Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Hansard source

Comparisons with Stalin! I was just about to get onto John Howard, the Prime Minister. I think it is a bit unfair of you to allege comparisons with Stalin, Senator Abetz. There is something Stalinist about the advertising campaigns we are seeing; they would put Joseph Stalin to shame. Hundreds of millions of taxpayers’ dollars are being spent on advertising propaganda campaigns that would put Joseph Stalin to shame.

Labor is the party that introduced the most profound tax reforms, when it was in government, and delivered the foundations of the modern tax system for which the current Treasurer, Mr Costello, takes credit. I have already referred to Mr Howard’s record on interest rates when he was Treasurer; they touched 22 per cent. But the marginal tax rate of 60 per cent which he presided over when he was Treasurer was reduced to 49 per cent by the Australian Labor Party.

This bill implements two measures announced in the 2007-08 budget, both of which have Labor’s support. Part 1 of schedule 1 to this bill amends the Income Tax Assessment Act 1936 to increase the dependent spouse tax offset from $1,655 to $2,100 from 1 July 2007. The separate net income at which the rebate is completely phased out will be increased from $6,901 to $8,681. The full dependent spouse tax offset is available to a resident taxpayer who contributes to the maintenance of a low-income spouse. Taxpayers are eligible to claim a dependent spouse tax offset if they maintain a spouse—married or de facto—and the taxpayer claiming the offset, or the spouse, is not entitled to family tax benefit part B. The full offset is only available where the taxpayer has a spouse who earns very little income or no income, as the tax offset is reduced by $1 for every $4 by which the dependent spouse’s separate net income exceeds $282. The income of the higher earner of income is not taken into account. The dependent spouse tax offset is currently indexed each year by reference to the consumer price index. Labor supports this proposal to provide a more significant tax offset to taxpayers supporting a low-income spouse. The dependent spouse rebate is one of a number of rebates provided to taxpayers who support a dependant. Others include the invalid relative rebate and a rebate for taxpayers who support a parent or parent-in-law. These and other offsets are increased by this bill in line with CPI increases and they are indexed each year.

Part 2 of schedule 1 to this bill amends the Medicare Levy Act to increase the Medicare low-income threshold for individuals and families. The dependent child student component of the family threshold will also be increased. The increases are in line with the consumer price index. They increase the Medicare levy low-income threshold for pensioners below age pension age so that they do not have a Medicare levy liability where they do not have an income tax liability, and they increase the Medicare levy surcharge low-income threshold in line with movements in the CPI.

These increases occur every year and they were announced in the budget. The Medicare Levy Act provides that no Medicare levy is payable by low-income individuals and families where taxable income or combined family taxable income does not exceed stated threshold amounts. The family income threshold increases by a set amount per child. The Medicare levy shades in at a rate of 10c in the dollar where the taxable income or combined family taxable income exceed the threshold amounts. This bill increases the low-income thresholds for individuals and families for the 2006-07 income year in line with movements in the consumer price index. The individual threshold is to be increased from $16,284 to $16,740. The level of the family income threshold is to be increased from $27,478 to $28,247. The family income threshold is to be increased by a further $2,594, instead of the previous figure of $2,523, for each dependent child or student.

The schedule also increases the threshold amount for pensioners below age pension age for the 2006-07 income year and subsequent income years. The increase ensures that such pensioners do not have a Medicare levy liability where they face no income tax liability. The threshold amount for pensioners who are the age pension age is to be increased from $19,583 to $21,637. The phase-in limits are also increased. The phase-in limit for individuals is increased from $17,604 to $19,694. The phase-in limit for pensioners who are below age pension age is increased from $21,170 to $25,455. References to the individual low-income threshold amount of $16,284 in the Medicare levy surcharge provisions, in respect of the surcharge payable on taxable income, are also being increased to $16,740. Labor supports this proposal to provide assistance to low-income earners by exempting them from paying the Medicare levy.

As a general comment, I reiterate that the Labor Party will be supporting the bills before the Senate. The tax changes before us, particularly those for low- to low-to-middle-income earners are particularly welcome. It is a real struggle for many low- to low-to-middle-income families, given higher petrol and food prices, and interest rate increases since the last election—some four interest rate increases. It is fit and proper and appropriate that their circumstances should be recognised through a reduction in income tax. Labor welcomes the somewhat belated recognition by the government, in the run-up to the election, of the need to ensure a reasonable level of tax cuts for low- to low-to-middle-income earners. Labor supports the legislation before the Senate.