Scott Ryan (Victoria, Liberal Party, Shadow Parliamentary Secretary for Small Business and Fair Competition) Share this | Link to this | Hansard source

Debate on the Tax Laws Amendment (Temporary Flood and Cyclone Reconstruction Levy) Bill 2011 and the Income Tax Rates Amendment (Temporary Flood and Cyclone Reconstruction Levy) Bill 2011 was adjourned to allow the Senate Economics Committee to look into this legislation and I note its report was tabled earlier today. I will not cover in detail all the many highly credible arguments raised by my colleagues with respect to the reasons these bills should be opposed—ranging from the lack of ability of this government to spend money effectively and the priorities of this government, to the enormous amount it has wasted in only 3½ short years.

Today, I want to address the priorities of this government. What happened in Queensland, in my home state of Victoria, as well as in Western Australia was indeed a tragedy, not just in human terms, although that is most important, but also in the damage done to property. I fail to understand why we would introduce a levy like this to pay for what is a basic function of government. The government has not sufficiently articulated the reasons. Why do we have government? Philosophically, it is partly to civilise us. Is it because, as Thomas Hobbes said, ‘Our life in nature would be solitary, poor, nasty, brutish and short’?

In essence, we have government to perform basic tasks which we, as individuals, cannot perform as effectively on our own. It is to create a common wealth and to create certain public goods, among which are emergency services, defence forces, courts, police and a legal system, all of which allow us to live in some degree of freedom from the harshness of nature or the arbitrary actions of others. At its most basic, providing basic infrastructure is a core function of government. It is not an additional extra. It is not something for which people should have to dip into their pockets and pay more. This government has run an extraordinarily large budget but to justify that it needs an extra levy to perform what should be the first task of government, to allow us to share some of the risk that the natural disasters of this continent can impose upon us as individuals, to build common infrastructure, shows that this government does not have its priorities right.

When this government is faced with a problem, an opportunity or a challenge, no matter what the situation, the opportunity is always there to resort to new taxes. It is a habit. It is an addiction. The first step for this government to not continually increase the burden upon the Australian people would be to realise it has a problem. Off the top of my head I can name six new or increased taxes in three short years. We had the alcopops tax. We had the luxury car tax increase, which this government cares to forget. We have had increases in tobacco excise and tobacco tax and now we have the mining tax, the carbon tax and, with respect to this bill, we have what is colloquially know as the flood tax. This government always resorts to taxes. In a massive budget it cannot perform the most basic tasks of government—rebuilding infrastructure from unforeseen and unforeseeable natural disasters. It has to levy the Australian people an extra cost.

The truth is that this tax is so small that it betrays the true agenda of this government. This government wanted an excuse to create a new tax. You know that in essence you do not need it. It represents less than half a per cent of the government’s annual expenditure. It represents well under that when you consider the period over which this money will be spent. This tax is simply not needed. Over the past three years, this government has shown its willingness to fling money around. It spent it on pink batts, on green loans and on shonky and shabby builders. Yet, it has to dip into Australians’ pockets when it wants to do the first most basic of functions. What are we to see next? Extra charges, extra levies to deal with security, to deal with courts, to deal with police? These are the functions of government which should come first. These are the core functions; they are not the ‘nice to have’. What does this say about the priorities of this government? More importantly, what does it say about this government’s lack of ability to prioritise?

Why should taxpayers be asked to fork out extra? The government has completely failed to answer that question. It has shown, however, that its priorities are all wrong. In a budget of more than $350 billion this year and, without any shadow of a doubt, of substantially more than that next year, why is there no scope for savings of under one per cent to perform the first tasks of government? But no—this government wanted to contrive a tax argument because it loves nothing more than a ‘Let us try and soak the rich; let us try and turn some Australians against other Australians.’ That is what it is doing with the carbon tax. Some Australians are worthy of being punished with punitive tax rates; other Australians are worthy of government largesse. In this case, it has again drawn the line at $50,000 or $100,000 and said that those below that are worthy Australians. The class war rhetoric from the Labor Party does not die—this government wants to turn some Australians against other Australians.

That has been the one consistent theme of the Australian Labor Party going right back to the days when it opposed Federation and right back to the days when it was the true intellectual father of the White Australia policy. It has always sought to turn some against others. All this trouble, all of this division, all of this wish to turn some Australians against each other—for $1.8 billion. I consider that to be a lot of money, but that is half of what they spent on an insulation program which they were warned was not going to work. And it is less than what they are spending to fix the problem they created—the problem that now we have dangerous roofs. Four people who were working in electrified, foil insulated roofs have died, and there have been house fires. I am yet to see, for those four people, the contrived outrage about occupational health and safety that I see in New South Wales at the moment.

The truth is that there is a little hook to this tax that the government does not tell you about. The Prime Minister promised that no-one impacted by the floods would pay the levy. I suppose that promise will soon go the way of the ‘there will be no carbon tax under the government I lead’ commitment that Prime Minister Gillard made before the last election—because it is simply not true. Those receiving the disaster income recovery subsidy are not exempt from the tax. Those receiving the Centrelink payment for temporary accommodation—those who could not access their houses or who had lost power—are exempt. But those receiving the business recovery grants, whether they be farmers, small business people or business employees who could not work—those people are not exempt from the tax. The payments they receive are exempt from the tax. But in the next financial year, if those Australians—particularly those in Queensland—earn more than $50,000, they are going to be stung with the flood levy. Yet again, the Labor Party is seeking to turn some Australians against other Australians. There are thousands of Queenslanders who are going to pay this levy who might have lost business stock or who might not have been able to work. Because they did not lose access to their home for 24 hours, they are not exempt from paying the flood levy.

To thousands of small business people who suffered, perhaps because they or their employees could not get to work due to transport in South-east Queensland not functioning for that short period, and to the farmers who lost crops—and the people I have spoken to are hoping that they are back on their feet come next financial year—this government is going to do what it is doing with every other tax. It is planning to take with one hand and give with the other, because those small businesses, those farmers and those employees are going to be stung with this flood tax if they earn more than $50,000. That, quite frankly, again betrays the doublespeak of the Labor Party on this issue. You promised that no-one impacted by the floods would pay the levy and that is objectively a false statement—many thousands of Australians who were directly impacted by the floods will pay the levy. Only those who had restricted access to their homes or damage to their homes are exempt from this levy. That leaves thousands of community leaders, small business people and farmers to be hit with a tax burden in the year they need it least—when they are recovering from the natural disasters that we saw in Australia earlier this year.

This government’s lack of priorities about the very basic functions of government is betrayed by this tax. Rather than pull out the budget and a red pen—in $350 billion it cannot find $1.8 billion to ensure that it can perform this basic task of government without levying an extra tax—this government hits Australians. It then hits Australians with the class war rhetoric that we had really thought was a remnant of university political science departments, a rhetoric that has no place in modern Australia. As people, many of whom were directly impacted by these floods and many of whom suffered significant financial loss, get these tax bills next year, this government will be held to account for this flawed policy and its complete lack of ability to prioritise its own activities.

Russell Trood (Queensland, Liberal Party) Share this | Link to this | Hansard source

It is a great honour to follow such an eloquent speech by my colleague from Victoria. I think Senator Ryan has made some very telling points on the Tax Laws Amendment (Temporary Flood and Cyclone Reconstruction Levy) Bill 2011 and the Income Tax Rates Amendment (Temporary Flood and Cyclone Reconstruction Levy) Bill 2011 and they are points on which I am in complete accord. The legislation seeks to implement the government’s announcements from January this year after the catastrophic floods. We all recognise that the events over the summer were of a kind which requires a unique and demanding response from the federal government and from the governments in all those states where catastrophes—and that is what they were—occurred during the summer period.

But this is an ill-conceived piece of legislation. I think we on this side are all in accord about that. It is an ill-conceived piece of legislation, even though its various components seem to make a kind of elegant statement about how one might address the issue. The $1.8 billion flood levy is part of it as are the spending cuts of $2.8 billion. Those cuts are a seduction because they suggest that the government is trying and committed to reducing excesses in its budget. But they do not go far enough from our perspective. The third component is the delay in some infrastructure projects, freeing up some funds. On its face, it looks like a complete package. But so much of what is being done depends and rests on the very foolish, very ill-conceived and unnecessary flood levy proposed in this legislation.

This is not the best way to deal with an emergency and this is not the best way to deal with this particular emergency. Clearly there are other reasons for introducing this particular approach. It is another reflection, I think, of the Gillard government’s absolute economic and financial incompetence. It is a reflection of the fact that when a problem occurs, when a need arises, when a public policy issue emerges the Gillard government’s solution—as indeed it was for the Rudd government—is a spasm response. It is almost a spasm response to a set of circumstances. Their only solution to the problem is to tax and, of course, to tax again. Part of the reason for this particular instinct is a reflection of the fact that the Gillard government is in coalition with the Greens. At the very foundation of the Greens philosophy is the belief that the only way to solve most, or indeed all, public policy issues is through increasing the burden on the Australian people.

There has been much commentary on this levy and much of the commentary has been unflattering, as it deserves to be. Saul Eslake, a well-known commentator from the Grattan Institute in Melbourne, who is well respected for his views, has made the point that this is a political choice that the government has made rather than reflecting economic imperatives. There are alternatives to solve this particular public policy problem. There are other ways to spend money and there are better ways to design a response to these particular disasters. One alternative would be to introduce further budget cuts, not the trifling cuts that the government has proposed, but a more determined and more critical introduction of budget cuts. Otherwise we could—and this is not necessarily desirable—accept for the short term a larger deficit.

Part of the problem is that in introducing a levy there is an amount of churn. As we collect and distribute the money there are, of course, administrative costs and the estimate has been that at least part of the levy will go towards meeting those costs, which is an unnecessary increased burden on the budget. If we did not have the levy we could roll out the response within the context of the usual financial arrangements for the Commonwealth, and we would probably save several million dollars if not a higher figure. That is always to be recommended. Industry groups do not support the levy. Mr Zimmerman from the Australian Retailers Association makes the point that a levy would impose additional cost-of-living pressure on families, and I think he is right to say that. The question then is: in light of these circumstances and in light of the ill-conceived nature of this levy, what could we do?

The coalition, being a responsible coalition and taking its task seriously to hold the government to account as it is always determined to do, has made a series of proposals where additional cuts could be made without great impact on the people who were, supposedly, going to be the beneficiaries of this expenditure. There are many parts of the budget where savings could be made, where there could be a deferral of spending, where money could be diverted to the reconstruction effort, which we all understand, know and recognise as being necessary, and where we could better use Commonwealth funds.

Some solutions could be: partially deferring the water buybacks; delaying funding that is unexpended so far in the Building the Education Revolution program; redirecting the remaining funds from the Building Better Regional Cities program; and reducing spending on the Automotive Transformation Scheme. There could be further cuts to the funding of GP superclinics, which have barely started. I think the promise was 35 by this date and we have reached only two or three so far. It is widely recognised that these are unnecessary expenditures. Discontinuing the funding on the National Solar Schools program or discontinuing the reward payment for school improvements program are other possibilities. Discontinuing the online diagnostic tools for parents and teachers program and discontinuing the helping our kids understand finance program are others. Some of these programs may have some particular value for some members and for some sections of the community. In a Commonwealth where there is limitless cash and where revenue is rolling into the coffers without any difficulty then some of these programs might arguably be deserving of funding, but not in these circumstances, not in these difficult times in which we are confronted and particularly not in a situation where the Commonwealth faces the primary burden of undertaking the reconstruction as a result of the floods and the events of the summer period.

If we are able to identify some of these, if we are able to be rigorous and vigorous in our determination to impose these savings measures then, of course, in my state of Queensland we would have an opportunity to do the things which remain to be done and which now seem likely to be postponed. For example, things such as the duplication of sections of the Bruce Highway; the project in relation to the Herbert River floodplain study; the realignment, again, of the Bruce Highway to provide flood-proof access, which is a long-term concern of many of my Queensland constituents, particularly in the north of the state, could be done. There are needs out there which are greater than those for which money has been outlaid. They are not going to be cut but could well be cut. What we have here is a situation where there are many opportunities for savings. There are many needs which might be substituted. The Gillard government has failed to undertake the rigorous assessment which is necessary.

This levy will impose obligations and further burdens on taxpayers earning between $50,000 and $100,000. In all likelihood they will pay something in the vicinity of $250 more tax. The levy is in addition—and Senator Ryan was making this point quite eloquently—to the $41 billion in new taxes that the government has either implemented or is proposing over the next few years. For the as yet unquantified carbon tax, which we are promised is coming for introduction after July 2012, an estimate is $300 per annum for our households, but will it be greater? This tax may not be the one that will break the back of many families but, at the very least, for many families it will impose an unnecessary and increasing burden on people who are struggling to make ends meet in very difficult circumstances. They do not need to have that imposed upon them, particularly in such a highly inefficient way for what is a relatively small amount of money.

We also remain unclear as to the full costs of the flood recovery. An estimate has been made but it may well blow out to a very much larger figure and the levy may turn out to be a very small amount of the money required. We on this side think the government should rethink this plan. I suppose the possibility that this is going to occur is somewhere between nought and nothing. We have very low expectations but the reality is that it is wasting our money and it is unnecessary.

We have questions which deserve an answer. I hope the minister might address some of these concerns in the committee stage of this bill. We are told the levy will raise $1.8 billion, but there is no clear estimate of the damage at this point in time, so I think we are entitled to ask: how reliable is the estimate of the costs that have already been made for recovery? Is this a precedent for future disasters? Is this what we are going to face into the future? Every time a disaster comes along and the Labor government is in power, are we going to have yet another levy to try and address the issue? Is this a comfortable way for this government to address this problem.

Nick Sherry (Tasmania, Australian Labor Party, Minister Assisting the Minister for Tourism) Share this | Link to this | Hansard source

You had six.

Russell Trood (Queensland, Liberal Party) Share this | Link to this | Hansard source

In better circumstances, Minister, in far more compelling circumstances I would venture. What about the question of the state responsibility here for insurance in relation to disaster relief? My own state, where much of the impact has occurred, did not have the insurance that was required. That was regrettable indeed. I think the argument has been made about the fact that the cost was going to be too great but it has been unpersuasive. Surely it is a fundamental responsibility of governments to protect against the kinds of exigencies that occurred on this occasion.

There remains the question about exemptions. Will it include visitors, voluntary contributions, ongoing assistance to family and friends? We note that this is an impost on individuals that companies or enterprises will not be paying. There are questions to be asked, not least the questions which arise about the deal that the government has done to secure passage of this legislation through the parliament. Mr Wilkie from the House of Representatives is said to have extracted a promise of something in the vicinity of $50 million for tertiary education for his vote in support of the legislation. Senator Fielding is said to have secured something in the vicinity of $500 million for aid for Victorian reconstruction efforts. Deals have been done which are costly, which increase the burden on the purse of the Commonwealth and which will increase the deficit just to get this piece of legislation through the parliament because, as it stood, it was unpersuasive. The case was weak and individuals had to be bought off to ensure that the legislation would be passed.

In summary, we abhor this piece of legislation. We recognise that the Commonwealth has a primary responsibility to respond to the challenges which are now before it in relation to flood reconstruction and disaster reconstruction more generally, but this piece of legislation is ill conceived. It is bad economic management. It is unfairly taxing a significant proportion of the Australian population. A much better solution overall would have been if the government had used this opportunity to cut unnecessary spending, of which there is a great deal in the budget—I failed to mention the NBN, which is always a useful candidate—retain core spending in areas where that was necessary and fold the response into the overall budget practice. If it had done that, we would have been much more willing to support this piece of legislation.

Anne McEwen (SA, Australian Labor Party) Share this | Link to this | Hansard source

I too would like to contribute to the debate about the Tax Laws Amendment (Temporary Flood and Cyclone Reconstruction Levy) Bill 2011 and Income Tax Rates Amendment (Temporary Flood and Cyclone Reconstruction Levy) Bill 2011. Like most Australians, I stared in disbelief at the confronting scenes before me on my television of the Queensland floods earlier in the year and soon after of the flooding in western and central Victoria. It was to be the worst flooding in our history. Homes, businesses, crops, livestock and, most devastatingly of all, lives were lost. To make things worse, after the absolute destruction of the floods Queenslanders had to endure Cyclone Yasi, the second natural disaster to strike the state within a couple of weeks.

We are fortunate to live in Australia but, unfortunately, our country also comes with some of the most extreme and unforgiving weather conditions of any nation; it goes from one harsh extreme to another. It often seems that, while one side of the country suffers through severe droughts, heatwaves and bushfires, the other side of the country is waterlogged and battening down the hatches in fear of tropical cyclones. As a South Australian, as indeed you are, Madam Acting Deputy President Hurley, we know that we have experienced both floods and droughts but fortunately, so far, not cyclones. Through all those times, I am always heartened by the generosity of Australians when they respond to tragedy affecting other Australians. In times of need, the Australian people really do know how to open their hearts and their wallets in order to help others.

In the case of the floods this year, hundreds of thousands of people have pledged their support to the various disaster funds and relief efforts by donating their time, monetary gifts or household items to help others. I think all of those individuals should be thanked for doing so. What has also been wonderful to see is the number of people volunteering in the clean-up efforts. Over 10,000 people arrived at the Brisbane City Council’s four volunteer centres the weekend following the flooding to help clean up in some of the worst-hit flood areas. Another 2,000 volunteers registered to get their hands dirty in Ipswich, and they were joined by thousands of others who did not register but who simply stopped and offered to help people in need. It has been mentioned in this place before that Queensland recorded a shortage of gumboots due to the overwhelming number of people looking to lend a helping hand, and I think that is indicative of the Australian spirit. As well as the volunteers and the people who ran projects to assist others, as I said, there were a great number of Australians who donated money to the relief efforts through the Queensland Premier’s Disaster Relief Appeal. Australian people, businesses and communities reached into their pockets to help others. The tally of donations for that flood appeal surged to well over the $200 million mark, and money is still coming in. So many Queensland residents in particular had little or no time to prepare for the floods and walked away with only the clothes that they were wearing. Many residents lost everything. The Premier’s Disaster Relief Appeal and other appeals like that are there to help those people to replace their day-to-day needs.

Of course, while the generosity and kindness of Australians has been outstanding, we must not forget that the damage to infrastructure that has been caused by the floods is unprecedented and the task of rebuilding Queensland is simply enormous. It may very well be that these floods are the most costly disaster in Australian history. It is in our nation’s best interests, certainly in its economic best interests, to rebuild the great state of Queensland as soon as we can. It is for that reason that the federal Labor government have introduced the package of bills that we are debating here today—the temporary flood levy bills—which will assist so much in the reconstruction process. I know the opposition, as they usually do when they have nothing constructive to say or to contribute to a debate, like to claim as they have done here that this spending initiative is just another tax on the Australian people. Let me tell you right now that those opposite me here today are wrong. This is a one-off levy that is one part of a comprehensive reconstruction effort by the Australian government in concert with the Queensland government, because no single level of government or community sector would ever be able to afford to do this alone. This is why the federal government is choosing through this legislation to impose a modest charge on taxpayers who have not suffered through the disaster. Many of us donated money to the Queensland Premier’s Disaster Relief Appeal and other appeals but we know that that will not be enough. There are roads, highways, ports, railway lines and public facilities which all need to be rebuilt. That reconstruction effort is going take time and is going to need a lot of money. Initial estimates put the cost to the Commonwealth at some $5.6 billion. That is almost 30 times more than the money which is currently in the Queensland Premier’s flood relief fund.

I believe that the coalition is well and truly out of touch with the Australian public on this issue. A good barometer of what the public thinks about something is the traffic to an electorate office in terms of phone calls, emails et cetera. My electorate office in South Australia has not received any negative feedback at all regarding the flood levy being proposed in this legislation. The phones have remained unusually quiet on an issue that will require some taxpayers to pay a small amount of money. The phones have remained unusually quiet, despite the opposition’s hysteria around this issue. Unlike those opposite, I believe a great percentage of the public actually agrees with the flood levy because they know and understand that this is a one-off measure designed for extraordinary circumstances. Australians understand why the government also makes donations to other nations that have suffered disasters, such as its provision of $10 million to the people of Japan to help that poor country deal with the aftermath of the unbelievable devastation there following the earthquake and tsunami. Australians understand that those who have should give to those who have not. So it is always disappointing to see the opposition playing political games, trying to win political points and making political mileage out of the hardship, in this case, of the Queenslanders and, to a lesser extent, the Victorians and the South Australians who suffered from the floods. The federal Labor government is not relying on the implementation of the levy alone to raise much needed funds. We have regrettably had to impose spending cuts and have delayed a number of infrastructure projects to ensure that we do have the financial ability to assist Queensland to rebuild.

The amendments to the existing legislation that we are debating here tonight are not going to affect each and every taxpayer in the same way. To reduce any financial stress on those who have already been involved in the floods, the bills ensure that those people affected by natural disaster will not have to contribute to the levy. Therefore, taxpayers who have already received an Australian government disaster recovery payment for a natural disaster in 2010-11 and those people who did not receive an AGDRP but who meet at least one of the criteria and live in a natural disaster and recovery zone will be exempt from the flood levy. Additionally, New Zealand special class visa holders who are ineligible for the AGDRP but who still received an ex gratia payment from the government as a result of the natural disasters will also be exempt from the flood levy.

For those people who are not exempt from the levy, I must say that the impost is very reasonable. For most taxpayers, it will be a very modest charge. The levy takes into account people’s different earning capacities and subsequently their capacity to contribute to the flood reconstruction. Approximately 50 per cent of taxpayers will not have to contribute to the levy whatsoever. The levy will only be applicable to those taxpayers earning over $50,000 in the 2011-12 tax year. Of those people, over 60 per cent will pay less than $1 a week, over 70 per cent of people will pay less than $2 a week and over 85 per cent of people will pay less than $5 a week. So, an Australian earning the average adult full-time wage of approximately $68,000, will pay $1.74 each week. That is a lot less than a cup of coffee each week. As we can see, it is a very moderate, reasonable and—importantly—one-off temporary measure to assist in rebuilding not just Queensland but the whole nation.

Applying this flood levy will mean that we can rebuild Queensland without compounding the stresses on our growing economy. I note that the task of rebuilding this state is set to increase demands on our capacity, our skills and our resources. Those are just some of the things that we are going to have to deal with as we take on the issue of rebuilding Queensland.

I noted earlier this month that the Deputy Prime Minister, Mr Wayne Swan, together with Queensland Premier Anna Bligh, announced the signing of the national partnership for natural disaster reconstruction and recovery. In signing the agreement, Mr Swan said that $2 billion of Commonwealth funding will go out the door right now and straight into needy Queensland communities. Included in the agreement is $50 million specifically aimed at the facilitation of the recovery process in North Queensland following Cyclone Yasi. Additionally, in line with the government’s resolve to see that infrastructure is rebuilt appropriately and efficiently, there are strong auditing and reporting requirements in place to monitor the spending of taxpayer’s funds. The government does not want to see any waste whatsoever and the agreement provides for the Reconstruction Inspectorate, led by Mr Jon Fahey AC, to oversee reconstruction activity. That will provide assurance that value for money is being achieved across the board for the disaster response.

The opposition’s knee-jerk response of trying to find funding for the disaster recovery is a far cry from this well-thought-out plan of the government’s. Many people were very alarmed to hear the Leader of the Opposition, Mr Tony Abbott, say that the coalition would fund the rebuilding of Queensland through the deferral of some funding as well as through a great many funding cuts rather than introduce a sensible, temporary, one-off levy. We are grateful—and I am sure that the people of Queensland are grateful—that the opposition is not in government. After over a decade of spending cuts at the hands of the former coalition government, Mr Abbott has angered many Australians by proposing a range of new spending cuts to offset the need for a temporary levy. Should, heaven forbid, the coalition ever secure government, those funding cuts would never be reinstated.

The opposition, for example, has suggested cuts of $500 million to the automotive industry, an industry that employs hundred of thousands of people across the country. In an echo of the policies of One Nation, the opposition has also said that it would defer some $400 million in overseas development aid. Overseas development aid—foreign aid, as it is usually known—as even Mr Alexander Downer, a former Leader of the Opposition, said, is in our national interest, particularly when we are spending it in Indonesia, a region targeted for aid cuts by the opposition.

In Senate estimates earlier this month, I had the opportunity to discuss our foreign aid budget and, in particular, our aid to schools in Indonesia with representatives from AusAID. I learnt that so far our Australian aid has contributed to the construction of more than 2,000 schools. AusAID anticipates that a similar number will be constructed with continued funding generating more than 300,000 new school places. Those are new school places for Indonesian students in areas where the only other alternative for eduction would be in radical religious schools. We are all well aware of how important it is for our neighbours in Indonesia to ensure that their students—their young people—have the opportunity for a decent education, not a radical education. We know how important it is for them to ensure that girls in particular in Indonesia are able to attend school and undertake a curriculum that will set them up for life, either in occupations or in further education. This point was reinforced in the discussion with AusAID at Senate estimates. It is a great shame that one of the first things that the opposition put forward as a way to fund the reconstruction of Queensland was to cease funding for that very important Australian aid initiative.

The point was made that another item that was immediately targeted for funding cuts by the opposition was water buybacks in the Murray-Darling Basin. That did not go down too well in South Australia, where we are very concerned about the future of not only the river but the communities that rely on the river for their livelihoods. To have this off-the-cuff ill-thought-out proposal from the federal opposition to get rid of, or defer for however long, the opposition proposed, $600 million of water buybacks did not go down too well in South Australia. It was typical of the lack of planning and lack of thought that the opposition have in regard to the Murray-Darling Basin. For them, it is just an expendable thing. They have no intention of seriously addressing the problems with the basin.

While the opposition is focusing its attention on trying to cut money from areas of need in the Australian community, the government is instead continuously thinking of ways to improve the lives of all of those affected by the recent disasters. Earlier this month, the Deputy Prime Minister, Premier Bligh and the Minister for Tourism, Martin Ferguson, launched ‘Nothing beats Queensland’, an aptly named marketing strategy to promote the state to Australia and to the world in these difficult times.

Nick Sherry (Tasmania, Australian Labor Party, Minister Assisting the Minister for Tourism) Share this | Link to this | Hansard source

The Tax Laws Amendment (Temporary Flood and Cyclone Reconstruction Levy) Bill 2011 and Income Tax Rates Amendment (Temporary Flood and Cyclone Reconstruction Levy) Bill 2011 are very important pieces of legislation. I would like to thank the senators who have contributed to the debate on the bills.

As we are all aware, the recent disasters around Australia have had a massive impact in human terms and on property and infrastructure. Costs vary but it appears as though the cost to the public purse of repairing the infrastructure damage we have seen, such as roads, bridges, ports and railways, will be approximately $5.6 billion. This would mean that it is one of the most significant disasters, if not the most significant one, in monetary terms that Australia has seen. This does not include the obvious cost to individuals that is also of great significance and will not be finalised until insurance claims are completed.

We are moving into the recovery phase and it is clear that there will be a need to rebuild large amounts of public infrastructure. Many Australians have already generously donated to charitable funds to assist people affected by the floods. Charities will use these funds to help people directly to bounce back from the disasters. This levy on the other hand is contributing funding to rebuild damaged essential infrastructure, such as the roads, bridges, ports and railways that I have mentioned. And, as I mentioned, the cost of rebuilding infrastructure is in the order of $5.6 billion. The government will fund the majority of the cost through spending cuts. The remainder will be provided by this temporary—and I stress, temporary—flood and cyclone reconstruction levy. In an economy that is growing strongly it is important that we pay as we go.

In terms of the spending cuts that I have mentioned, they approximate $2.8 billion. This includes removing industry assistance and cutting back some other programs by abolishing, for example, the Green Car Innovation Fund and the Cleaner Car Rebate Scheme, and making some other cuts. There will be a $1 billion delay in some infrastructure projects. This will free up both funds and skilled workers, which is particularly important at a time of skilled labour shortages around the country.

The Tax Laws Amendment (Temporary Flood and Cyclone Reconstruction Levy) Bill 2011 and the Income Tax Rates Amendment (Temporary Flood and Cyclone Reconstruction Levy) Bill 2011 introduce a modest one-off, temporary levy that will end at midnight on 30 June 2012. There has been a fair amount of criticism from some members of the Liberal and National parties in respect of this legislation. I remind them that this is not the first time over the past decade that this parliament has seen a levy in response to a particular set of unusual and special circumstances. I have been in this place for almost 21 years and I can recall a number of other levies under the previous Liberal and National government. A couple come to mind. I think there were about half a dozen. We had one in respect to the Ansett collapse, which I am sure people would remember. They may not recall that there was a levy on airline tickets to pay for the cost of the collapse of Ansett Airlines. We had a levy in respect to the gun buyback. We had a levy in respect to East Timor. We had a levy in respect to the milk industry. We had a levy in respect to the sugar industry. There was one other that does not quite spring to mind.

In the critique by those opposite of this government’s approach, we have massive hypocrisy. They have condemned and criticised this government for its temporary, one-off levy when they in fact resorted to the same approach on at least six occasions when they were in government from 1996 through to 2007. On six occasions they resorted to levies and some of them went for a damn sight longer than the levy that is proposed in this legislation. The Ansett levy went for a couple of years. The milk and sugar levies went for longer than a year, although I cannot recall the exact time. So in this legislation we are not dealing with anything that is conceptually new.

The levy will end on midnight of 30 June 2012. The levy will be progressive and based on an individual’s ability to pay. The Australian income tax system is based on the individual, which achieves fair treatment between individuals and is simpler to understand for taxpayers. For this reason the levy is based on taxable income earned by individuals which is assessable income less allowable deductions. This is the same income base used for previous levies, levies that I have referred to earlier in this debate such as the East Timor levy and the gun buyback levy. These levies that I have just mentioned involved an increase in the Medicare levy, which is based on taxable income.

Anyone with a taxable income in 2011-12 of $50,000 or less will not pay the levy. Taxpayers with taxable incomes between $50,001 and $100,000 will pay a levy of 0.5 per cent—half a per cent—on that part of their taxable income over $50,000. Taxpayers with a taxable income over $100,000 will pay a levy of 0.5 per cent on that part of their taxable income between $50,000 and $100,000 and a levy of one per cent on that part of their taxable income over $100,000. Let me give an example. A taxpayer with a taxable income of $60,000 a year will pay a levy of 96c a week. A taxpayer with a taxable income of $100,000 a year will pay $4.81 a week. Importantly, taxpayers affected by the recent disasters—not just the floods but also Cyclone Yasi and the Western Australian bushfires and floods—will not have to pay this levy if they meet certain criteria.

The legislative instrument under which these bills provide for the minister to exempt people from the levy will provide an exemption for those who have received an Australian government disaster recovery payment for a disaster that occurred in 2010-11. There will also be an exemption for those who are ineligible for an Australian government disaster recovery payment but have been affected by a disaster declared under the National Disaster Recovery and Relief Arrangements and meet at least one of the Australian government disaster recovery payment criteria. There will be a further exemption for non-protected New Zealand special category visa holders who received an ex gratia payment from the government in relation to a disaster that occurred in 2010-11.

The levy will be paid through the tax withheld from regular wages and salaries like personal income tax and the Medicare levy that is already paid. But if employees are exempt from the levy they can ask their employer not to have the levy withheld from their regular pay. Alternatively, at the end of the year the ATO will assess a taxpayer’s tax liability, taking into account their exemption from the levy.

Once again I would like to thank members of the Senate for their contribution to the debate on these bills, which are of great importance for Australia’s response to the recent devastating disasters. Before I conclude my remarks and sit down, I note the Attorney-General has issued a determination as to the 2011 National Disaster Relief and Recovery Arrangements which amends the NDRRA determination of 2007 to strengthen arrangements ensuring that state and territory governments have adequate capital or insurance to fund restoration and replacement of infrastructure following a disaster. A new guideline is attached to the 2011 determination providing details of how the strengthened arrangements can be fulfilled. I table the determination as to the 2011 National Disaster Relief and Recovery Arrangements.

Question put:

That these bills be now read a second time.