector to benefit from an increase in housing supply.

Two million small businesses in Australia benefited from Labor's permanent instant asset write-off when we were in government. The coalition, upon coming into office, immediately scrapped that measure, only to bring back a temporary instant asset write-off. The temporary instant asset write-off expires on 30 June 2017. That is going to mean an investment boom just before the deadline and an investment bust straight after it. What is the economic rationale for cutting off the instant asset write-off in the middle of next year? There is none. It is a political rationale based only on the short-term politics that this government seems so fond of. The former Treasurer was too caught up in politics and the current Treasurer is all politics; delighted to come in here and tell us his views on Senate voting reform but terrified of actually talking about economics at the National Press Club.

Another Labor initiative for small business that was dismantled by the coalition was the loss carry-back measure, which allowed companies and businesses that were taxed similarly to carry-back tax losses of up to $1 million to offset taxable income from an earlier year. It was a recommendation of the Henry review but we are yet to see any evidence that the government is serious about broad-ranging tax reform. We recently heard the Treasury head say the department were 'waiting for direction' from the government on whether the tax white paper was dead or alive. It seems like the ex-parrot of Monty Python: the government keeps on telling us it is alive, and if you just push the cage or give it a jolt it will get going again. But the fact is, this tax white paper is an ex-tax white paper. Bereft of life, it rests in peace.

The government is unwilling to tell the people who put their submissions into the tax white paper what they are going to do about tax reform. There were 800 submissions and millions of dollars spent putting in place the submissions, and the Minister for Finance can simply refer to the white paper as 'stationery'. It is 'stationary' all right, not just in the sense that it might be written on paper but also in the sense that it has ground to a halt, as has the economic debate in this country under this government. That is why it has fallen to Labor to list a range of positive plans, which benefit not just small businesses but also all Australians.

We have consumer confidence down, growth down and unemployment up. We have debt up and deficits up—entirely contrary to a promise of the Abbott-Turnbull government that they would deliver a surplus in their first year and in every year after that. How is that promised surplus going? Last I looked, it was at 2020-21 when the government was planning to be back in surplus, but they are now saying that they are going to tackle bracket creep. Bracket creep is, of course, 80 per cent of their return-to-surplus strategy, so once they tackle bracket creep it will probably be out to the 2030s before this government can be pledging to return the budget to surplus. Meanwhile, Labor has laid the groundwork with clear, positive plans for tax reforms that will not hurt growth and equity but will provide us with the scope for a start-up year for young Australians, a smart investment fund and a partial guarantee scheme to finance microbusinesses. Labor supports needs based funding for schools and the proper funding for universities that they deserve.

I was at the Australian National University today with Bill Shorten, Kim Carr, Amanda Rishworth and Gai Brodtmann. The university is delighted that there is one side of politics that takes university funding seriously and is willing to invest in the jobs of the future.

Ross Vasta (Bonner, Liberal Party) Share this | Link to this | Hansard source

Order! The debate is interrupted in accordance with standing order 43. The debate may be resumed at a later hour. The member will have leave to continue his remarks at that later hour.