Doug Cameron (NSW, Australian Labor Party, Shadow Minister for Human Services) Share this | Hansard source

I rise to speak on the Tax Laws Amendment (Norfolk Island CGT Exemption) Bill 2016. But first I want to look at the Norfolk Island Legislation Amendment Bill 2015, which ended the island's self-governance in exchange for access to Australian government services and programs, and why that original proposition was put.

Norfolk Island used to have a tax-free regime, which was part of the old British and Australian colonial system. Like the Cayman Islands, where tax rorts can take place, rich people could access a magnificent lifestyle, and, as long as they could pay for their own health, their children's education and get out of the place if they needed to, then everything was okay. But if you are a worker on either the Cayman Islands or Norfolk Island you have a completely different lifestyle. You have no access to a social safety net of any significance, or, in some places, no access to any. You are in an area where the day-to-day costs of living are higher. When something goes wrong for a worker, without access to medical attention and a proper education system, the whole community framework falls apart for that individual. It was okay if you had plenty of money. It was okay if, in the past, you were using Norfolk Island to dodge tax. You were okay, but the ordinary worker had no backup.

There was a long debate leading up to the passage of the Norfolk Island Legislation Amendment Bill where the Norfolk Island elite—if I can put it that way—were in this place lobbying to maintain a position of independence from Australia in various health and education systems and their governance system. When they came to see me I was not convinced that this was an appropriate thing to do. I do not think that their lobbying exercise, which was full-on, convinced anyone in the chamber that this was a good thing.

Some of the more extreme, right-wing members of the coalition would argue that government should only provide defence and a court to look after property rights—the old Hayekian approach to economic policy—but that does not work in practice. Norfolk Island was a clear example of where simply allowing the rich and powerful to have a standard of living that was beyond the wildest dreams of anyone else, but where there was no access to health, education and social services for the rest of the community, does not work in practice. It just shows that the argument that the market will look after everyone is an absolute nonsense. That is why the majority—Labor unanimously—supported this across parliament, and a new, local-government-style council replaced the old governance regime that was in place. The New South Wales government now delivers state based services to Norfolk Island.

A bipartisan report of the Joint Standing Committee on the National Capital and External Territories entitled Same country: different world—the future of Norfolk Islandfound that infrastructure on the island was run down, the island was indebted to the Commonwealth by approximately $11 million and the federal government had spent tens of millions of dollars keeping the island's government running. It was not feasible that some multimillionaires could live on Norfolk Island and could access medical help by simply jumping on a plane and heading to the Australian mainland, while workers on Norfolk Island had substandard health, substandard education and substandard infrastructure to carry out their day-to-day living. Despite the theoretical views of some in the coalition that the market would fix these problems, it was clear that the market was never going to and that the government had to intervene to resolve them.

The Tax Laws Amendment (Norfolk Island CGT Exemption) Bill 2016 amends the Income Tax (Transitional Provisions) Act to give capital gains tax exempt status to assets held by Norfolk Island residents prior to 24 October 2015. This is akin to the pre-CGT exempt status applied to assets purchased before 20 September 1985, when capital gains tax was introduced into the Australian income tax system. This small amendment remedies concerns raised by Norfolk Island residents about the tax treatment of capital gains in the original legislation, bringing the island into Australia's tax regime. The change will not apply to assets held by Norfolk Island residents who would not have been exempt from CGT before Norfolk Island was fully brought into the Australian income tax system. Assets acquired by Norfolk Island residents on or after 24 October 2015 will be subject to the normal operation of the capital gains tax rules from 1 July 2016.

It is a little ironic that this government is moving to make changes to the capital gains tax rules specific to Norfolk Island while squibbing the much more significant question of Australia's unsustainable settings on the capital gains tax discount and negative gearing. As I think I have said before, I live in the Lower Blue Mountains in New South Wales. I have family who live around the Parramatta area. I have had a look at some of the house prices around Parramatta. In the past, if you were a young couple brought up in the eastern suburbs, or one of the more salubrious suburbs in Sydney, you may have found that, to bring up a family, you had to move out west, as many families do, to get a great lifestyle out in the western suburbs of Sydney. If you wanted to move out there, you could do it and you could actually afford to buy a house to start your family's life in the western suburbs of Sydney, and many people would commute into Sydney to carry out their daily work. But now, if you look at the suburbs surrounding Parramatta, a three-bedroom, tarted-up, ex-housing commission, fibro home costs $905,000. How can any young family afford that?

Part of the problem is that, with many of these houses, the prices are being driven up by property speculators, overseas investors and the white shoe brigade moving in to try to make a profit on capital gains from those homes. That simply means that young families that have used the move to the western suburbs of Sydney to start their married life and to start their families are priced out of the market—priced completely out of the market. If you want a newer, modern home close the Parramatta CBD, you are looking at $1.2 million or $1.3 million in that area. This is just speculation-driven costs.

The difference between Labor and the coalition on this issue is that we do not want to reward the speculators. We want a proposition where young families can actually go to a suburb and go either to a real estate agent to buy direct or to an auction and not be in a position of being totally disadvantaged—where the auction outcome is skewed because of the capital gains tax advantage that speculators have, because of the overseas investors or because of the advantage of negative gearing that people have. We take the view that we want to focus on building new homes in the Sydney basin and around the country. We want to ensure that a young family can actually make a decision and have a vision that they will be able to afford a home in the Sydney basin—from my point of view, coming from Sydney. And this applies, I think, in most other areas around the country and in the big Australian cities. So this is an issue for us. Young Australians need to have hope for the future. People's grandkids and kids need to be able to access housing at a reasonable cost.

We are not arguing that those who are already investing through a negative gearing process would be disadvantaged. We have said we would red circle those investors so that they know where they stand—they would get certainty. There would be no retrospective taxation of those investors. But we want to ensure that those people who are actually battling to get a deposit for a house are not set against investors who are wealthy, the overseas-financed or those in there just to make capital gains over a period of time. The existing scheme gives an unfair advantage to the wealthiest people in the country—an unfair advantage over current homebuyers. So, investors, if you are rich, if you are powerful, if you get plenty of money, you have a significant advantage through negative gearing and capital gains tax gains.

The top 10 per cent of high-income earners receive nearly 70 per cent of all the capital gains tax subsidies. We hear the nonsense from those opposite that these are people who are on $70,000 and $80,000 taxable income. The reason that many of these people are on taxable income is that they are on their seventh, eighth, ninth or 10th—and for some people, scores—investment property, where they are writing their tax down. So when you hear the argument from the government that these are people on $80,000 and that they are just the battlers who are out there trying to get some advantage through the scheme, understand that the figures those opposite quote are the figures that are designed to protect their mates, who put money into their election funds—the big end of town, the white shoe brigade and the foreign investors—at the expense of ordinary Australians who are trying to pick up a house, even in some of the more affordable areas in Sydney.

So we want to make sure that we have a strong and sustainable budget. We do not want to end up like Norfolk Island, where the budget could not provide hospitals, could not provide roads, could not provide schooling and could not provide any social welfare approaches. We do not want to end up like Norfolk Island. But if we take the approach that the coalition takes, that we have to have a small government, then we need to understand what small government means. Small government means that those who can afford to will look after their own private health and their own private education—those who can afford to get around the country with no problem—because they are highly-paid executives. They will be okay.

But when government expends money, predominantly it is spent on those who cannot help themselves. It is about making sure that we have a decent health system, it is about making sure we have a decent education system and is it is about making sure that there is some brake on the inequality that is taking place, not only in this country but all over the world.

What we have done on capital gains tax and on negative gearing will improve the budget bottom line by $32.1 billion over the decade. That means more hospitals, it means more schools and it means more roads. It means the things that ordinary Australians need to carry out their day-to-day lives. If you are rich, it does not matter if the public schools are decaying. So they can argue against Gonski. They can argue against all these issues.