Andrew Bragg (NSW, Liberal Party) Share this | Hansard source

Righto. That's good. That's very nice. Thank you. The Prime Minister, Mr Albanese, said in the last parliament, before the last election, 'We won't have any changes to the franking credits regime.' That was a good commitment from the now Prime Minister. In addition, Mr Chalmers said, 'We won't be doing franking credits. I couldn't be clearer than that.' I guess that means that the Prime Minister and the Treasurer decided that it wasn't a good idea to tell the Australian people that they would be doing franking credits. Therefore, they would only do something to franking credits if they were to win the election, and then they would be able to do what they really wanted to do, which, of course, is what the Treasury department have recommended to them, which they have swallowed hook, line and sinker.

The whole basis of this schedule, schedule 7, is based on pretty dodgy data. It has no real basis, and it could actually disrupt the whole franking system. For Australian companies that seek to raise capital—which, of course, is every company, because I don't know any company which has a balance sheet of 100 per cent debt—when they go to the market to raise equity capital, they will find it difficult to pay franked dividends. That is what this is all about. Can a company go to the market—a small company or a large company; it doesn't matter—raise equity capital and pay a franked dividend? That's what this is all about. The judgement of the legal experts and the people that are in the markets is that this change puts this whole model at risk.

It may be obvious to others who are listening today that this is happening for a particular reason. The only reason I can diagnose here is that the government decided that it would need to capture some more revenue to pay for its spending. Of course, the issue with fiscal policy is that the government has been working against the Reserve Bank. Australian families have had to endure 12 interest rate rises, more than they should have, because the government's fiscal policy does not support monetary policy. That is the core problem that the Australian economy has today. The government in Canberra is spending money and inflating the federal budget when it should be deflating the federal budget. It should be running a contractionary fiscal stance. That is what the country needs to support the tightening policy of the Reserve Bank.

But what we have in Canberra is a government that is not able to say no to the rent-seekers and the bloodsuckers and all the vested interests which run the Labor Party, finance their campaigns, man their polling places and run their preselections. They can't say no to these people on money. We know that the Commonwealth public servant base is swelling by the day. It's getting bigger and bigger and bigger. So Labor can't say no on money, but they also can't say no on policy. What we have seen in these last 18 months is a cavalcade of rent-seekers and bloodsuckers running the policy agenda of this government, whether it is on industrial relations or whether it is in the Treasury portfolio. What we see is a parliament clogged up with bills to suit narrow vested interests, not the national interest.

In fact, the first act of the minister responsible for taxation, the Assistant Treasurer, Mr Jones, in this parliament was to introduce a regulation that would strip transparency away from superannuation members so they would not be able to see if their super fund was paying a whole bunch of money to a union. He didn't want the Australian people to see that. I don't think you can find any better example of the warped agenda of 'the government for vested interests' than their first act, to remove transparency from the people to suit the super funds and the unions. So we shouldn't be surprised that the consequence of the government for vested interests running policy and the budget in favour of the rent-seekers is that we see a desire for new taxes—and that is effectively what we have here.

This is not a large improvement to the budget, but it is still a tax increase, which the government promised it wouldn't do. It promised that it wouldn't be doing anything to franking credits. It promised that. So we go back to 22 October last year and the government's first budget, and there it is in the budget papers—a proposal to disrupt franking credits, particularly in relation to capital raisings. The problem here is that it sets out an established practice test. That is a problem with this proposal. It may well work for you, if you're a large company that's been paying the same franked dividends for 10 years. You can probably keep doing that. But if you are a new company—and most new companies are small and disruptive—you haven't got an established practice test, so, therefore, you cannot pay a franked dividend. When you raise money—as all companies do because every company needs equity capital—as far as I can see, you won't be able to pay a franked dividend. That is the reality.

We did an inquiry through the Senate Standing Committee on Economics. I don't agree with everything that Senator Walsh said before, but I do think that she does a good job in chairing the Economics Legislation Committee. The inquiry looked into these issues, and the inquiry found, even in the government's own report, that there were problems with this section—that the drafting was bad and would put capital raisings at risk and would cause companies not to raise capital in Australia. Companies would seek to raise more debt and pay less tax, or they might look to establish a domicile offshore, or they might seek to raise foreign equity, where, of course, there are no franking credits paid. So that is the warped situation we have with this established practice test. It's very poorly drafted. Even the government said it was bad, and their proposed amendments do little to assist there.

The reality is that this measure is based on data from 2015-16, when the MYEFO costed this—if there were to be a measure like this—as a boost to the budget of $10 million. During the committee's inquiry into the bill, I asked the Treasury official, Ms Brown, 'How a big a problem is this in the Australian capital markets today?' By 'how big a problem', I'm talking about the problem the government say they're trying to solve, which is that companies are raising equity just to pay franked dividends. I think that's the proposition. It's actually not clear why this is happening, other than it's important to have more money to pay for the expenditure that we want to make, including hiring an endless group of new public servants in Canberra. Ms Brown said:

Currently, because of the early action by the ATO in issuing an alert and the announcement of the former government's intention to introduce legislation and subsequently the development of legislation, there aren't any cases of this.

So if there are no cases of this issue then why are we today debating this measure, which is going to have a significant impact on Australia's capital markets? That is the question, I think, for the chamber: why are we pursuing a measure—