David Bushby (Tasmania, Liberal Party) Share this | Hansard source

I rise to talk on the Tax Laws Amendment (Temporary Budget Repair Levy) Bill 2014 and the associated bills. In full confidence that Minister Cormann would, when he stood up to speak on this legislation, cover the relevant points, I had no intention of actually taking up the opportunity to speak today. But, having listened to some of the earlier contributions from those on the other side, I do want to make a brief contribution just to set a few things straight.

I start off by noting that it is a bit rich of Senator Wong and others on that side to talk about the fringe benefits tax. In last year's election campaign, Labor promised to slug low- and middle-income earners with increased FBT through the hike on the FBT on leased cars. During the campaign, we said that there was no way that we would introduce this change. At the time, the industry pointed out that 28 per cent of salary packaged leased motor vehicles are with charity and public health workers and nurses and 21 per cent with police and teachers. Let's not forget that Labor would have hit the Salvation Army with a $4 million increase in FBT, which was equivalent to nearly half the money raised by the Red Shield Appeal doorknockers each year. The Victorian health minister, Mr David Davis, said that the impact on the not-for-profit, charities and health sectors could be $200 million to $300 million each year across Australia. Senator Wong and Labor are using hollow words. They should be judged on their record.

Stakeholders point out that salary packaging arrangements are generally established around the specific FBT year. This means that the arrangements have already been negotiated and structured for the 2014-15 FBT year for many thousands of employees. FBT compliance is a complex area. To align the FBT and income tax rates to these existing arrangements would again produce significant administrative financial burden. There are compliance costs that will be borne by businesses and their employees when making changes to employment agreements midway through an employment agreement.

Stakeholders point out that temporarily aligning the changes in the top marginal tax rates and the FBT rate from 1 July 2014 would require employers to produce two separate FBT returns for each relevant employee—namely, an initial FBT return under the old rates from 1 April 2014 to 30 June 2014 and a second return with the new rates from 1 July 2014 to 31 March 2015. Again, this would impose a significant administrative and financial burden on employers. In Senate estimates earlier this month, Treasury Executive Director Rob Heferen said:

If the question is whether the FBT increase should have occurred on 1 July 2014 to align with the increase in the personal tax, the compliance costs for employers and dividing the FBT year like that we would take to be pretty onerous.

Further, he said:

… it is a pretty straightforward proposition that a fringe benefits tax increase should align with the fringe benefits tax year.

In readiness for the FBT year commencing 1 April 2014, employers have only recently been required to make adjustments to remuneration arrangements for their employees to account for the 0.5 per cent increase in the Medicare levy required to fund the National Disability Insurance Scheme. To require employers to make additional changes for the temporary deficit levy at this time would pose a financial burden on employers across Australia. The administrative effort required by organisations to facilitate short-term changes to remuneration packaging arrangements provides a significant barrier and disincentive to engage in such short-term measures.

As chair of the committee inquiring into these bills, I also had a little to do with its report, which was tabled today. For the benefit of this debate, I quote some excerpts from the conclusion of that report. It said:

The committee understands that in order 'to repair the budget and deliver important structural reforms' that would 'facilitate future growth in living standards', the government was asking all Australians, including high-income earners, to contribute to achieving a healthy budget.

Further, it said:

The committee considers the Levy will not encourage undue tax minimisation or avoidance behaviours by Australian taxpayers, as the Levy's design intentionally adjusts a number of tax rates to reflect the introduction of the Levy. These adjustments have been proposed to reduce potential opportunities for taxpayers to avoid their tax liabilities.

Further:

The Levy will ensure high income earners will make a contribution to the government's Budget Repair Strategy, which was announced in the 2014-15 Budget.

And:

… it is entirely appropriate for the government to ask all Australians to make a contribution to Budget repair when they can afford to do so.

Further:

The committee notes the threshold of $180,000 was chosen so almost none of the Australians affected by expenditure cuts to direct assistance in the 2014-15 Budget, such as family payments and pensions, would be liable to pay the Levy.

Finally, the committee's sole recommendation was:

The committee recommends that the Senate pass the bills.