Ursula Stephens (NSW, Australian Labor Party) Share this | Hansard source

It is good to follow Senator Boyce in this debate. Senator Boyce and I are here for our last two weeks in the chamber so it is good that we are able to continue to work right to the end and beyond, as Senator Boyce has suggested.

Today we are debating a suite of bills including the Tax Laws Amendment (Temporary Budget Repair Levy) Bill 2014, which has many names—the debt levy or the debt crisis levy—as we have heard from other speakers. But we also debating the 14 other bills that are associated with this measure to enable the government to go on the most extraordinary search for funds to fund some of its most perverse projects and commitments in the budget.

Senator Siewert, in her contribution to this debate, addressed the inequity and the extent of the impact of this measure and it will be the poorest people in Australia who are going to carry its weight. Of course this is a temporary budget levy that is going to run out in 2017-18 whereas all of the impositions that are going on such as the Medicare co-payment, the changes to Newstart, the cuts to government expenditure for support services to refugees, those with mental illness and for community services will continue. The Youth Connections program is gone. These are the long-term structural impacts that are going to change Australia's society and economy forever.

This debt levy will last for three years and there are some debates about how much it will actually raise. The financial impact statement from the government in its legislation suggests: in the year 2014-15 it will raise $600 million; in 2015-16, $1,150 million; in 2016-17, $1,200 million; and in 2017-18 $150 million. But in fact we already know that those are very questionable figures. The Prime Minister went to this election with promises that there would be 'no more taxes', 'no new taxes' and the coalition reiterated that there would be 'no changes', 'no cuts to pensions' and that they would not do anything that was 'going to disturb the economic balance in our society'.

Yet the raft of things that have come in this budget have been really offensive to many people. People have been horribly shocked at the extent to which the government has just sliced and diced lower income earners in Australia. I know that Senator Moore really worked hard during the most recent Senate Estimates to try and extract some information. One of the really frustrating things was to ask officials from the Department of Social Services about what would be the impact of this six-months-on, six-months-off Newstart arrangement that was going to be put in place for people who were on unemployment benefits. It was like pulling teeth to actually get the department officials to acknowledge that the $320 million that the government had estimated they would be saving from this measure would be going to an emergency relief fund for people who could indicate that they could not survive on Newstart—and they could not survive on 'no start', which is the six months without any payments—and so they would be able to go to a welfare provider and seek some emergency funds. That to me was probably the most insulting thing I heard throughout the whole estimates process.

We are setting up a process in Australia to create what this government considers to be the 'deserving' and the 'undeserving' poor—that is really what this measure amounts to. It is going to be that some volunteer in the Vinnie's shop down the road in Woop Woop is going to have to make a call about whether someone who is homeless, who is desperate, who cannot pay for their medication is going to be given some of those emergency funds. I think that is an insult to the way we think about people who are vulnerable in our communities. Thinking that we have 'deserving' and 'undeserving poor' is not the Australia I grew up in and it is certainly not the Australia that I want my children and grandchildren to grow up in.

Where are we at? Several speakers have already talked to some of the 14 pieces of legislation and talked about the impacts of the different parts of the legislation cascade. What we have seen from the budget first of all has been a sense of budget shock. We have seen a retraction of consumer spending and we have seen a reduction in consumer confidence because people just cannot get their heads around the cumulative impacts of these bills and what they are going to mean. The Treasurer has tried so desperately to propose the notion that we have to be a nation of lifters not leaners and that we all have to be carrying the burden. Well, it has been proven time and again and demonstrated even by the most recent reports that the burden is not going to be shared equally across the community.

NATSEM's report showed that families with children will be the most significantly impacted. Those in the most affluent fifth of the population will see less than half a per cent of reduction in their disposable income, while those in the poorest fifth will see a five per cent reduction in their disposable incomes. That is despite the fact that inequality has been on the rise for a generation. This is not a budget that is fair across the board; it redistributes income from the poor to the rich.

Today's report from Oxfam said, as Senator Siewert so rightly noted, that the notion that more than three-quarters of Australians think that the wealthy are not paying enough tax includes the fact that the nine richest Australians—including Gina Rinehart, Anthony Pratt and James Packer—have a net worth which exceeds that of the bottom 20 per cent of all Australians and that those nine individuals, who also include Andrew Forrest, Harry Triguboff and Frank Lowy, are estimated to have a combined net worth of about $58.6 billion. That is more than the shared fortunes of the country's poorest 4½ million people. Sixty-four per cent said that the widening gap between the rich and the poor was making Australia a worse place to live. I say, again, that that is not the Australia we all think about. It is not the Australia of the fair go. In fact, that is why the report is called Still the lucky country?

Having said that, going back to the specific bill: the Economics Legislation Committee considered the bill, as it does, and the 14 other bills and made some very important recommendations. But it also made observations around the impacts to the fringe benefits tax, which are really quite important. They go to show that the bill, drafted in haste, creates real disincentives and opportunities for rorting which need to be addressed because they represent significant flaws in the design of the bill. The role of the committee in its investigation is to determine how best the bill could be improved to ensure that there are not unintended consequences.

The thing that concerns people about the fringe benefits tax has been raised with me in my office, and I know others have mentioned this too. It is that there is actually a mismatch between the introduction of the income tax increase and the commensurate increase in the FBT, which creates a significant tax arbitrage and tax avoidance opportunity. That has been reported quite widely in the media, including the idea that the fact that changes to the fringe benefits tax do not come in until next April means that people are able to rearrange their affairs, as several people have discussed this morning. They are able to rearrange their affairs so that they can continue to minimise their tax.

In both the first and the third years of this measure, taxpayers are able to shift income out of the salary and into the fringe benefits to avoid tax. The income tax increases commence on 1 July, as it is proposed. The FBT increase does not occur until 1 April next year. Then, in the third year, the fringe benefits tax increase will cease on 31 March 2017. So there are nine months in the first year to reorganise your arrangements and three months in the final year where the fringe benefits tax will not be aligned with the top marginal tax rate. That means that the tax increase will only apply in full for one year.

Again, this goes to the integrity of the estimates of what this measure will actually raise. Treasury officials identified and acknowledged that fringe benefits loophole during Senate estimates and suggested that it will reduce the revenue of the tax levy by hundreds of millions of dollars. In fact, a Treasury official answered Senator Wong by suggesting that it is the difference between taking $600 million and $1.15 billion.

As I said, the Senate Economics Legislation Committee, when examining the bill, had submissions to this effect. Significantly, I think the prominent economist Saul Eslake stated that this levy will be likely to be avoided by:

… making greater use of the myriad provisions in the income tax system which offer preferential or concessional treatment for particular types of income, forms of business organization or categories of investment vehicles.

Taxpayers Australia—I think Senator Thorp may have mentioned their evidence—also demonstrated that the tax can easily be avoided by using a combination of the fringe benefits tax loophole and other tax minimisation strategies.

Many admitted to the fact that they are advising their clients to do exactly that. But, more importantly—I think we can acknowledge that tax advisers and accountants will help people to minimise their tax legally if they can—there are unintended consequences here where taxpayers who earn less than $180,000 can be impacted by the increase in the FBT. The Tax Institute actually raised that concern when they said:

The increase in the FBT rate corresponding to the increase in the Levy, applies in respect of all employees, not only those employees earning taxable income over $180,000.

That can create quite a perverse circumstance where the wealthiest avoid the tax by using some aggressive tax planning and those who are just in the PAYE system and perhaps are salary sacrificing—but earning less than $180,000—end up making up some of the shortfall.

These are the conundrums that we have. The debt levy, of course, goes to the issues in what the government is saying about the shameless, parlous state of the nation's economic situation. We have had that refuted across the board. Many people have spoken about that already and many more will continue to speak about it.

I just want to raise the problems that we are seeing emerging out of the government's huge cuts. First of all, there are the job losses. This weekend, the Australian Local Government Association—ALGA—released its report on the state of the regions. They highlighted the impact of the mining boom, the end of the GFC and the changing shape of Australia's economy on our regions, recognising that Western Australia had a 30 per cent increase in its gross state income, but to the detriment of states like Victoria and South Australia who have lost their manufacturing bases.

As well as that, the ALGA, which is meeting this week in Canberra, is confronted by one of the measures in this bill, a $930 million freeze to the financial assistance grants to local government. This is devastating to rural and regional councils, which by this one measure are going to be put into financial straits which may mean some of them will have to look at forced amalgamations or winding up a council. I think the focus on this is quite extraordinary.

We have also seen $1.7 billion worth of cuts to Commonwealth home support programs for the most vulnerable in our community—things like Meals on Wheels and home care support. These cuts to programs are going to represent for regional Australia that persistence of an unfunded mandate to local governments and local community organisations—to try to pick up the slack to deal with the most vulnerable in our communities. It is the cumulative effects of what this debt levy is seeking to do, and the impacts it is having across the board. The impacts of this budget are really quite horrific, particularly for regional Australia.

I want to raise my concerns today. We are supporting the debt levy because the level at which it cuts in—$180,000—is income. Labor recognises people who are in the fortunate position of being able to organise their affairs. Less than 50 per cent of people in Australia are PAYE taxpayers. It is those people who are caught in the PAYE system—who are doing the right thing, paying their taxes, paying their fair share—that are going to carry the burden of this budget repair levy legislation that is before us today.

I think this is a shameless piece of grandstanding and fudging by the government. I think that what we have here is a convoluted budget that is all about ideology; there was never any kind of systematic tax reform. Several speakers have talked today about how, if we had pursued some of the measures that were in the Henry review of taxation reform, we would be in a far better place; instead of attacking the Australian way of life and the Australian economy with this piecemeal, haphazard, patchwork effort that has gone on in this budget, as part of what is being seen as responsible fiscal economic reform. It is nothing like that at all. It is very easy to avoid this debt levy. It is a shameless piece of political nonsense. While we are supporting it, we have many reservations about how haphazardly it has been brought about.