John Watson (Tasmania, Liberal Party) Share this | Hansard source

The Tax Laws Amendment (Personal Tax Reduction and Improved Depreciation Arrangements) Bill 2006 is a very important piece of legislation because it continues the government’s commitment to being the responsible manager of the Australian economy. This bill takes an excessive tax burden off people’s backs. The steady management of our economy by the government will be one of the most enduring legacies that we can leave to the Australian people, but it is important that we do not rest on our laurels and that we continue to improve and to reform aspects of legislation when appropriate. I believe that this bill does just that.

The Tax Laws Amendment (Personal Tax Reduction and Improved Depreciation Arrangements) Bill has several purposes. Obviously, the primary purpose is to reduce the personal income tax rates for 2006-07. I will note here that while Australia’s tax regime is quite competitive when compared to the OECD average, for example, our top marginal tax rates have for a long time been amongst the highest in the OECD. This bill reduces our top marginal tax rates towards the OECD average, which has to be a good thing in retaining workers here in Australia and attracting others back to our shores who have left because of excessive taxation. At the same time, the bill manages to reduce the margin and increase the thresholds of most of the other brackets, which is a good thing. I think this is a fantastic achievement and one that the Treasurer is to be commended on.

The bill also seeks to increase the low-income tax offset for 2006-07. It will decrease the amount of Medicare levy paid by low-income senior Australians in 2006-07. As more and more Australians retire, this measure will become more and more valued. It will also increase deductions of the decline in value of depreciating business assets under the diminishing value method from 10 May 2006. For me this is perhaps one of the most important measures contained in the bill, and I will deal with that later in my address. The bill amends the Income Tax Rates Act 1986, the Income Tax Assessment Act 1936, the Fringe Benefits Tax Act 1986 and the Medicare Levy Act 1986 to achieve all these grand results.

The bill is good legislation because it continues the trend of the Howard government towards the redistribution back to taxpayers of the proceeds of increased tax revenues. Taxes, I remind the Senate, have steadily come down under the Howard coalition government. Unfortunately, those on the other side of the chamber might disparage the size of the weekly reductions in tax, but I remind you that when Labor was in government taxes were rising, not falling. An extra $500 in the pocket at the end of the year might not seem much to my colleagues on the other side, but it is far better than being $500 out of pocket.

The effect of this bill will be to increase the disposable income of taxpayers. It will give taxpayers greater control over their own financial situation. I firmly believe that private citizens are far and away the best people to manage their money. We have seen that in the recent amendments to end benefits taxation on superannuation. People under a taxable superannuation arrangement will be able to walk away with their lump sums tax free, and if they invest that money in a pension that will be tax free. In other words, they will not have to have as much capital to enjoy the equivalent level of disposable income. This is another good measure introduced by this government. It will take away the increased complexity associated with calculating termination payments and the like, where you had eight different calculations because of the previous arrangements. As I said, I firmly believe that private citizens are far and away the best people to manage their money. The government has a role, and an important one, but I believe that the Australian public should be trusted with as much of their own money as the government can permit.

By reducing the marginal tax rates and increasing the thresholds, the bill will continue to make Australia’s tax regime one of the most competitive in the world. In our region, the South-East Asian region, this is important. It will help attract and retain the highly skilled workers and professionals that our economy needs. We cannot afford to have our best and brightest move overseas because of our tax laws. I have spoken in other places about some of Australia’s brightest people being leading players in the London financial markets and increasingly occupying such positions in America. We want them back here in Australia using their brains and expertise to advance Australia’s competitive position in the world global economy.

The bill contains increased incentives to undertake additional work or start new businesses, thereby increasing productivity and employment opportunities. Unemployment is already at the lowest rate it has been in 30 years, and this bill will help ensure that unemployment rates stay as low as possible for as long as possible. I worry that if the Labor Party got power at the next election there would be massive unemployment in this country as employers take fright at the consequences for their workplace relations.

The bill also slightly decreases the tax advantages from the negative gearing aspects of property, thereby putting less upward pressure on residential property prices. This is important right across Australia, including in my own state, which has seen property prices skyrocket since 2000 without a comparable increase in the average wage.

I mention again that the bill features a 200 per cent uplift factor on the prime cost basis where people use the reducing balance method of calculating their depreciation or reduction in value. To my mind this is one of the most important aspects of the bill, as it will strongly encourage business investment. It will help farmers and small business. It will help start-up businesses and it will help established industry. In fact, this bill will dramatically help anyone who uses the diminishing value accounting method. It is an option the taxpayers have. Finally, this bill reduces the reliance on personal income tax as a source of tax revenue, and this can be a good thing. I commend the bill to the Senate.