Steve Fielding (Victoria, Family First Party) Share this | Hansard source

The Tax Laws Amendment (2008 Measures No. 4) Bill 2008 deals with a couple of issues of special interest to Family First, those being family trusts and the demutualisation of health funds. On the issue of family trusts: to be blunt, the government is being stingy. The government says it is proposing changes to family trusts to stop people using losses to reduce their income tax ‘to help fund more urgent priorities’. But a quick look at the numbers show this is a furphy. The government will not be able to fund much at all from this change. The government says it will increase tax revenue by $1 million in the first year and $6 million in each of the three years after that. Evidence to the Senate inquiry into this bill was that any increase in the tax take would be much less than that.

Accounting groups also question the government’s policy approach. Most trusts last about 80 years, so why would the government decide to stop them halfway through their life? The government is trying to limit the reach of family trusts to two generations—so to grandchildren but not to great-grandchildren. That change is likely to affect more than 400,000 family trusts, so it will have quite a wide impact on compliance requirements for family trusts with relatively little increase in revenue in return. It will penalise families passing their businesses, such as farms, from generation to generation and will create a mountain of red tape and bureaucracy instead of allowing families to have legitimate family trusts.

I will now turn to the issue of demutualisation of health funds. In the bill there are tax changes with regard to the demutualisation of health funds, which the government says are to provide ‘relief from capital gains tax for private health insurance policyholders when their insurer demutualises to a for-profit insurer’. The government has argued that these amendments are ‘intended to facilitate the demutualisation of private health insurers’, but Family First questions whether demutualisation is always such a good thing.

The trend to demutualisation was triggered by the Howard government when, in 2006, it voted to sell off Medibank Private. Family First warned that the Howard government’s decision would open the way for other health funds to opt for the profit-driven model. At the time, health fund NIB’s CEO said that the Medibank sale would cause a ‘tsunami’ of change in the industry and result in ‘fewer and larger players’. We have since seen that the change with the NIB health fund demutualising and listing on the stock exchange means that profits now come before the health policies of families. The loyalties of NIB are now to shareholders, not to policyholders. There have been further moves towards fewer and larger players in the industry since then. MBF demutualised in June and is merging with the BUPA Australia Group. Just last month the Australian Competition and Consumer Commission approved the taking over by Medibank, Australia’s largest health insurer, of Australian Health Management. And, again last month, Australia’s third largest health insurer, HCF, made a bid to merge with Manchester Unity Australia.

The concern is that these changes will lead to further demutualisation and moves to a for-profit model, and the Rudd government seems content to encourage this. Demutualisation means that Australian families will have less trust in private health funds to put their needs first. Demutualised companies need to earn 30 per cent more just to cover the loss of their tax exempt status. Funds listed on the share market need to make profits above and beyond that to provide a return to shareholders.

Private health insurance is a huge cost to many Australian families. More than one in two adults has made the financial sacrifice to take out insurance, with the highest take-up rates among couples with children. Families with private health insurance are depending on the guarantee that they will have access to quality hospitals at affordable prices. This has been put in danger by the insurers opting for a business model that puts profits before members. Family First is considering supporting this schedule, not to support demutualisation but to clarify the tax treatment for ordinary Australians caught up in these corporate changes.