Rod Kemp (Victoria, Liberal Party, Minister for the Arts and Sport) Share this | Hansard source

I would like to acknowledge the speeches of my colleagues on the Tax Laws Amendment (Personal Tax Reduction and Improved Depreciation Arrangements) Bill 2006. I am always particularly interested in the contributions of Senator John Watson, who has a reputation for giving very thoughtful speeches in this chamber.

As part of the budget, the government announced personal income tax cuts for all Australian taxpayers. As is well known, from 1 July 2006 the government will reduce the marginal tax rates of 47 and 42 per cent to 45 and 40 per cent respectively. This builds on reductions to lower income rates in earlier years. In addition, the bill will increase the thresholds so that the 15 per cent tax rate will apply up to $25,000, the 30 per cent rate will apply up to $75,000, the 40 per cent rate will apply up to $150,000 and the 45 per cent rate will apply to income above that. The low-income tax offset will be enhanced by increasing it from $235 to $600. It will begin to phase out at $25,000 from 1 July 2006, compared to $21,600 currently. This means that those eligible for the full low-income tax offset will not pay tax until their annual income exceeds $10,000.

Overall, in percentage terms, the greatest tax cuts have been provided to low-income earners. These tax changes will ensure that more than 80 per cent of taxpayers face a top marginal tax rate of 30 per cent or less over the forward estimates period. Let me repeat that: the tax changes will ensure that more than 80 per cent of taxpayers face a top marginal tax rate of 30 per cent or less over the forward estimates period. That is a measure of the achievement of this government and its ability to reduce taxes.

The Medicare levy low-income phase-in rate will be cut from 20 per cent to 10 per cent, ensuring more low-income taxpayers pay a reduced rate of Medicare levy. Further, the bill ensures that senior Australians who are eligible for the senior Australians tax offset will now pay no tax on their annual income of up to $24,867 for singles and up to $41,360 for couples. The fringe benefits tax rate will also be cut to 46.5 per cent by this bill, and this will ensure that the FBT rate aligns with the top marginal tax rate, including the Medicare levy. This package provides $36.7 billion of benefits to taxpayers over four years and reinforces Australia’s reputation as a low-tax country. These tax cuts significantly restructure the personal income tax system to increase disposable incomes, to enhance incentives for participation and to improve Australia’s international competitiveness.

The bill also includes measures that substantially improve Australia’s depreciation arrangements by increasing the diminishing value rate for determining depreciation deductions from 150 per cent to 200 per cent. This change aligns depreciation deductions for tax purposes more closely with the actual decline in the economic value of an asset, which is consistent with the government’s tax policy strategy of ensuring that the tax system has minimal effect on the allocation of resources within the economy. The new depreciation arrangements provide increased incentives for Australian business to invest in new plant and equipment. This will mean that businesses will be better able to keep pace with new technology and remain competitive. Taxpayers will get the benefit of the improved depreciation arrangements for assets acquired on or after 10 May 2006. For the reasons I have outlined above, I commend this bill to the Senate and hope that it can enjoy the support of all senators, because we know that taxpayers are waiting.

Question agreed to.

Bill read a second time.