Andrew Murray (WA, Australian Democrats) Share this | Link to this | Hansard source

I seek leave to table a supplementary explanatory memorandum relating to the amendments I propose to move to the Tax Laws Amendment (Personal Income Tax Reduction) Bill 2007.

Leave granted.

The debate on the Tax Laws Amendment (Personal Income Tax Reduction) Bill 2007 is being held cognately with the Tax Laws Amendment (2007 Budget Measures) Bill 2007. Before I move to my amendment on the first of the two cognate bills, I want to briefly address the matter of the Tax Laws Amendment (2007 Budget Measures) Bill 2007 and ask a question of Minister Colbeck, who is at the table.

The purpose of the Tax Laws Amendment (2007 Budget Measures) Bill 2007 is to introduce new taxation offset thresholds for the dependent spouse tax offset and the Medicare levy for low-income earners and pensioners below the age pension age as announced in the federal budget in May. The bill contains a single schedule which proposes amendments to the Income Tax Assessment Act 1936, A New Tax System (Medicare Levy Surcharge—Fringe Benefits) Act 1999 and the Medicare Levy Act 1986. Changes to the ITAA 1936 increase the dependent spouse tax offset from $1,655 to $2,100. The full offset applies as long as the income of the dependent spouse is less than $282. It is phased out at $1 for every $4 by which the income of the dependent spouse exceeds $282. The phase-out limit is increased from $6,901 to $8,681.

The Medicare levy increases low-income thresholds for individuals, families, dependent children and students in line with the CPI. It also increases so that those pensioners below age pension age do not have a Medicare levy liability where they do not have an income tax liability. The Medicare levy low-income and under-age pensioner threshold changes are in line with inflation. The cost to the revenue of these changes to the dependent spouse tax offset and the Medicare levy are estimated over the forward estimates period at $425 million and $150 million respectively. It is a modest but useful return to those people.

The dependent spouse tax offset is increased annually by the CPI. Several other related tax offsets are also affected by the indexation provisions, including child-housekeeper, invalid relative, parent-housekeeper, notional sole parent and notional dependent spouse with child tax offsets. With my mind on the fact that HREOC will be reporting on the matter in the coming two weeks, I note that the dependent spouse tax offset ignores same-sex couples.

The dependent spouse tax offset is, as I understand it, not means tested. If that is so, it enables wealthier wage earners with stay-at-home partners to receive a tax deduction. Changes to the dependent spouse tax offset would be on an equity basis, meant to broadly reflect the tax-free threshold benefit that dependent spouses forgo by not working. If a dependent spouse earns less than the very minimal amounts set out in this schedule, the working partner can benefit from a reduction in their taxation. This offset has no upper earnings threshold limit for the working spouse, hence wealthy wage earners with stay-at-home partners are able to claim the tax offset.

My question to the minister is with respect to means testing. Does the government continue to hold the view that the dependent spouse tax offset should not be means tested? If it does, is there any data available to indicate how many persons above $180,000, which is to be the new top tax threshold, are beneficiaries of the dependent spouse tax offset? I recognise, in asking that question, that it is highly unlikely the minister would have the latter figure at hand and I am willing to have it taken on notice if necessary. However, it would be useful to get a general indication of whether it is possible to get such a figure, which it might not be.

Richard Colbeck (Tasmania, Liberal Party, Parliamentary Secretary to the Minister for Finance and Administration) Share this | Link to this | Hansard source

I am not aware of any prospective policy change except to say that the income test is on the lower income earner, not on the higher income earner. You are correct, I do not have the figures in relation to the statistics to hand, but I am more than happy to take that on notice.

Andrew Murray (WA, Australian Democrats) Share this | Link to this | Hansard source

I do not want to have something taken on notice which might not be feasible to get, so my question is, and the minister can probably check with his advisers: do you think they are able to get such a figure or would it be too difficult? It might not be available in the statistical database.

Richard Colbeck (Tasmania, Liberal Party, Parliamentary Secretary to the Minister for Finance and Administration) Share this | Link to this | Hansard source

It will be difficult to find the information. I am not certain whether it is collected, so I suppose that caveat overlays the fact that I am prepared to take the question on notice.

Andrew Murray (WA, Australian Democrats) Share this | Link to this | Hansard source

If there is no more on the Tax Laws Amendment (2007 Budget Measures) Bill 2007—I am giving the opportunity for the shadow to raise matters if he has anything on that bill—I will go back to the Tax Laws Amendment (Personal Income Tax Reduction) Bill 2007. I move:

(1)    Schedule 1, page 3 (after line 14), after item 4, insert:

4A  At the end of Part I of Schedule 7

Add:

Indexation of the ordinary taxable income of the taxpayer in item 1

          4.    The amount of the ordinary taxable income of the taxpayer in item 1 of the table in clause 1 is indexed for each year of tax after the year of tax commencing on 1 July 2006 in accordance with the CPI indexation method as follows.

                 The amounts specified in item 1 of the table in clause 1 are to be increased by the indexation factor worked out using the following formula:

where:

CPI quarter means a period of 3 months ending 31 March, 30 June, 30 September or 31 December.

index number means the All Groups Consumer Price Index number (being the weighted average of the 8 capital cities) published by the Australian Statistician.

The indexation factor is to be calculated to 3 decimal places, but increased by .001 if the 4^th decimal place is more than 4.

Calculations:

             (a)    are to be made using only the index numbers published in terms of the most recently published reference base for the Consumer Price Index; and

             (b)    are to disregard index numbers that are published in substitution for previously published index numbers (except where the substituted numbers are published to take account of changes in the reference base).

If an amount worked out under the formula is not a multiple of $5, the amount is to be rounded as follows:

             (c)    if the amount exceeds the nearest lower multiple of $5 by $2.50 or more—round the amount up to the nearest higher multiple of $5;

             (d)    in any other case—round the amount down to the nearest lower multiple of $5.

Indexed amounts for each year of tax must be notified in the Gazette before the commencement of that year.

There is an explanatory memorandum accompanying that. I have motivated that amendment in my speech during the second reading debate. Unless there are particular questions from the shadow or the minister, I propose to just move it on that basis.

Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

Labor will be opposing this amendment. As Senator Murray would be aware, we have discussed his proposals to index the current tax-free threshold on previous occasions as part of a broader approach that Senator Murray brings to the debate about indexation of thresholds more generally. There is one point I would make about what I think is an inherent contradiction in the approach he is taking, which is to index the current tax-free threshold and then partly pay for it by retaining the top threshold at $150,000. Whilst moving the top threshold from $150,000 to $180,000 is not indexation, it is recognition of the impact of inflation moving into the top bracket. So there is an inherent contradiction. Senator Murray is proposing to directly index the current tax-free threshold but effectively to freeze the top threshold, and that is a contradictory position in Labor’s view.

On previous occasions we have indicated that the matter of the movement of the thresholds should be a matter for budget, from time to time, depending on circumstances, and Labor has not changed its view and we will be opposing the amendments and supporting the budget tax cuts without amendment. This would not come as any surprise to Senator Murray, because I do mention this from time to time when we discuss tax proposals: if the Democrats wanted to advance their argument about indexing of thresholds, why did they not do it as part of the GST negotiations which Senator Murray supported? Most of the Democrats—those still standing, with the exception of one or two—supported its introduction. They had an opportunity to advance, as part of the tax reform process, the GST and the other associated tax changes that occurred then. I do not know whether Senator Murray put that one on the table. If he did, I am not terribly convinced by his negotiating prowess. If you could not achieve it then, I do not think you are going to achieve it today, Senator Murray.

The only other comment I would like to make is in reference to the earlier questions from Senator Murray. I hope that Treasury, and probably the ATO, are able to provide the information that Senator Murray has requested, but he knows, from the long hours we spend at estimates hearings, how difficult it is to obtain information from this government. We know the government has the information—in the forward estimates or the forward projections—but when trying to get an answer from the government, with its secrecy of prepared figures, you just get the response, ‘We don’t publish the figure.’ They have a figure but they do not publish it. So, quite genuinely, I wish you good luck with your request for information, Senator Murray, but on the past performance of this government at estimates hearings, as you and I know, even when the government has figures, if they do not want to publish them they will not produce them, even at estimates. That is a regrettable aspect of secrecy and arrogance that the government have taken on, particularly since they have had control of the Senate.

That is all part of a very tricky process that we know the Prime Minister goes through, particularly in the lead-up to an election. The Prime Minister is very tricky and very cunning. If there is a group in the electorate that he believes has been neglected—as low- and middle-income earners have been in recent years, in terms of tax cuts—

Julian McGauran (Victoria, National Party) Share this | Link to this | Hansard source

Senator McGauran interjecting—

Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

Senator McGauran, be careful!

Julian McGauran (Victoria, National Party) Share this | Link to this | Hansard source

Why? What have you got on me?

Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

I do not want to refer to your jump from the National Party to the Liberal Party but you provoke me yet again, Senator McGauran. Labor opposes the amendments as moved by Senator Murray on behalf of the Democrats. We will be supporting the government’s income tax reduction measures unchanged.

Andrew Murray (WA, Australian Democrats) Share this | Link to this | Hansard source

The shadow minister asks for two areas of clarification. Firstly, with respect to negotiation and the GST, I do not know if Senator Sherry is one of the legions of union officials that grace the ranks of the Labor Party, but union officials know that in any negotiation you never get everything you want unless you indulge in standover tactics, which I understand new Labor thoroughly disagree with—and I applaud that. So it is quite true, shadow minister, that I was keen on indexing the rates. I did not get that. We got many things; we did not get everything we wanted. So that is the answer to that particular question.

Your first question was, I thought, deserving of more serious appraisal and response. I made it clear, and I have made it clear before, that the Democrats have a five-pillar agenda for income tax reform. The first is raising the tax-free threshold. The second is indexing the taxation threshold rates—all the rates, Senator Sherry. The third is to broaden the taxation base; the fourth is to review and improve the negative tax-welfare interaction; and the fifth is to lower tax rates and raise tax thresholds, if sustainable. Those reforms are not affordable, under any government, in one hit, so you have to phase them in, prioritise them and so on. It is perfectly true that we would seek to index all tax rates, but we can only afford, in terms of the money available to us right now, this particular measure. I am obliged to fund it by opposing the $150,000 increase to $180,000 and taking moneys from the surplus, but, if Labor ever get into government and if they want to put the proposition to me to support indexing all tax thresholds, I will do so. I hope that clarifies the question.

Richard Colbeck (Tasmania, Liberal Party, Parliamentary Secretary to the Minister for Finance and Administration) Share this | Link to this | Hansard source

I have just a few comments in response. The government, over its terms since 1996, has increased more than indexation to taxpayers, in relation to its tax cuts. We have always had the view—and you would have heard the Treasurer enunciate this on many occasions—that once we have paid for essential services and balanced the budget, if we have the capacity to reduce taxes we will pass the benefit back to taxpayers. We continue to believe that that is the right way to manage the economy. Once we have balanced the budget, after providing all the essential services, we will, on an annual basis, make decisions that we see are of benefit to taxpayers in the relevant tax brackets. That is, essentially, the way we see this, so we do not support the amendment.

I would like to thank Senator Sherry for his little lecture. Obviously, he has been listening to the polls and the focus groups. I hope he does not have any trouble working out which side of the bed to get out of. I am sure he does not. The cliches were appreciated, Senator Sherry, as is your support for the government in opposing the amendment.

Question negatived.

Bills agreed to.

Bills reported without amendment; report adopted.