Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

I move:

That these bills be now read a second time.

I seek leave to have the second reading speeches incorporated in Hansard.

Leave granted.

The speeches read as follows—

TAX LAWS AMENDMENT (TEMPORARY BUDGET REPAIR LEVY) BILL 2014

The Government has introduced a Budget that will redirect taxpayers’ dollars from unaffordable consumption today to productive investment for tomorrow. It will do this while supporting the most vulnerable, and taking significant steps towards ensuring that government can live within its means. It will move Australia towards greater equality of opportunity.

The underlying cash deficit is projected to be $60 billion over the four years to 2017 18, compared to $123 billion over the four years to 2016 17 at the 2013-14 Mid Year Economic and Fiscal Outlook. Instead of the $667 billion of debt by 2023 24, we will now have debt of $389 billion.

This substantial improvement is built off a significant reduction in payments growth. At the 2013 14 Mid Year Economic and Fiscal Outlook, average real growth in payments over the four years to 2016-17 was 2.6 per cent. The average over the four years to 2017-18 is now 0.8 per cent.

The 2014-15 Budget is the first step in our action plan to return the Budget to a more sustainable footing.

We will invest in a stronger economy by redirecting Government spending to measures that will boost productivity and workforce participation. This includes the Infrastructure Growth Package—the Asset Recycling Initiative and other new investments in infrastructure—to which we have committed nearly $11.6 billion in this Budget. It includes building a new Medical Research Future Fund—the largest of its kind in the world—within the next six years, with a guaranteed stream of support. And in education, we will provide direct financial support to all students studying higher education diplomas, advanced diplomas and associate degree courses, as well as those studying bachelor degrees, at all approved higher education institutions.

Through the measures announced in the 2014-15 Budget, we are also eliminating waste and targeting government assistance to those who need it most.

This accords with our plan to reduce the Government’s share of the economy over time, which in turn will free up resources for private investment. It will see payments as a percentage of GDP fall over time. And it will allow us to pay down public debt. Every generation before us has helped to build the quality of life that we enjoy, and we can do no less for future generations.

We have taken structural reforms to improve the sustainability of the Budget in the longer term.

We are making the Age Pension system more sustainable into the future and targeted to those who need it most with some long-term changes. We are also tightening the eligibility criteria for unemployment benefits, so that people under the age of 30 are encouraged to earn, or learn or work for the dole.

In the health sphere, we’re introducing new patient contributions and increasing medicine co-payments. We are also bringing the excessive growth of public hospitals funding under control while ensuring real funding increases every year.

Alone, these measures are not enough. They will take time to generate the necessary savings over the longer term. That is why we are also introducing a range of temporary savings measures to help with the immediate task of budget repair. We will pause the indexation of certain government payment eligibility thresholds, and will also be keeping the fortnightly payment rates of family tax benefit at current levels for two years.

For the Age Pension, we’re pausing means test thresholds and resetting the deeming thresholds in 2017-18, to ensure our pension system can handle an ageing population. We’re asking self-funded retirees to do their bit by ceasing payment of the seniors supplement and including untaxed superannuation in the means test for the Commonwealth Seniors Health Card.

These measures are part of a sensible way forward that balances the need for budget repair with an economic recovery that is still in its early stages—asking those on low and middle incomes to bear the full burden of the consolidation would be unfair and bad for the economy.

All Australians—from households to businesses and the public sector—will contribute to getting the budget back on track.

It is in this context, the context of the immediate task of budget repair, that we are introducing the Temporary Budget Repair Levy.

The Temporary Budget Repair Levy will start from 1 July 2014, and remain in place until 30 June 2017.

It is progressive and will apply at a rate of 2 per cent on individuals’ annual personal taxable income above $180,000.

This measure will raise $3.1 billion over the forward estimates period.

It will help to ensure that all Australians—households, businesses and those in the public sector—will contribute to getting the Budget back on track.

All of us have to contribute to the heavy lifting required to repair the Budget in one form or another, because in the longer term, everyone will benefit from the effort we all put in now.

In the broader scheme of the Budget, this is not a large tax increase. It is not a permanent tax increase. And it is not an unprecedented tax increase—governments of both sides have in the past introduced or increased levies as a way of responsibly funding particular public needs. For example, we have had temporary levies in the past to pay for the gun buyback in the late 1990s, and for flood and cyclone reconstruction.

Recently, and also commencing from 1 July 2014, the former government legislated an increase to the Medicare levy to go towards funding DisabilityCare Australia.

The Temporary Budget Repair Levy has been designed so that it will not impact directly on the average worker.

In 2014 15, around 400,000 taxpayers—less than 4 per cent of taxpayers—will directly incur the Temporary Budget Repair Levy on their personal taxable income.

This includes members of Parliament.

Importantly, the threshold of $180,000 has been chosen so that almost none of the people affected by expenditure cuts to direct assistance, such as pensions and family payments, directly incur the Temporary Budget Repair Levy.

It is a simple and reasonable measure that will help to ensure that those on the highest incomes contribute to the budget repair task based on their ability to pay.

Without the Temporary Budget Repair Levy, the cost of repairing the Budget in the medium term would be borne by low and middle income households alone.

The expenditure savings that we have announced in this Budget need to be supported by longer term, structural reforms to the tax system. This is the only way to ensure that the Government’s call on resources is sustainable.

We are committed to the longer term task of tax reform. We have committed to produce a comprehensive White Paper on tax reform which will identify those longer-term structural tax reforms that can improve sustainability and reduce the costs to the economy. And we will take any proposals from the White Paper to the Australian people.

In the medium term, the Temporary Budget Repair Levy is a reasonable and responsible measure that will help to ensure the task of budget repair is shared by all Australians.

The Tax Laws Amendment (Temporary Budget Repair Levy) Bill 2014, which is part of a package including fourteen additional supporting Bills, will introduce a Temporary Budget Repair Levy from 1 July 2014 until 30 June 2017.

As I have said, the Temporary Budget Repair Levy will apply at a marginal rate of 2 per cent on individuals’ annual taxable income in excess of $180,000.

In addition to the introduction of the levy itself, the package of supporting Bills contains important consequential amendments that will maintain the integrity and fairness of the tax system, and minimise the opportunities for taxpayers to avoid the levy during the three years that it is in place.

These consequential amendments will, among other things, amend the rate of fringe benefits tax. Over the same period, we will increase the caps that apply to certain not-for-profit organisations, as well as increasing the fringe benefits rebate rate. This will maintain the cash value of benefits under the cap to employees of those not-for-profit organisations while the higher fringe benefit tax rate is in place.

This package of Bills will also make consequential amendments to rates in a number of other Acts, to ensure that tax rates set by reference to the top personal marginal tax rate, or by calculations comprising that rate, also reflect the introduction of the Temporary Budget Repair Levy.

For example, the top marginal tax rate is currently applied as a flat rate to no tax file number withholding, and the taxation of the unearned income of minors, certain trustees and certain non complying retirement funds. These rates will be increased to reflect the introduction of the Temporary Budget Repair Levy.

In addition, a number of other rates in the tax system are also set by reference to the top personal marginal tax rate, or by calculations comprising that rate. These rates are in place to encourage compliance and to limit opportunities for tax minimisation.

These rates will also be amended to reflect the introduction of the Temporary Budget Repair Levy. They are rates for family trust distribution tax, income tax (bearer debentures), first home saver accounts misuse tax, no tax file number withholding tax for employee share schemes, departing Australia superannuation payments tax, excess non-concessional contributions tax, excess untaxed roll-over amounts tax, trustee beneficiary non-disclosure tax, interest on non-resident trust distributions, corporate untainting tax, and trust recoupment tax.

I will speak to these consequential amendments when I come to introducing the rest of the Bills contained in this package.

For now, I turn to the detail of the Tax Laws Amendment (Temporary Budget Repair Levy) Bill 2014.

Schedule 1 to this Bill will amend the Income Tax (Transitional Provisions) Act 1997 to introduce the Temporary Budget Repair Levy on individuals with a personal taxable income exceeding $180,000.

This Schedule defines the ‘Temporary Budget Repair Levy years’ as being the 2014-15, 2015-16 and 2016-17 financial years.

This Schedule also sets out the method for determining an individual’s Temporary Budget Repair Levy liability.

It clarifies that the amount of Temporary Budget Repair Levy that a person must pay cannot be reduced by their eligibility for non refundable personal income tax offsets, with the exception of the foreign income tax offset.

Schedule 2 to this Bill will define the ‘Temporary Budget Repair Levy years’, in relation to the consequential amendments to the fringe benefits tax concessions, as the 2015-16 and 2016-17 FBT years. To minimise the administrative burden on employers, these amendments were aligned with the FBT tax year, which starts on 1 April.

Schedule 2 will further amend the Fringe Benefits Tax Assessment Act 1986 to align the fringe benefits rebate rate to the fringe benefits tax rate from 1 April 2015 onward.

Schedule 2 to this Bill will further amend the Fringe Benefits Tax Assessment Act 1986 to maintain the cash value of benefits under the cap that can be provided to employees of not-for-profit organisations while the higher fringe benefits tax rate is in place. This is done by increasing the annual caps.

Finally, Schedule 3 to this Bill will amend the Taxation Administration Regulations 1976 to allow the Commissioner of Taxation to increase the highest withholding rate for certain payments where no TFN or ABN has been quoted by 2 percentage points. This will reflect the introduction of the Temporary Budget Repair Levy from 1 July 2014.

Together with the other measures announced in our Budget, the Temporary Budget Repair Levy will begin the task of repairing the fiscal circumstances that we have inherited. Further, it will help to ensure that everybody shares some of the burden of the repair task, and that those on the highest incomes contribute based on their ability to pay.

Without these actions the budget would have been in deficit for at least the next decade—a total of 16 consecutive years of deficits.

This would have left Australia in a vulnerable position, ill equipped to cope with an ageing population, and increasingly reliant on future generations to pay off our debt. Instead, the totality of measures contained in the Budget the Treasurer has announced tonight will reduce the forecast gross debt to $389 billion over the next decade, rather than nearly two thirds of a trillion dollars in 2023 24 as projected at last Mid Year Economic and Fiscal Outlook.

Full details of the measure are contained in the explanatory memorandum.

INCOME TAX RATES AMENDMENT (TEMPORARY BUDGET REPAIR LEVY) BILL 2014

The Income Tax Rates Amendment (Temporary Budget Repair Levy) Bill 2014 forms part of the package of measures that will introduce the Temporary Budget Repair Levy.

This Bill will amend the Income Tax Rates Act 1986 to introduce a new schedule of income tax rates and thresholds that will comprise the Temporary Budget Repair Levy.

The Temporary Budget Repair Levy will be set at a rate of 2 per cent on individuals’ annual taxable income in excess of $180,000. The Temporary Budget Repair Levy will be in place during the ‘Temporary Budget Repair Levy years’, which are the 2014-15, 2015-16 and 2016-17 financial years.

This Bill will also amend certain other income tax rates in the Income Tax Rates Act 1986 that are set by reference to the top personal marginal tax rate, or by calculations comprising that rate.

These amendments will maintain the integrity and fairness of the tax system, and minimise the opportunities for avoiding the levy.

Full details of the measure are contained in the explanatory memorandum already tabled.

The Family Trust Distribution Tax (Primary Liability) Amendment (Temporary Budget Repair Levy) Bill 2014 forms part of a package of Bills that ensures that tax rates set by reference to the top personal marginal tax rate, or by calculations comprising that rate, also reflect the introduction of the Temporary Budget Repair Levy.

This Bill contains consequential amendments to the Family Trust Distribution Tax (Primary Liability) Act 1998.

These consequential amendments will maintain the integrity and fairness of the tax system, and minimise the opportunities for avoiding the levy.

Further details of the Bill are set out in the explanatory memorandum.

The Fringe Benefits Tax Amendment (Temporary Budget Repair Levy) Bill 2014 forms part of a package of Bills that ensures that tax rates set by reference to the top personal marginal tax rate, or by calculations comprising that rate, also reflect the introduction of the Temporary Budget Repair Levy.

This Bill contains consequential amendments to the Fringe Benefits Tax Act 1986.

These consequential amendments will maintain the integrity and fairness of the tax system, and minimise the opportunities for avoiding the levy.

Further details of the Bill are set out in the explanatory memorandum already tabled.

The Income Tax (Bearer Debentures) Amendment (Temporary Budget Repair Levy) Bill 2014 forms part of a package of Bills that ensures that tax rates set by reference to the top personal marginal tax rate, or calculations comprising that rate, also reflect the introduction of the Temporary Budget Repair Levy.

This Bill contains consequential amendments to the Income Tax (Bearer Debentures) Act 1971.

These consequential amendments will maintain the integrity and fairness of the tax system, and minimise the opportunities for avoiding the levy.

Further details of the Bill are set out in the explanatory memorandum already tabled.

The Income Tax (First Home Saver Accounts Misuse Tax) Amendment (Temporary Budget Repair Levy) Bill 2014 forms part of a package of Bills that ensures that tax rates set by reference to the top personal marginal tax rate, or by calculations comprising that rate, also reflect the introduction of the Temporary Budget Repair Levy.

This Bill contains consequential amendments to the Income Tax (First Home Saver Accounts Misuse Tax) Act 2008.

These consequential amendments will maintain the integrity and fairness of the tax system, and minimise the opportunities for avoiding the levy.

Further details of the Bill are set out in the explanatory memorandum already tabled.

The Income Tax (TFN Withholding Tax (ESS)) Amendment (Temporary Budget Repair Levy) Bill 2014 forms part of a package of Bills that ensures that tax rates set by reference to the top personal marginal tax rate, or by calculations comprising that rate, also reflect the introduction of the Temporary Budget Repair Levy.

This Bill contains consequential amendments to the Income Tax (TFN Withholding Tax (ESS)) Act 2009.

These consequential amendments will maintain the integrity and fairness of the tax system, and minimise the opportunities for avoiding the levy.

Further details of the Bill are set out in the explanatory memorandum already tabled.

The Superannuation (Departing Australia Superannuation Payments Tax) Amendment (Temporary Budget Repair Levy) Bill 2014 forms part of a package of Bill that ensures that tax rates set by reference to the top personal marginal tax rate, or by calculations comprising that rate, also reflect the introduction of the Temporary Budget Repair Levy.

This Bill contains consequential amendments to the Superannuation (Departing Australia Superannuation Payments Tax) Act 2007.

These consequential amendments will maintain the integrity and fairness of the tax system, and minimise the opportunities for avoiding the levy.

Further details of the Bill are set out in the explanatory memorandum already tabled.

The Superannuation (Excess Non-concessional Contributions Tax) Amendment (Temporary Budget Repair Levy) Bill 2014 forms part of a package of Bills that ensures that tax rates set by reference to the top personal marginal tax rate, or by calculations comprising that rate, also reflect the introduction of the Temporary Budget Repair Levy.

This Bill contains consequential amendments to the Superannuation (Excess Non-concessional Contributions Tax) Act 2007.

These consequential amendments will maintain the integrity and fairness of the tax system, and minimise the opportunities for avoiding the levy.

Further details of the Bill are set out in the explanatory memorandum already tabled.

The Superannuation (Excess Untaxed Roll-over Amounts Tax) Amendment (Temporary Budget Repair Levy) Bill 2014 is part of a package of Bills that ensures that tax rates set by reference to the top marginal tax rate, or by calculations comprising that rate, also reflect the introduction of the Temporary Budget Repair Levy.

This Bill contains consequential amendments to the Superannuation (Excess Untaxed Roll-over Amounts Tax) Act 2007.

These consequential amendments will maintain the integrity and fairness of the tax system, and minimise the opportunities for avoiding the levy.

Further details of the Bill are set out in the explanatory memorandum already tabled.

The Taxation (Trustee Beneficiary Non-Disclosure Tax) (No. 1) Amendment (Temporary Budget Repair Levy) Bill 2014 forms part of a package of Bills that ensures that tax rates set by reference to the top personal marginal tax rate, or by calculations comprising that rate, also reflect the introduction of the Temporary Budget Repair Levy.

This Bill contains consequential amendments to the Taxation (Trustee Beneficiary Non-Disclosure Tax) Act (No. 1) 2007.

These consequential amendments will maintain the integrity and fairness of the tax system, and minimise the opportunities for avoiding the levy.

Further details of the Bill are set out in the explanatory memorandum already tabled.

The Taxation (Trustee Beneficiary Non-Disclosure Tax) (No. 2) Amendment (Temporary Budget Repair Levy) Bill 2014 forms part of a package of Bills that ensures that tax rates set by reference to the top personal marginal tax rate, or by calculations comprising that top personal rate, also reflect the introduction of the Temporary Budget Repair Levy.

This Bill contains consequential amendments to the Taxation (Trustee Beneficiary Non-Disclosure Tax) Act (No. 2) 2007 as a result of the introduction of the Temporary Budget Repair Levy.

These consequential amendments will maintain the integrity and fairness of the tax system, and minimise the opportunities for avoiding the levy.

Further details of the Bill are set out in the explanatory memorandum already tabled.

The Tax Laws Amendment (Interest on Non-resident Trust Distributions) (Temporary Budget Repair Levy) Bill 2014 forms part of a package of Bills that ensures that tax rates set by reference to the top personal marginal tax rate, or by calculations comprising that rate, also reflect the introduction of the Temporary Budget Repair Levy.

This Bill contains consequential amendments to the Income Tax Assessment Act 1936.

These consequential amendments will maintain the integrity and fairness of the tax system, and minimise the opportunities for avoiding the levy.

Further details of the Bill are set out in the explanatory memorandum already tabled.

The Tax Laws Amendment (Untainting Tax) (Temporary Budget Repair Levy) Bill 2014 forms part of a package of Bills that ensures that tax rates set by reference to the top personal marginal tax rate, or by calculations comprising that rate, also reflect the introduction of the Temporary Budget Repair Levy.

This Bill contains consequential amendments to the Income Tax Assessment Act 1997.

These consequential amendments will maintain the integrity and fairness of the tax system, and minimise the opportunities for avoiding the levy.

Further details of the Bill are set out in the explanatory memorandum already tabled.

The Trust Recoupment Tax Amendment (Temporary Budget Repair Levy) Bill 2014 forms part of a package of Bills that ensures that tax rates set by reference to the top personal marginal tax rate, or by calculations comprising that rate, also reflect the introduction of the Temporary Budget Repair Levy.

This Bill contains consequential amendments to the Trust Recoupment Tax Act 1985.

These consequential amendments will maintain the integrity and fairness of the tax system, and minimise the opportunities for avoiding the levy.

Further details of the Bill are set out in the explanatory memorandum already tabled.

FAMILY TRUST DISTRIBUTION TAX (PRIMARY LIABILITY) AMENDMENT (TEMPORARY BUDGET REPAIR LEVY) BILL 2014

The Family Trust Distribution Tax (Primary Liability) Amendment (Temporary Budget Repair Levy) Bill 2014 forms part of a package of Bills that ensures that tax rates set by reference to the top personal marginal tax rate, or by calculations comprising that rate, also reflect the introduction of the Temporary Budget Repair Levy.

This Bill contains consequential amendments to the Family Trust Distribution Tax (Primary Liability) Act 1998.

These consequential amendments will maintain the integrity and fairness of the tax system, and minimise the opportunities for avoiding the levy.

Further details of the Bill are set out in the explanatory memorandum.

FRINGE BENEFITS TAX AMENDMENT (TEMPORARY BUDGET REPAIR LEVY) BILL 2014

The Fringe Benefits Tax Amendment (Temporary Budget Repair Levy) Bill 2014 forms part of a package of Bills that ensures that tax rates set by reference to the top personal marginal tax rate, or by calculations comprising that rate, also reflect the introduction of the Temporary Budget Repair Levy.

This Bill contains consequential amendments to the Fringe Benefits Tax Act 1986.

These consequential amendments will maintain the integrity and fairness of the tax system, and minimise the opportunities for avoiding the levy.

Further details of the Bill are set out in the explanatory memorandum.

INCOME TAX (BEARER DEBENTURES) AMENDMENT (TEMPORARY BUDGET REPAIR LEVY) BILL 2014

The Income Tax (Bearer Debentures) Amendment (Temporary Budget Repair Levy) Bill 2014 forms part of a package of Bills that ensures that tax rates set by reference to the top personal marginal tax rate, or calculations comprising that rate, also reflect the introduction of the Temporary Budget Repair Levy.

This Bill contains consequential amendments to the Income Tax (Bearer Debentures) Act 1971.

These consequential amendments will maintain the integrity and fairness of the tax system, and minimise the opportunities for avoiding the levy.

Further details of the Bill are set out in the explanatory memorandum.

INCOME TAX (FIRST HOME SAVER ACCOUNTS MISUSE TAX) AMENDMENT (TEMPORARY BUDGET REPAIR LEVY) BILL 2014

The Income Tax (First Home Saver Accounts Misuse Tax) Amendment (Temporary Budget Repair Levy) Bill 2014 forms part of a package of Bills that ensures that tax rates set by reference to the top personal marginal tax rate, or by calculations comprising that rate, also reflect the introduction of the Temporary Budget Repair Levy.

This Bill contains consequential amendments to the Income Tax (First Home Saver Accounts Misuse Tax) Act 2008.

These consequential amendments will maintain the integrity and fairness of the tax system, and minimise the opportunities for avoiding the levy.

Further details of the Bill are set out in the explanatory memorandum.

INCOME TAX (TFN WITHHOLDING TAX (ESS)) AMENDMENT (TEMPORARY BUDGET REPAIR LEVY) BILL 2014

The Income Tax (TFN Withholding Tax (ESS)) Amendment (Temporary Budget Repair Levy) Bill 2014 forms part of a package of Bills that ensures that tax rates set by reference to the top personal marginal tax rate, or by calculations comprising that rate, also reflect the introduction of the Temporary Budget Repair Levy.

This Bill contains consequential amendments to the Income Tax (TFN Withholding Tax (ESS)) Act 2009.

These consequential amendments will maintain the integrity and fairness of the tax system, and minimise the opportunities for avoiding the levy.

Further details of the Bill are set out in the explanatory memorandum.

SUPERANNUATION (DEPARTING AUSTRALIA SUPERANNUATION PAYMENTS TAX) AMENDMENT (TEMPORARY BUDGET REPAIR LEVY) BILL 2014

The Superannuation (Departing Australia Superannuation Payments Tax) Amendment (Temporary Budget Repair Levy) Bill 2014 forms part of a package of Bill that ensures that tax rates set by reference to the top personal marginal tax rate, or by calculations comprising that rate, also reflect the introduction of the Temporary Budget Repair Levy.

This Bill contains consequential amendments to the Superannuation (Departing Australia Superannuation Payments Tax) Act 2007.

These consequential amendments will maintain the integrity and fairness of the tax system, and minimise the opportunities for avoiding the levy.

Further details of the Bill are set out in the explanatory memorandum.

SUPERANNUATION (EXCESS NON-CONCESSIONAL CONTRIBUTIONS TAX) AMENDMENT (TEMPORARY BUDGET REPAIR LEVY) BILL 2014

The Superannuation (Excess Non-concessional Contributions Tax) Amendment (Temporary Budget Repair Levy) Bill 2014 forms part of a package of Bills that ensures that tax rates set by reference to the top personal marginal tax rate, or by calculations comprising that rate, also reflect the introduction of the Temporary Budget Repair Levy.

This Bill contains consequential amendments to the Superannuation (Excess Non-concessional Contributions Tax) Act 2007.

These consequential amendments will maintain the integrity and fairness of the tax system, and minimise the opportunities for avoiding the levy.

Further details of the Bill are set out in the explanatory memorandum.

SUPERANNUATION (EXCESS UNTAXED ROLL-OVER AMOUNTS TAX) AMENDMENT (TEMPORARY BUDGET REPAIR LEVY) BILL 2014

The Superannuation (Excess Untaxed Roll-over Amounts Tax) Amendment (Temporary Budget Repair Levy) Bill 2014 is part of a package of Bills that ensures that tax rates set by reference to the top marginal tax rate, or by calculations comprising that rate, also reflect the introduction of the Temporary Budget Repair Levy.

This Bill contains consequential amendments to the Superannuation (Excess Untaxed Roll-over Amounts Tax) Act 2007.

These consequential amendments will maintain the integrity and fairness of the tax system, and minimise the opportunities for avoiding the levy.

Further details of the Bill are set out in the explanatory memorandum.

TAXATION (TRUSTEE BENEFICIARY NON-DISCLOSURE TAX) (NO. 1) AMENDMENT (TEMPORARY BUDGET REPAIR LEVY) BILL 2014

The Taxation (Trustee Beneficiary Non-Disclosure Tax) (No. 1) Amendment (Temporary Budget Repair Levy) Bill 2014 forms part of a package of Bills that ensures that tax rates set by reference to the top personal marginal tax rate, or by calculations comprising that rate, also reflect the introduction of the Temporary Budget Repair Levy.

This Bill contains consequential amendments to the Taxation (Trustee Beneficiary Non-Disclosure Tax) Act (No. 1) 2007.

These consequential amendments will maintain the integrity and fairness of the tax system, and minimise the opportunities for avoiding the le

Penny Wong (SA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

I rise in this second reading debate on the Tax Laws Amendment (Temporary Budget Repair Levy) Bill 2014 and related bills to indicate the Labor opposition's position. Labor will not be opposing these bills, but we want to place on record a number of issues. The first is our concern about the implementation risks inherent in the design of the levy. We also wish to discuss the double standards on tax from this Prime Minister. We also wish to talk about economic management and the lies which we have been told by many in the government about Labor's record of strong economic management.

This government has confected a budget emergency which I think Australians are increasingly understanding is a guise for a vicious attack on Middle Australia. This budget will hurt those who work hard, those who do it tough, those who are sick, those who seek a better life for their children and those who are studying to improve their skills and to strengthen the nation's future. This budget will hit Australians every time they get into their cars, when they take their kids to the doctor, when they need a prescription. It will hit local hospitals and local schools. I look forward to hearing from the senators from Tasmania, South Australia, the Territory and the other states and territories which will be so badly hit by this budget, not to mention the billions which will be taken out of the budgets for hospitals in the larger states.

As I said, this is a budget which will hit local schools and local hospitals. It will cost our children more to go to university and it will hit Australia's pensioners. Perhaps worst of all, these are all the things that this Prime Minister said he would not do prior to the election. Mr Abbott famously promised 'no new taxes, no cuts to hospitals and no cuts to schools' before the election, but this budget increases the cost of living, increases taxes, cuts funding to hospitals and cuts funding to schools. These very bills are the evidence that Mr Abbott says one thing before the election and does a very different thing thereafter.

This budget cuts pensions and family payments. It cuts $80 billion from Australia's hospitals and schools. It shows not only that Mr Abbott does not appear to know how to tell the truth before the election but also that he does not understand the cost of living pressures facing Australian families. But I tell you one thing he is pressing ahead with, one election promise he is determined to keep, and that is a paid parental leave scheme for millionaires. This is a budget which fatally undermines fairness in our nation.

I want to talk briefly about the distribution impact of the budget, because the Minister for Finance and the Treasurer tell us that one of the reasons they had to have this levy is that it is a means of sharing the burden of this budget. I can almost guarantee that what occurred is they went through all of their budget measures and suddenly Treasury said to them: 'Oh my goodness! Actually, people who are on high incomes are almost not contributing at all to this budget. We'd better do something so we look at least a bit fair.' So the ERC decided to have a temporary levy in order to try and avoid the argument that those who do the heaviest lifting in relation to this budget are those who can least afford it.

As Dr Leigh, the shadow Assistant Treasurer, told the other place when he spoke on this legislation and on other budget matters, the distributional effects of this budget are clear when one looks at the National Centre for Social and Economic Modelling's report—NATSEM's report—which shows who will be hit and who is paying. This is the modelling the government refuses to release. Treasury is quite capable and generally does produce the distributional impact of the budget, but magically they do not want to tell Australians who is being hit in this budget. All of a sudden the government somehow now wants to tell people: 'We just don't want to talk about who is actually paying. We don't want to show you which income groups, which family types, are going to bear the heaviest burden in this budget.'

This NATSEM research tells the story the government does not want Australians to hear—that the burden in this budget is not fairly shared. It confirms the fears that Australians already have about this government and about this budget. For example, this research shows that couples with children in the lowest income quintile will see a 6.6 per cent fall in their disposable income, while couples with children in the highest income quintile will see a 0.3 per cent increase in disposable income. To take out the economic jargon, it means poor people get poorer and rich people get richer. That is what it means. You get less disposable income if you are on a lower income and more if you are on a higher income.

Particularly worryingly, it shows that a single parent in the bottom income quintile will see a 10.8 per cent decrease in his or her disposable income. Right across the distribution, those in the bottom quintile are seeing a 2.2 per cent fall in their disposable income, while those in the top income quintile are seeing a small increase of 0.2 per cent. A single parent in the bottom income quintile—that is, the poorer single parents in Australia—will see a 10.8 per cent, nearly 11 per cent, decrease in their disposable income.

Of course, the backdrop to this budget is a global trend in advanced economies which has seen inequality rising. Notwithstanding the best efforts of Labor governments to look at the distributional impact, because when we were in government we actually looked at the distributional impact of our budget measures and sought to put in budget measures which benefited those who worked and those who were on lower incomes, we have seen a very substantial acceleration in the earnings of those in the higher earnings bracket, compared to those in the lower earnings bracket. Therefore, the measure before the chamber against that backdrop is atypical for this budget. It is an attempt to try to go some way to marginally redressing the balance that is contained at the heart of this budget.

I want to briefly talk about the National Party and its hypocrisy in falling into line with this government's measures. I wonder how many of the National Party are going to speak on this debate. I remember being here when Senator Joyce was Leader of The Nationals in the Senate. I remember when he first came in, huffing and puffing about the sale of Telstra, saying that he was never going to agree to it. Of course, he went soft. In the end, he rolled over and had his tummy tickled. That is what the National Party do. They talk tough, but then they just roll over and have their tummy tickled by the Liberals. And you play them.

Credit where credit is due and respect where respect is due, the National Party in fact do represent many of Australia's lower paid families and lower income communities. A great many people who are on incomes lower than the average are located not just in metropolitan cities, particularly in outer suburbs, but in rural and regional areas. The measures in this budget will negatively affect and will hit low-income Australians in rural and regional areas. This is a budget which will hit many of the people whom the National Party purport to represent. Where are the icons of the bush, the defenders of people on the land, the defenders of our regional cities and towns? The silence in regional Australia has been deafening.

Senator Ian Macdonald interjecting—

I hear Senator Macdonald. One thing that I will say for Senator Macdonald—and welcome to the debate—is that at least he comes in here and talks about his constituents. I do respect that and I give credit where credit is due. Where is the National Party? Where is the National Party talking about rural and regional Australia and the people in rural and regional Australia who will be hit by this budget? They are very quiet. We get a few Liberals who are prepared to speak out, but I do not hear the National Party coming in here to talk about how this budget is hitting the people they purport to represent.

In many National Party electorates, constituents and families do not have access to public transport. We have geographically diverse communities, geographically distant communities and of course they will be hit by the fuel excise change. These families will also be hit by the GP tax and by the withdrawal of benefits that will occur through this budget. We will certainly have more to say about this in the days and weeks to come.

Even dyed-in-the-wool National Party voters must be wondering where their voice in Canberra has gone and why it is so silent. I am unsurprised that the end of the chamber, where the National Party sit, is empty when it comes to this budget. They cannot defend it and they should have done better in standing up for the people they represent.

I raised at the outset some implementation issues with the debt levy. We have raised some concerns, as have a number of experts, about the way in which this budget measure is being implemented. The rushed implementation of the measure appears to have exposed a number of significant flaws in its design and we are sceptical about the level of revenue the measure is forecast to raise. One of the most significant implementation issues relates to the interaction between FBT, fringe benefits tax, and this income tax increase. As was canvassed in Senate estimates, there is a mismatch between the introduction of the income tax increase and the commensurate increase in FBT. This mismatch creates a significant tax arbitrage and tax avoidance opportunity. In both the first and the third years of this measure, there are opportunities for taxpayers to shift income out of salary and into fringe benefits to avoid the tax. This is because, as the chamber would be aware, the income tax increase commences on 1 July 2014 but the FBT increase will not occur until April 2015, the following year. In the third year, the FBT increase will cease on 31 March 2017. In total, this provides around nine months in the first year of the measure and three months in the final year where the FBT rate is not aligned with the top marginal tax rate. This creates the risk that the revenue-raising measure may not raise the revenue it is designed to raise.

This was made clear at Senate estimates. In fact, I sought to explore what was the amount of revenue forgone as a result of the mismatch. Certainly, in the 2014-15 and 2015-16 years you are looking at revenue of $600 million in the first of those two years and $1.15 million in the second, so that is over half a billion dollars difference. Treasury officials made it clear that the vast bulk of that lower revenue in the first year was as a result of the fringe benefits tax rate being lower than the relevant income tax rate.

The concerns that the opposition have raised have been echoed in the submissions to the Senate Economics Legislation Committee inquiry into this bill. Prominent economist Saul Eslake stated that this levy will likely be avoided by:

… greater use of the myriad provisions in the income tax system which offer preferential or concessional treatment for particular types of income, forms of business organization or categories of investment vehicles.

Taxpayers Australia also raised concerns about how easily this tax will be avoided using the FBT loophole and other tax minimisation strategies. They said:

Treasury estimates are therefore likely to be overstated because considerable amounts of relatively straightforward tax planning is likely to take place which have the effect of reducing taxable income, often to beneath the $180,000 threshold.

Taxpayers Australia went on to say:

We note that most of this planning is relatively straightforward and is already being actively marketed by many tax advisers. In short, it is clear that in practice only the wealthy but poorly advised will be paying the Debt Tax.

This loophole has already been picked up on by tax advisers, and media reports have quoted advisers asserting that this loophole will be exploited. For example, Prosperity Advisers tax director Mr Stephen Cribb said,

Taxpayers will take advantage of it simply because it is so easy to do.

In addition, there may be taxpayers who earn less than the $180,000 who will be impacted by the increase in fringe benefits tax. This concern was raised by the Tax Institute in their submission:

The increase in the FBT rate corresponding to the increase in the Levy, applies in respect of all employees, not only those employees earning taxable income over $180,000.

This may create the perverse circumstance whereby the wealthiest avoid this tax by using aggressive tax planning and those earning less than $180,000 end up making up some of the shortfall. It raises the question of just how serious the government really is about sharing the burden of this budget or resolving its so-called budget emergency. If the government was really serious it would have close loopholes in its new tax measure with the same zeal that it is showing as it cuts services, raise taxes on the poor, the sick and the young, and hits Australia's pensioners.

I now turn to the economic record of the previous government, something that this government seeks to denigrate. In fact, it so confected a budget emergency that what we did see was a real hit on consumer confidence in the wake of the Treasurer, the Prime Minister and the finance minister really trash talking the Australian economy. It seems to have eluded some of the senior economic ministers in this government that they are in government now, and markets actually listen to what they say. We certainly saw consumer confidence at one point in the post-budget period hitting levels that were not as bad but almost as bad, and certainly the worse, since the consumer confidence measures during the global financial crisis, which of course was a very different period in terms of where the economy was at.

What we know, though, is that the government is so focused on making the political case for a budget which hits middle-income Australia, which hits low-income Australians that they forget that they of course are in government, and their words are listened to by the market and by consumers. They are so focused on partisan politics that they forget the national interest. One thing you can say about a coalition led by Mr Tony Abbott is that they will always put their partisanship ahead of the national interest.

I want to put on record again some of the economic success that Australia has had, including over the last six years. Over the period Labor was in government, the Australian economy grew by some 14 per cent. Nearly a million jobs were created, and Australia came through the global recession in far better shape than most of our peers. This was a standout performance amongst our global peers. We took almost a million people out of the income tax system by tripling the tax-free threshold. We gave 3.6 million workers a tax break and boosted the retirement income savings of over eight million Australians. We took decisions to improve the structural position of the budget, many of which those opposite opposed, even though those decisions created room to fund important investments for the long-term health and economic prosperity of our nation. These included investments like the National Disability Insurance Scheme and the Better Schools Plan, otherwise known as the Gonski plan.

In terms of the global financial crisis, as I mentioned earlier, Australia under the Labor government came through the global recession in far better shape than virtually any other advanced economy. We did this while both preserving fairness and preserving jobs. As the Nobel prize-winning economist Joseph Stiglitz said, in Australia the stimulus helped avoid a recession and save up to 200,000 jobs. Without fiscal stimulus, which has been so denigrated by those opposite, Australia would have gone into recession. Hundreds of thousands of people would have lost their jobs. Tens of thousands of small businesses would have gone to the wall and Australia would have suffered a permanent hit to productivity, a permanent hit on our GDP.

Today Mr Abbott is happy to trash talk the Australian economy even on the world stage. By contrast, Labor used its time in office to protect jobs and to grow our economy. Perhaps there are many measures to which you could look as to the strong economic management of the previous government, but perhaps one which is particularly useful is the GDP rankings. Under the Labor government Australia's GDP rose from 15th to 12th in the world, and we also increased on a GDP per person basis.

Labor will not walk away from our record in government that saw Australia through the global financial crisis, that staved off a recession and saved hundreds of thousands of jobs in small business. We will not walk away from our strong commitment to economic growth with fairness. We see, through the loophole in the design of this levy, legitimate questions raised about how serious the government is when it pays lip-service to sharing the burden or solving its budget challenges. I say again that if the government were serious about these challenges it would have closed loopholes in the new tax measure with the same zeal that it is cutting services and raising taxes which are hitting on the poor, the sick, the young and the elderly.

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

Just give me one moment please. I might have to pass over to another senator as I have a nosebleed. This has come at a very bad time. Please go to the next speaker.

Ian Macdonald (Queensland, Liberal Party) Share this | Link to this | Hansard source

I commence my contribution to this debate on the Tax Laws Amendment (Temporary Budget Repair Levy) Bill 2014 and related bills by indicating that I totally support the government's drive to address Labor's debt crisis—the $650-odd billion of debt that Labor has left us. Whilst I support the measure in this bill that introduces a levy on income earners on above $180,000, I have trouble in supporting the bill, not because I do not agree with that aspect of it but because I do not believe it goes far enough.

I indicate to the chamber that I want this bill to be debated in the Committee of the Whole so that I can seek answers from the government minister in charge of the bill, Senator Cormann. I have indicated to Senator Cormann, as I have to others in my party, my concerns around why, when Australia needs additional money, the government is introducing a levy on individual taxpayers but not on corporate taxpayers. I have to say that this is not a new position for me. I spoke against Labor's flood levy. I was criticised by Labor for not wanting to impose a levy to help the flood victims in my state of Queensland, but, as with most things the Labor Party do, that was complete rubbish. Of course I wanted to help the flood victims in Queensland, but I wanted to know then, as I want to know now, why we are taxing individual income earners additionally but not companies that earn a certain amount in profits.

Nobody likes paying additional tax, and I certainly do not want to gain a reputation of calling for increased taxes. You might recall that not long ago I was seeking to broaden the GST. The Labor Party and populists got on the bandwagon and said, 'There's Macdonald wanting to increase the tax poor people pay on their food.' What I said in response to that is that, when the Howard government was elected, it actually went to an election on a GST proposal and was supported by the Australian public. The proposal was that it be a broad based GST on everything, with commensurate compensation for low-income earners, who would be unduly impacted by the broadening of the GST.

In this day and age, the states are being asked to do more and more in health and education—and I agree they should; I agree that as far as possible the Commonwealth should get out of it. But the states need money to do that. They cannot just do it on a wing and a prayer. As a senator supposedly looking after the interests of my state, I take notice of what the Queensland government said in that regard. I thought one way to address that was to expand the GST back to what was endorsed by the Australian public at the 1998 election—nothing more, just going back to what we were elected on at that time: a broad based GST that did not require small business to fiddle with what is taxable and what is not, and that did have appropriate compensation for lower income earners. So I am not calling for an increased tax; I am just calling for the introduction of what we originally proposed, because the states need the money if they are going to do more in health and education, as I believe they should.

In relation to this particular levy bill, I support entirely the increase of tax on those earning more than $180,000. Nobody likes paying increased taxes, and I am like everyone else. To people who complain to me about a tough budget, I say to them, 'Don't complain to me, brother. Here's the address of the local Labor Party politician'—I do not say 'local', because there are none up our way these days. I say, 'Here is the address of the few Labor senators that are left in Queensland. Speak to them about their government's financial mismanagement that has led Australia from something like $60 billion in credit to approaching $650 billion in debt.' There is a debt crisis and I accept the word of Mr Hockey when he says there is a debt crisis. That is why I am surprised when this government, our government, my government, wants to address the debt crisis, but it leaves off the recovery regime—a significant set of taxpayers who could contribute to paying off Labor's debt. I have asked for an explanation, as I did with Labor's debt levy. Why do we tax individuals but not companies? In talking about the Labor flood levy, I said, 'You're taxing the butcher and the baker but not their biggest opponents in Woolworth and Coles who compete with them but do not have to pay the tax.' It is okay for the butcher and the baker but not for Coles and Woolworths. I have sought answers. I have not got them, and I am hoping Senator Cormann will be able to answer these questions in the committee of the whole. I have asked why companies do not have to pay it.

I point out that many of the companies earning profits of more than $180,000 in Australia are companies who have shareholders who are not Australians. When I raised the question, the only reasonably sensible answer I got was from a new colleague from mine, who had been a chartered accountant, and he explained to me, 'If you tax companies, it means that the dividend that they pay to their shareholders will be a little bit less.' I can follow that. He then pointed out that many of those who received the dividends were superannuation funds. Many of them were the mums and dads who are perhaps on $40,000 a year and rely on the income from Xstrata, WesFarmers, Coles and Woolworth for their living. That is probably right. That would mean that, if the companies had to pay a little bit extra tax, their dividends would be a little bit less and people on lower incomes would have that much less money.

I look at the company tax system and I am told that it would be good for Australian investment if we did not have any company tax at all, and I agree with that. It would mean a lot of investment in Australia, a lot more jobs and a much brighter economy. But of course we have a company tax. It is probably higher than many in the world, but we have it. This government, in its wisdom—and I was part of this—agreed prior to the election that we would reduce company tax as a step towards making investment in Australian companies more attractive. I thought that was a pretty good idea. It was only a 1½ per cent reduction, but that is a start. Then, lo and behold, we have a Paid Parental Leave scheme, which is not going to cost anyone anything, except the top 3,000 companies. So the company tax reduction we are taking from one place is added back on. There are all the arguments which I am sure Senator Cormann will raise with me on why we want to reduce company tax, and I agree—they are valid and good arguments; I do not object to them—but why are we putting back a 1½ per cent levy on these companies? It just means that the argument for reducing company tax is blown out of the water. I understand that a decent paid parental leave scheme is a good idea, but I have heard the word of our leaders that we are in a debt crisis, and I think we are. You cannot go from $60 billion in credit to $650 billion in debt and not call that a credit crisis.

I heard the Leader of the Opposition in the Senate, Senator Wong, saying she was going to list the economic achievements of the previous government. Fortunately she did that when she had only two minutes left in her speech, because it would not take more than two minutes to list the achievements of the previous government in the economic area. It is easy to give away money if it is not your money and someone else has to pay for it in the years to come. I will not even waste time arguing the case about Labor's economic mismanagement. Except for the few people who are members of the Labor Party and some of the 10 per cent or so of workers who are members of the unions who now support the Labor Party, nobody else in Australia would I think accept it as relevant or reasonable that the Labor government was anything but an awful financial manager. So I will not address that anymore.

There is a crisis, and we have to address it. So, what is the best way to address it? Pose an additional tax on high-income earners—I agree entirely. But why aren't we imposing that same tax on companies? There will be arguments on why we do not want to tax companies, but then why doesn't the same argument apply to paid parental leave? Paid parental leave is a good thing to strive towards when the country can afford it. You only have to go as far as the Commission of Audit for an indication that the country cannot really afford the proposed paid parental leave scheme—at this time; there will be a time in the future. Give this government one or two or three terms, and you can be assured that, as we did in the Howard days, the books will be back in order, the Treasury, if not overflowing with cash, will have enough cash to pay its way. And then we should look at a proper paid parental leave scheme.

I have my concerns about the paid parental leave scheme. I am seeking more information. I am wanting to see how it impacts on people in the constituency I represent, which is basically regional Queensland and Northern Australia. And I want to see how it impacts on stay-at-home mums. My inclination is to vote against the measure, but I am waiting for the arguments. I want to see the fine print of the legislation to see what is actually proposed. And if there is a proposal for stay-at-home mums, if there is a proposal that really makes sure that this rather generous scheme does not apply only to the capital cities, then I would go along with it—except that I am not sure that this is the economic scenario that we should be following. Yes, we have to do it, but not at a time when we are in a debt crisis. I accept that we are in a debt crisis. Why are we bringing that forward now?

So, I desperately seek, as I have sought in the past, answers to why the Labor Party had a debt levy scheme that did not involve corporations and now my party is having a debt levy scheme that does not involve corporations. I repeat: many of the shareholders of these large companies that make more than $180,000 a year are foreign owned companies. They have Australian shareholders but foreign shareholders too. And I might say, they are companies that to a certain degree also benefited from Labor's lavish waste of money. Why shouldn't all those who make an income out of Australia contribute to the debt crisis? That is what I am desperately trying to understand. And I answer my own questions, but the answers are nonsensical, because if we do not want to tax companies to pay off Labor's debt then why are we taxing them for a paid parental leave scheme that is perhaps a little before its time?

So, I have grave concerns about this. If I had the wit, I would have moved an amendment to include companies, but I must confess that like Mr Palmer I do not have the staff to do that. And, unlike Mr Palmer, I do not have the private wealth to engage my own accountants to prepare a scheme for me. In any case, I am not sure that we can amend financial bills in the Senate.

But, short of that, I oppose the bill, not because—and I want to make this very clear—I oppose the tax on those earning $180,000 or more but because I do not think it goes far enough. I think it should also be imposed on large companies who are earning more than $180,000. To those who would say, 'Small business would have to pay,' I say that, unfortunately, after six years of Labor, I do not think there are too many small-business companies earning $180,000 or more, so I do not think it really would attack them. I know from my long-gone practice as a lawyer that most small businesses have corporate veils but in fact really work under some sort of family trust, in which case the corporate veil does not pay the tax.

So here is an opportunity. I do not want to be nasty to these people; I love Coles, Woolworths, Xstrata, BHP, Wesfarmers and all the people who make a real contribution to Australia. Good on them. I am pleased that they do well, but, because they are doing well, why aren't they contributing to Labor's debt crisis? That is the issue I raise.

My crossing the floor might be relevant on some occasion over the next year or so. It would not be today because Labor are actually supporting this. They introduced the flood levy—against my opposition at the time to the levy aspect, not to raising money to assist people affected by floods. Labor are, of course, supporting this new levy but without, I think, giving it the right sort of support. I am not sure where the Greens are coming from, but, with Labor and my own party agreeing, my vote is going to be fairly irrelevant. That is why I wanted to take time today to explain my position—and not just explain my position but say to governments in the future, be they Labor or Liberal: if you are going to need extra money, have the courage to add a little more on top of the general taxation rate for high-income earners. Do not use this levy pretence. Is it a tax or is it a levy? Who cares? I do not care; I think most Australians do not care either. Why do we go for levies when we should just do the right thing? If we need money—if we have a debt crisis; and, thanks to Labor, we do have a debt crisis—then I think all Australians should contribute. Why aren't those people who make their money out of Australia, the foreign shareholders of big, wealthy, multinational companies, contributing as well?

It is a pretty simple argument and I am a pretty simple person, but I have been asking this since Labor's flood levy. I think there were levies in times gone by that I did not quite understand, but I did ask at the time of Labor's flood levy and I have asked at the time of this debt crisis levy. I am still yet to receive any reasonable explanation, bearing in mind that we are going to increase company tax in one particular area for another measure that has been proposed. I look forward to the opportunity to have this discussion with the minister in the Committee of the Whole so that, hopefully, the minister can explain to me why it is that we tax only individuals and not companies.

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I had to pop into the bathroom to quickly fix a nosebleed, and I came out and noticed that Senator Macdonald had pretty much delivered my speech, which would be a first. Although there are some fundamental things we disagree on, I am very heartened to hear Senator Macdonald say that we are not doing enough to take money off those entities that can afford to pay rather than taking money off the poor, the needy and the disadvantaged in this country. I was very heartened to hear that and I certainly look forward to joining with Senator Macdonald in asking similar questions about why we are not taking a structural approach to increasing taxation in this country.

Actually I wanted to start with a biblical parable, and it is just coincidence that Senator Bernardi is in the chamber with me today. It tells us that when reflecting on our future—and you will be very familiar with this, Senator Bernardi—we should build our house on stone and not on sand. Figuratively, the house can be our lives, our societies, our communities, our governments. This Tony Abbott budget is looking like it will soon disappear into quicksand because the foundation it is built on is dishonesty and deception and it is proving unpalatable and unacceptable to many Australians—and I am sure that everyone in this chamber has received that feedback themselves in recent weeks no matter what political colour they are.

This so-called budget emergency, the debt crisis, the key justification for these cruel and unnecessary cuts to our country's most disadvantaged, is the biggest deception of all. The idea that Australia is in a debt crisis has been debunked by both the International Monetary Fund, and last week by the Parliamentary Budget Office who, whilst acknowledging that they wanted to see our levels of debt retired, said that it was nonsense to say that we were in some sort of crisis. This is the type of language and emotive messaging that we use in times of warfare or at other times of national crisis and most Australians are smart enough to know when they are being conned. They know when it is time to pull in their belts and do their bit for their country. This is not a crisis or an emergency that requires the types of draconian, cruel and unnecessary cuts that we have seen, for example, to young unemployed Australians under 30 or to pensioners either elderly pensioners or disability pensioners.

The myths this budget dishonesty are built on were recently analysed by the Australian Institute in its report, Auditing the auditors, which I have a copy of here. They showed that Australia's present debt levels are historically low and that by international standards the Australian government net debt levels and current budget deficit are amongst the lowest in the developed world in the OECD. Contrary to this government's propaganda, Australia's current debt levels are the result of tax cuts under the Howard years rather than from recent supposed runaway government spending on things such as welfare, health and pensions. We are the fourth lowest taxing country in the OECD and our levels of government spending rather than being out of control are in line with Australia's average spending over the past 30 years.

The Greens like every other political party in this chamber support sensible measures to raise revenue and manage budgets but, like Senator Macdonald, we want to target those who can afford to pay rather than punishing the battlers in this country. This includes keeping the current tax on mining super profits and going back to the original Henry review and fixing that tax; a price on carbon pollution; a new deposit guarantee levy on big bank profits relating directly to the deposit guarantee they received during the GFC and the benefits that has brought the big banks, which should be paid back to the Australian taxpayer; and the removal of billions of dollars in corporate welfare such as mining diesel subsidies. None of these are considered in this budget. The most common thing I say when I talk to people about the budget is, yes, the coalition did have very clear policies going into the election that they would axe the taxes—getting rid of a mining super profits tax and a price on carbon. But what they did not say was where they would find the revenue necessary to retire debt and run this country. When they were asked repeatedly whether there would be cuts to science, to CSIRO or the Antarctic Division, whether there would be cuts to the ABC, whether there would be cuts to pensioners, to the unemployed or to universities, they consistently said no. There were at least seven direct broken promises, at least seven. This is coming from a Prime Minister, Tony Abbott, who campaigned for four years—longer than four years but especially the four years before he came to government—on the supposed lie that Julia Gillard had told, something which I have heard Senator Macdonald, for example, mention at least 2,000 times in my two years in the Senate. One lie by a Prime Minister, one broken promise, but six lies that I have counted so far, one for each month the government has been in power in the country.

And it is not just the fact that we have this deception—and it is obvious to nearly every Australian who is true-blue and knows when he is being conned—it is a matter of trust, and that trust is going to take so long to restore not just for this government but for all of us as members of parliament. Personally, I think the feedback that I have received indicates that we could not possibly be at a lower ebb as parliamentary representatives than we are now because of these broken promises, and the cynicism day in day out of talking about Prime Minister Julia Gillard being a liar and breaking a promise on a carbon tax, yet suddenly it is okay for that same Prime Minister to do exactly the same thing. Six months in power, and how many more broken promises are there going to be? Clearly, promises mean nothing. Integrity and honesty mean nothing in this country, and that is something we all have to fix and we have to fix it soon.

We have already voiced our opposition to the poorly constructed ideological budget initiatives such as the debt crisis levy. Not only is it bad policy, it is a smokescreen, the political gimmick that this government is using to somehow sell its cruel and dishonest budget. But looking at it and pinpointing the details around this policy, it is also bad policy. Let us consider it more detail.

According to the numbers I got from Senator Cormann in estimates last week, this budget repair levy—and I have also heard it called a 'budget crisis levy' and a 'debt crisis levy' and every week the messaging and the language around this seems to change—will raise around $3 billon. Looking at our projected forward debt, $667 billion—and Senator Cormann reminded me last week that if we had some other add-ons it would be $748 billion—on my calculations $748 billion divided by $3 billion, is 0.02 something per cent. So much for repairing the debt crisis in this country! And if it was a budget repair levy—if you want to use that messaging—it works out to about two to three per cent based on the forward estimates for budgets. How is that sharing the heavy lifting, when high-income earners in this country are contributing less than half a per cent to retiring this nation's debt? Clearly, it is not.

I was also intrigued as to when is a deficit repaired, when is debt repaired, when is a budget repaired. I could not get any answers from Senator Cormann last week on what actually would be classified as 'repaired' and whether this levy would stay in place if the budget was not repaired or the debt and deficit not repaired. We all know that the forecasts for the next three years and beyond rely very heavily on receipts and increase in economic activity. None of us have crystal balls. We do not know whether that is going to eventuate and, if it does not, then it is likely that we are going to have significant trouble paying down our debt. Yet, under this legislation, high-income earners still get let off the hook.

On the other hand, we have permanent changes to pensions and permanent changes for the young who, potentially, if they are not from a loving family, get thrown out on the street if they lose their job. Imagine a young person now facing the prospect of much higher fees at university but committing himself to going down that road—and this is only just one sample—and committing himself to those payments and getting though the degree and getting a job. It is a kick in the teeth for any young person—or any young person for that matter—who loses their job. How much more stress will they face now knowing that they have got six months with no income, six months where they are going to have to find, scrap, beg and borrow? As an economist, I think that through. If I were a young person and I had that uncertainty in my life, I would save my money. Maybe it will be good from a national savings point of view, but that is not going to be good for consumption or for investment. Why is it that consumer confidence has crashed in the last month? It is for exactly for the same reason.

We live in a society, in communities, that full of anxiety. It is a dog-eat-dog world we live in. Now we are only making it harder and harder particularly for young people after the commitment they are going to make to training and to bettering themselves. We are going to raise the levels of anxiety and ultimately, in my opinion, the levels of stress and mental illness, all things that afflict out society, because we implement stupid policies like the ones we have seen in this budget. They are cruel and unnecessary, designed by people who are totally out of touch with reality.

At a forum in Glenorchy last week, I met 60 or 70 disability support pensioners. At the end of the forum, there was a question put to me that I was not prepared for. An elderly gentleman, sitting with four of his friends, got up and said, 'My friends have discussed this and we believe that this government has set this budget up to fail. Can you tell me what possible reason they would have in setting this budget up to fail?' I said that I could not think of a reason and that I did not think that was the case. He said, 'Well, how can they be so stupid? How could they do this? How could they be so draconian, without consultation and without going to an election saying that they are going to increase the age of retirement or change the indexation of pensions? How could they do this? It does not make sense to us.' And I said, 'The only thing I can come to terms with, sir, is that they are totally out of touch.' Totally out of touch with average Australians; with people who have a right to live with dignity. And I challenge the government senators, if I have not done it already, to go down to Centrelink and meet these people. A lot of them are very good people who are desperately trying to get out of their circumstances. They are not people who are laying back on their pillow of entitlement. Sure, maybe there are some; I have no doubt there are some, but the majority are not. You cannot take a cookie-cutter approach to people, to human beings. What we need in this house in the next few weeks is some compassion and also some courage to stand up and say, 'This is stupid.' A lot of these measures need to be blocked, and the Greens will certainly do that.

In relation to this particular levy that we have in front of us, as I mentioned earlier, how can it be a repair levy if it is only repairing 0.02 something per cent of our national debt? I asked Senator Cormann that as well, and he said: 'It's like a boulder—it's going to get the ball rolling. High income earners are going to put their hands in their pockets and contribute.' I then said: 'Are you planning to cut taxes in this country going into the next election? And Senator Cormann said, 'Because of bracket creep, it's a natural thing for governments to cut taxes.' I said, 'All right then; can you guarantee you will only cut taxes in line with bracket creep?' And the government could not do that. Once again, I hate to be cynical, but it seems to me that that is exactly what this government is doing. They are building a war chest to go pork-barrelling and to provide tax relief and tax cuts across the income streams in this country going into the next election. So much for high-income earners doing their bit.

The Greens would like to see, in line with what Senator MacDonald said, structural changes to this tax so that it is permanent. How is it fair that the poor in this country suffer permanent cuts but the rich only get a temporary levy for two to three years? And—I will not go into it, because I think Senator Wong has already covered it—up to half a billion dollars of it could be avoided in the first 12 months due to loopholes. Also, a number of small businesses—and I know this from my own experience—could also avoid paying the levy by simply reshuffling their own dividends and incomes that they pay themselves within their businesses. So it is very unlikely to even raise anywhere near the $3 billion, let alone repairing the levy.

There are things we can do in this country to raise revenue when we need to. We can take on tax cheats; particularly offshore. It was estimated—and I went through this in estimates last week as well—that there is half a billion—$500 million—in at-risk revenues that this government could chase. We could also have the courage and conviction to take on big business and to see through the structural reforms that the Henry tax review recommended. This reminds me of a quote from one of my favourite Australian authors, Gregory Roberts, who wrote the book Shantaram. He said, 'There is only one thing more ruthless and cynical than the business of big politics, and that is the politics of big business.' This is a big business budget, and when the two come together—when the self-interest of this government and the self-interest of the large multinational corporations that make so much money in this country come together—we get the perfect storm. That is what we have in this budget, where a treasurer is happy to get up and say in his budget speech that he is redefining the role of government in people's lives. And I haven't the exact words, but I noted he made a comment the other day that it was not a government's role to tackle inequality. That is not why I am here. I am here because I think it is the government's role to do what is necessary to tackle inequality, and that is why my colleagues and I will stand up against these cruel, harsh and unnecessary budget measures we are going to see come to this House in the coming months.

I encourage all senators in here to go out and hear people's real stories and to have the compassion and the foresight necessary to not only help build our communities but also address why it is that we have these problems in our communities. Do not just address the symptoms; address the causes. Saying people are lazy and somehow feeling like they are entitled is not the answer. We need to be prepared, as Senator MacDonald said, to put in place permanent higher taxes. The Greens have a policy—a longstanding policy—on progressive taxation, particularly to millionaires. We also have a policy of taxing bags and taxing pollution. To give you a very quick idea, removing the carbon price is going to lose us around $12.5 billion. But reducing tax avoidance by taxing discretionary trusts would provide $3.3 billion; applying a millionaires' tax—50 per cent over a million—that is $907 million; and implementing the original super profits tax—$35.58 billion dollars. That is the exact amount of expenditure cuts—almost the exact amount that this government is taking in its budget that could be recouped from our mineral wealth and shared by all Australians if we had the guts and the courage to do it. Placing a $2.00 per ton levy on thermal coal would provide another billion dollars; and a public insurance levy to pay back taxpayers for providing deposit guarantees—$11 billion. There you go—and that does not even include some of the easy other low-hanging fruit that we need to tackle in this country.

The Greens will be opposing this measure, as we will other measures in the budget.

Cory Bernardi (SA, Liberal Party) Share this | Link to this | Hansard source

May I thank Senator Thorpe for providing the slot for me to speak in this debate. I would also like to thank Senator Whish-Wilson for outlining the Greens manifesto, which basically reduces us all to economic slaves, where everything will be going up in price and taxes will be levied upon anything that moves or prospers or provides any sort of incentive for the country. It is a dreadful state of affairs, the result of which can be seen right around the world, where people are rejecting big government and saying, 'We've had enough of toiling so that you can waste our money in an inappropriate manner.' That is what the Greens want to establish for all Australians.

It is probably pretty clear that I am coming to this debate from a different angle. Overall, the government has probably got the balance of the budget right. Let us remember that Labor's legacy was one of a dysfunctional and incompetent government. It was about debt and deficit, the likes of which we have never seen in this country before. Once again, it is up to the Conservative parties, the Liberal-National coalition, to pick up the pieces left behind by the Labor Party and its alliance partners, the Greens, on behalf of the Australian people.

There is nothing more pressing on my mind than to reduce the level of debt that the government has in this country. Debt cripples governments. It has been responsible for the fall of every empire in the history of the world. When they cannot pay their bills they start chasing the people for more money—and the people get sick of it, eventually. You can go through history and find it is this sort of economic collapse that is the problem with society.

Australia is nowhere near that, so I do not want to be alarmist, but massive debts begin somewhere. Let us remind ourselves that it was only six or seven years ago when Australia had no net debt. We had money in the bank. How quickly that was turned around with $50-billion annual deficits. The government was spending $50 billion more every year than it was taking in, in revenue.

The answer to that for the Labor Party—and for the Greens and others—is: 'Well, rather than cut our spending, let's put taxes up!' I have a fundamentally different view on that. I said at the outset the government has probably got the balance of this budget right, overall. However, there are elements of the budget and plan that has been put forward that I have a principled disagreement with. This new tax bill is one of those measures I find myself unable to support.

The result of the passage of this bill will see Australia's top marginal tax rate hit 49c in the dollar, when you incorporate other levies and responsibilities. It will kick in at around three times the average wage. The first part of that—the tax rate of 49c in the dollar—in my view, is simply too high. The second part of that equation, the fact that it kicks in at around three times the average wage, says to me it is too low. The end result will be that Australia will have a top marginal income-tax rate that is one of the highest in the developed world. It is a marginal income-tax rate that will kick in at a much lower level than many comparable nations.

I would like to reference a few of those tax rates. When you incorporate national and state taxes, in places like Toronto in Canada, for example, the top total tax rate is 38.2 per cent. It kicks in at an income level, in Australian-dollar equivalent, of $503,912. In New Zealand the top tax rate is 33 per cent. In the United Kingdom it is 45 per cent. In Los Angeles—the highest-taxing state, I understand, in the US when you look at federal taxes plus state taxes—it comes in at around 50 per cent. But that top marginal tax rate only kicks in at US$1 million, which is A$1,068,000. Texas is probably the most prosperous state in the union of the United States, at the moment, because it has a small government philosophy and a low-taxing philosophy. Texas, has a top tax rate of 39 per cent, which is entirely comprised of federal taxes. That takes places after $434,000 worth of Australian-dollar income. In Japan it is 40 per cent, kicking in at around $188,000. In Singapore it is 20 per cent of $273,000. In places like Switzerland, in Zurich, it is 24½ per cent once you earn over $900,000 per annum.

I am highlighting this because I want to demonstrate that Australia's tax regime is not keeping pace with the rest of the world. We should be looking to lower taxes in this country, particularly for personal-income taxes, so there is less incentive for people to get into tax-avoidance measures to engage in unprofitable or unproductive measures, some of which could be addressed in further speeches. But there is also a substantial body of academic literature which shows that high rates of taxation have a negative impact on economic growth and investment.

These studies use different data and sources, but they are quite compelling. In 2012 a review of the literature completed for the Tax Foundation by Mr William McBride looked at 26 peer reviewed studies going back to 1983. All but three of these studies confirmed that increased taxes have a negative impact on the economic growth, and none of those three dissenting reports had been completed in the last 15 years. The most recent an influential studies confirm this.

In 2009 Alesina and Ardagna completed a study looking at episodes of fiscal consolidation from 1970 to 2006. They found that fiscal stimuli based upon tax cuts are more likely to increase growth than those based on spending increases. They also found that fiscal consolidations based upon spending cuts and no tax increases are more likely to succeed at reducing deficits and debt, and less likely to create recessions, compared to fiscal consolidations based upon tax increases. The evidence is overwhelming; the studies support it, even in places like the UK. British Chancellor George Osborne recently commissioned the Treasury to publish a series of papers that indicate that lower taxes would, at least in part, pay for themselves through higher revenue. In December of last year Mr Osborne published analysis that showed that his decision to cut corporation tax from 28 per cent in 2010 to 20 per cent by 2015 would increase gross domestic product by 0.8 per cent.

These ideas—the notion that if you cut taxes, the government will receive more in revenue—are a product of the work of economist Arthur Laffer, who developed the Laffer curve. It was a theory that was pivotal in inspiring the tax cuts instituted by Ronald Reagan. In the 1981 Economic Recovery Tax Act, President Reagan slashed marginal income tax rates by 25 per cent across the board over a three-year period. Prior to those cuts the American economy was choking on high inflation, high interest rates and high unemployment. Between 1978 and 1982 the economy grew at an 0.9 per cent annual rate in real terms. Following the tax cuts, between 1983 and 1986, annual growth increased to 4.8 per cent. In 1996, the Kemp commission in America produced a report. I want to quote from it:

America has experienced three periods of very strong economic growth in this century: the 1920s, the 1960s, and the 1980s. Each of these growth spurts coincided with a period of reductions in marginal tax rates. In the eight years following the Harding-Coolidge tax cuts, the American economy grew by more than five per cent per year. Following the Kennedy tax cuts in the early 1960s, the economy grew by nearly 5 per cent per year.

And, as I have mentioned, in the seven years following the 1981 Reagan tax cuts the economy grew substantially as well.

The evidence is absolutely clear: tax cuts stimulate the economy. I believe—it is my considered view—that we should be looking to cut taxes in this country. I salute Senator Cormann and the government if their intention is to cut taxes in the years to come, but I do not believe the economy can afford a tax increase now. I may stand corrected on that: they have more access to much better data than I do; they have the departmental heads. There is a principled approach to this that we would be wise to be mindful of: the Australian people are not just economic slaves to government. They are entitled to keep the vast majority of what they earn. If people are earning $180,000 in this country, I want to see more of them earning $180,000. I want to see more of them earning top rates of income because that means we have a prosperous, a successful and an aspirational society. When we put taxes up to nearly 50c in the dollar—49c in the dollar—it means the government thinks it is entitled to half of what you earn over that amount. I think the empirical evidence shows that is absolutely wrong.

I would like to point out that, when it comes to tax is paid in this country, higher-earning people pay a substantial amount of the current tax. Individuals who earn over $80,000 per annum account for nearly 63½ per cent of total income tax take so two-thirds of tax is paid by those who earn over $80,000 per annum. When you ask about the top marginal tax rate of $180,000, those individuals who earn over $180,000 pay 26.2 per cent of the tax in this country—they are paying over a quarter of personal income tax in this country. That says to me that those people who are working hard—who are in good jobs in good professions and who are earning substantial amounts of money—are already doing their bit. They are the people who are paying the bills that, I regret, have been necessary to support previous governments that have squandered the strong financial legacy we had from the Howard-Costello years.

It is always difficult when you are at odds with your own party. I regret that this is my first opportunity to have a conversation about these tax rates with members of my own party. But, on principle, I am simply unable to support this bill. Like Senator Macdonald, I know the numbers are there. I know that the Labor Party and the coalition will be supporting this bill. I do not intend to cross the floor on it but I do want my objection to higher taxes in this country to be registered. The country cannot afford them. It is in the interest of every politician—whether in the Senate or the lower house—just as it is in the interest of every Australian to reduce taxes because that is the thing that will kick-start our economy. It will grow our economy and allow us to manage our debt and deficit in this country. I hope we never have to go through another period like the six or seven years when we had such a spendthrift government that we racked up what is effectively a debt that will mortgage our children's future. To get out of that debt we have to grow our economy; the best way we can do that is to cut taxes.

Lin Thorp (Tasmania, Australian Labor Party) Share this | Link to this | Hansard source

There are many opportunities for the contrast between the different political parties represented in this place to be demonstrated; that most recent contribution by Senator Bernardi probably illustrates it more clearly than most times I have heard it. The big difference between the Labor Party and the Liberal-National coalition—more particularly the Liberal Party—seems very much to be one around individualism as opposed to the common wealth. The Labor Party is always going to take the position whereby the wealth of this country is distributed equally so that every man, woman and child—every person with disability and every person who reaches a ripe old age—can be assured of decent housing, good education, access to public health and a safe future—not to live with the dregs of what is left over when the rich people have got a bit to spare. That is the chronic difference between these two groups.

Labor is going to be supporting this particular budget measure basically because it is going to be raising revenue from high-earning taxpayers, which is fundamentally acceptable to the Labor Party. But it must be said that the Labor Party, as the opposition, does have serious problems with its implementation and criticisms of its design. Fundamentally, they are around the time frame, specific design flaws, capacity for tax minimisation, misalignment with the fringe benefits tax and effects on superannuation. These problems with this particular piece of legislation have been canvassed quite widely through relevant groups and also in the committee that looked into it. Those concerns were also around the short time frame, the temporary nature, the adding of potential complexity to the tax system and the failure to address broader inequities in the tax system.

Around the time frame, the Taxpayers Australia group considered the levy's implementation period was too short to make a real contribution to 'budget repair'. The submission it gave to the relevant committee contended that the levy will end right at the time that government spending measures will be particularly high and need some support. In the submission that they gave they said:

Estimates released by Treasury show public debt accelerating rapidly over the period 2018-2023 but we note that the Debt Tax is scheduled to end in 2017. The $3.1bn which Treasury estimates the tax will raise contributes little to the repair of the budget and contributes nothing in the period when action is most required …

Also the Grattan Institute noted that the levy fails on one of the most important criteria for effective budget repair in that it has no impact on the long-term structural position of the budget as it will cease in 2017-18. Other important institutions noted real difficulties with the levy's design. The Tax Institute expressed the view that the levy would create unnecessary complexity in the Australian tax system, which would create a burden of compliance for taxpayers while not substantially increasing tax returns for government. The Tax Institute also suggested that the bills would introduce unnecessary complexity to the Income Tax Assessment Act 1997 by the addition of three steps to calculate a taxpayer's basic income tax liability.

Then there are also issues around tax minimisation and arbitrage opportunities. Many critics of this particular piece of legislation argue that the design contains opportunities for high-income earners to minimise their tax liabilities. For instance, Mr Saul Eslake has suggested that the levy could be avoided by most high-income earners through:

… greater use of the myriad of provisions in the income tax system which offer preferential or concessional treatment for particular types of income, forms of business organisation or categories of investment vehicles …

Taxpayers Australia have made similar comments. They have been known to say that 'only the wealthy but poorly advised' will be paying the debt tax, and I repeat that: only the wealthy but poorly advised will be paying the debt tax. Taxpayers Australia contend that the Treasury's projection for raising $3.1 billion over three years may well be overstated as:

… considerable amounts of relatively straightforward tax planning is likely to take place which have the effect of reducing taxable income, often to beneath the $180,000 threshold.

Taxpayers Australia contend that tax agents are already out there advising the wealthy how to avoid this tax anyway. They are telling people to accelerate tax receipts or tax deductible expenditures into years where the tax relief is available or the levy is not active. They are also advising their clients on deferring tax into those years as well and also exploiting the misalignment between the financial and fringe benefit tax years through salary packaging programs. The people who are supposedly going to be hit by this levy are also the ones who have access to the kind of information they need to avoid paying it in the first place. That is how the rich get richer. That is how they do it. They are also increasing contributions to superannuation funds, which will continue to be taxed at 15 per cent, and so are reducing their taxable income below the level at which the levy will kick in.

We have got a measure here that is ostensibly there to demonstrate to the broader Australian public that the rich are going to take a hit, they are going to share the pain. But Australians are not thick. They know that wealthy Australians got there, in many cases, through the hard work of their ancestors, not necessarily themselves. But they got there and they know how to hold on to it. They hold on to it by having accountants and financial advisers advising them how to avoid paying tax that the average Joe Blow has no access to. How many Australians have family trusts to split and stream incomes? It is not a generally acceptable thing for an average family to have. These are tools of the trade for the wealthy to protect their wealth. When it is as obvious as this, look at the potential for rorting that the paid parental leave scheme is going to bring in. It is as clear as a bell what is going to happen there. So, on one hand we have a levy that is trying to demonstrate to the broader Australian public that the rich are going to take a hit, and we already know that they are out there making their appointments now, paying their accountants to say, 'How can we avoid paying this?'

Then there is the issue of the misalignment with the fringe benefits tax. Many critics of this scheme have noted that there are many opportunities for high income earners to exploit the levy's misalignment with the FBT system through the use of salary packaging and fringe benefits schemes. These both reduce the taxable incomes of high income earners and impose a lower rate of tax on money that they put into these schemes. This is another problem with the system.

There is quite specific detail I could go into here, but suffice it to say that there are problems with the time frame of this legislation and the levy. There are serious design flaws in it. There are massive opportunities for tax minimisation and misalignment with the fringe benefits tax. And most of the companies in Australia who deal with superannuation have said that there are problems in the way that this will impact on superannuation.

Anybody here who has not had a chance to look at the red for today only has to look at the list of legislation that is required. There are something like 20 bills that are required to make these changes. There is legislation relating to family trust distribution, fringe benefits tax distribution, first home savings accounts misuse, TFN withholding tax, departing Australia superannuation payments, excessive non-concessional contributions tax, excessive untaxed roll-over amounts and trustee beneficiary non-disclosure tax. All of these bills are necessary because even those who wrote this poor piece of legislation have realised what problems there are with it.

But the Tax Laws Amendment (Temporary Budget Repair Levy) Bill 2014 is fundamentally about raising money from those who can afford to pay it, not from those who cannot afford to pay it. So, from that point of view, this legislation does get the support of the opposition. But, like Senator Whish-Wilson, I believe that there are many alternative ways we can go if we wish to raise more revenue in this country.

Why wouldn't we remove tax concessions around negative gearing, which some people—like Mr Saul Eslake—consider would save about $4 billion per annum in the short term? What about reform of the superannuation tax concessions to tax earnings of those over 60 at the 15 per cent tax rate? People have already got to the age of 60, they have saved up their superannuation, they have earnings on that superannuation and they are still getting concessional tax on it. Mr Eslake notes that that reform alone would save about $3 billion per year.

And what about reducing superannuation contribution tax concessions such that only $10,000 can be contributed at the reduced 15 per cent tax rate—currently it is at $25,000—which would save $6 billion a year? If you add those figures up you will find that the sum is quite considerable. Those matters are spread widely over the community and, to some extent, they take away what this government seems to believe is the necessity to put the bite on the most vulnerable people in our community.

We have a levy, which is a bit of a con because we all know—Australians know—that those with a lot of money also know how to keep hold of it. It is a con in that respect but there are better ways to raise revenue. There are better ways to make sure that the wealth of this country is distributed more broadly.

I received, as I am sure a lot of people did today, a letter from the Clerk of Canberra Quaker Meeting. It is quite scathing in its comments about this particular budget. Amongst the points it makes, the letter talks about the exaggerated emphasis on debt and deficit, which are modest by international standards, as a justification for severe reduction in government outlays. The letter talks about the budget's unfairness, with the greatest impact falling on the poor and disadvantaged, the cut in foreign aid and the quarantining of Defence expenditure from constraints at a time when diplomacy is severely limited by funding cuts. The letter talks about the move away from universal health care, the wholesale cutting of environmental programs, the cutting of welfare, community services, the reduced funding for Australian Aboriginals, and the continued allocation of much greater resources for off-shore detention of asylum seekers whilst denying extra funding support to agencies such as the Refugee Council. It refers to the adverse impact on young people in the decisions to change rules for unemployment benefits, training and education.

The Quaker letter concludes by saying: 'Our overall assessment is that the budget undermines collaboration in front of competition, reinforces individualism at the expense of cooperation, and imposes the greatest burdens on those with the least capacity to carry to them. It adds to inequity, breaks promises and places too little stress on the willingness of all of us, as citizens, to create a harmonious community within Australia and to contribute to peace beyond our shores.'

I can only conclude my remarks by saying that I think they have got it pretty right.

Rachel Siewert (WA, Australian Greens) Share this | Link to this | Hansard source

The so-called budget emergency which underpins this measure is the government's key justification for its cruel and unnecessary cuts to our country's most disadvantaged. We have had a number of people, including my colleague Senator Whish-Wilson, highlighting what a bunk the so-called budget emergency is. In the same way as we have a confected budget emergency or budget crisis we also have a confected welfare crisis, which is used to justify these cruel measures. I think we should note that while the measure contained in the Tax Laws Amendment (Temporary Budget Repair Levy) Bill 2014—if it was properly implemented and people were not using the loopholes, which I will come to in a minute—would potentially make $3 billion, this budget takes $12 billion from the most vulnerable members of our community. This levy is simply to hide the fact that this government is driving an ideological agenda to take that money off Australia's most vulnerable people and fundamentally change our community—that is what this budget is about, that is what these measures do—and you make a little token, with a whole lot of little loopholes built in, to make it look as if you are also hitting your mates. You are not. You are hitting the most vulnerable.

Mr Hockey's claim about the end of the age of entitlement was all about driving his ideological change to cut income support, social security, and things like universal health care. That is what this is about, let us make no mistake. And, let me tell you, you are not fooling Australians. They hate it. They know what you are up to. This emergency has been debunked by the International Monetary Fund and again this week by the independent Parliamentary Budget Office. This confected budget emergency further entrenches inequality in this country. If that is what the aim was—and it seems like it is—that is what you are doing.

Allowing inequality to continue to grow will put significant pressure on our community; in fact, it fundamentally changes our community. We know that inequality in itself has negative health impacts. The government's agenda hits single parents, pensioners, carers, people with disabilities and our young people, our next generation. We know that these groups are already living in poverty and suffering the effects of that poverty. We know what impact poverty has in entrenching disadvantage and intergenerational consequences. We already know that our current income support system is inadequate. Try living on Newstart—I have—for only a week: you cannot do it! We know that people on Newstart are living in poverty. We know that single parents are living in poverty. We know that 30 per cent of people over the age of 65 are already living in poverty.

This budget comes with a big price: driving the most vulnerable members of our community into poverty, and increasing inequality. It is because of the inherent inequality of this budget, and the apparent acceptance by this government that growing inequality in general is okay, that we want to see these budget measures defeated. We do not want to see a levy in place; we actually want to see progressive tax reform. We believe that this levy needs to be a permanent tax change. We have never hidden the fact that we think we need tax reform. But this levy, as I said, is simply designed to make it look as if the mates, the big end of town, are paying just a little bit.

We know it is actually the most vulnerable in our community that are going to be paying the price not just because they will be living in poverty but also in terms of the long-term consequences. The cuts of $12 billion to payments and programs for those on low incomes are permanent changes for those community members and our community. The agenda here is not the confected budget crisis, not the confected welfare crisis, but the fact that this government wants to change our society. This temporary deficit levy will raise $3 billion—if you do not manage to find a loophole. Senator Wong articulated some of those loopholes, as did my colleague Senator Whish-Wilson. Of course, the race will be on to find those loopholes, so we will never see the $3 billion from this levy. Avoiding the real conversation and relying on trickle-down economics is clearly what this government are at. They clearly want to create a mean and cruel society in Australia—and these cuts are particularly mean and cruel to the most vulnerable members of our community.

This government has not gone for revenue measures which would genuinely raise a significant amount of money for our budget. There is new evidence internationally that more than $21 trillion of assets are hidden offshore due to tax loopholes. If the Australian component of this was taxed properly, it would certainly generate more income for Australia. And it would also change the conversation about our national wealth. Instead we have a community where the gap in Australia between those who have the assets and the money and those who do not is growing. The wealthiest one per cent of Australians have more than 60 per cent of the country's wealth—and the way these changes will impact on the most vulnerable people means they will keep it and it will grow. The nine richest people in Australia have a fortune that equates to the bottom 20 per cent of our country—that is, 4.5 million people.

There has been a concerted effort to make out that income support is putting enormous pressure on our budget. But the HILDA report today—bad timing for the government—shows that there has been a gradual decline in welfare reliance by all working aged people over the last two decades. In 2001, 23 per cent of people aged 16 to 64 received welfare payments each week. In 2011, that figure had fallen to 18.5 per cent. The proportion of households receiving any welfare fell from 41.3 per cent to 34.7 per cent. The HILDA survey reports today have put paid to Treasurer Joe Hockey's claims that there is a welfare mentality in Australia and the government needs to cut the social security budget. The Treasurer says welfare is costing each Australian $6,000. Let us have a think about what that is for. It is to support seniors. It is for the age pension and to support people in aged care. It pays for family tax benefits. It helps people with disability. It not only pays for the DSP and other disability supports but also funds the NDIS. It also funds and helps support those people who cannot find work.

It pays unemployment payments, it pays sick payments, it pays veterans and it pays carers. Of course, the government is going for them too. It supports other programs that provide help to people with disabilities. It provides childcare, income support payments and child support payments, and it helps to pay states for people with disabilities. In other words, it provides those fundamental supports that a caring and generous society provides to its citizens and which underpinned our social security system when it came into being at the beginning of the last century. The feedback I am getting from the community is that community members still want those supports and still believe we should be providing those supports to members of our community.

Let us look at the Oxfam report released today, where we learn that 64 per cent of those surveyed said that inequality was making Australia a worse place to live. The government seem to be in denial about what inequality looks like. Not only are they making the situation worse for many members of our community who bear the brunt of these budget cuts, but they also have the gall to suggest that Australians have equality of opportunity under this government. They obviously do not understand what equality of opportunity means. If you entrench disadvantage and poverty, you increase inequality. They clearly need to go back and gain an understanding of what equality of opportunity means.

Equality of opportunity means access to education, yet funding for Gonski has been dropped and tertiary education will become much more expensive, particularly for women. Equality of opportunity means access to housing, yet we have seen funding for social housing cut. Equality of opportunity means access to work, yet this government is putting in place policies that make it harder for people to find work. The perverse incentives that are being built into these measures for young people will entrench poverty and make it harder for people to find work. Equality of opportunity means access to health care, yet this government is fundamentally undermining universal health care at a time when we are not, for example, closing the gap adequately for Aboriginal and Torres Strait Islander people in this country.

This debt crisis is a confected crisis, and the debt crisis levy is a poorly constructed, ideological budget initiative that simply highlights that the government is being dishonest with the Australian community. There is no budget crisis and there is no welfare crisis. There are ideologically driven attacks on the Australian community that are confected to try and justify the horrendous cuts that the most vulnerable in our community face, such as dropping young people into poverty for six months.

If you are born with a silver spoon in your mouth, you will never know what it is like to be unemployed and have no income for six months. Maybe you think you can go home to mum and dad. For a start, in estimates—and I asked in a number of estimates committees—no-one could tell me how many of the young people they expect to be caught up in this measure are living at home: 'I can't tell you, Senator.' 'How many have children?' 'I can't tell you, Senator.' 'Will a couple that are both unemployed and have children be subject to this measure?' 'Yes, one of them will.' So we will have families living on one Newstart allowance. We heard in the media over the weekend—and we did not hear this in estimates—that if you are pregnant you will be subject to this measure as well. The cute thing about that measure is that you are still on Newstart—nil start, nil payment. It is an abomination to treat the income support system in this manner.

The Greens support sensible measures to raise revenue and manage the budget by targeting those who can afford to pay. This includes keeping the current tax on mining superprofits and keeping a price on carbon pollution. We proposed a new deposit guarantee levy on the big banks' profits and the removal of billions of dollars in corporate welfare—such as the mining diesel subsidies—but none of these were considered in the budget.

You could say there is a welfare crisis in this country. The welfare crisis is the fact that this government refuses to look at where you can get real revenue and remove the welfare for big business. This government is refusing to consider measures such as removing the mining diesel subsidies, which provide billions of dollars to the big end of town. We need to assess why we are prepared to abandon a caring society and let this idea of a budget emergency stand when it will only further entrench inequality and make things much worse for many people in our community. How can this government continue to say that there is a budget emergency when there clearly is not, and how can it continue to try to take $12 billion off the most vulnerable in our community?

Inequality has a significant impact on people's sense of belonging and makes them feel excluded. It has real impacts on people's health. Poverty has long-lasting psychological impacts, as well as the most obvious impacts of not being able to eat, pay for housing, pay for clothes or afford your kids' schoolbooks. Anglicare released a report last year that showed the impact of not having enough money to buy food and what that means for our most vulnerable families. It talked about the shame that children experience when they go to school with no lunch or when they cannot bring their friends home after school. It talks about the lifelong disadvantage that is experienced by people entrenched in poverty and how those early experiences make people feel long-lasting shame.

Housing stress is reaching a critical peak, particularly in my home state of Western Australia. We have families living in one room, or worse, in tents and in their cars—families with young children living in cars. How can you go to work, go to school or expect to perform in job interviews when you have not got a home and you have not been able to eat, when you are stressed because you cannot feed your family?

The Salvation Army's Economic and Social Impact Survey has also highlighted the serious challenges facing many people across Australia, including homelessness and housing insecurity, a lack of food and heating, no access to money in emergencies, and social isolation. The report also highlighted the serious consequences of the GP co-payment and the challenges to the PBS, with a quarter of people surveyed already unable to afford medical treatment and 34 per cent of people going without medication. Poor health, insecure housing, going without meals and being unable to at least heat a room in the house during winter are events and situations that trap people in long-term disadvantage, and they are real, they are live, they are happening now.

It is time to stop pretending that this is a level playing field and that everybody has the same access to opportunity, when clearly they do not, and this budget makes it worse. We need to start talking seriously about how we resource the kind of community we want to live in, the kind of community that provides those things that I outlined that our social security pays for. This is something that the Treasurer, Joe Hockey, seems to think the Australian community do not care about. Well, I can tell you they do care about it. They do care that we have a caring society. This government has lost touch with that society. We do not want a temporary debt levy to relieve a fake budget emergency. We want proper tax reform, not this temporary levy—and, let me guess, the government will say the need for the temporary levy will end, just by coincidence, by the end of 2015, beginning of 2016, when the next election comes around. That is why we have a temporary levy—to make it look as if something is happening. It is not. It is not going to collect the revenue that the government claims it is, because there are loopholes built into it.

The budget measures take $12 billion off the most vulnerable. This levy will disappear, but those changes will still be there. Those people that this budget affects will still be living in poverty. This builds inequality into our future economy. If that is what the government were planning to do, they have done it. The disparity between the very wealthy and the very poor is already a cause of economic and social problems. This will get worse. Already in 2014, at the Davros conference, the United States President, Barack Obama, and the Managing Director of the International Monetary Fund, Christine Lagarde, have identified inequality as a major risk to the pace and stability of future social and economic growth. That is what will happen in Australia as well. If this budget proceeds as the government planned, it will increase inequality. The Greens will not support that. We will not support these measures. We want permanent reform to our tax system, not a temporary levy that the government will conveniently take off before the next election and look like they have delivered something.

Sue Boyce (Queensland, Liberal Party) Share this | Link to this | Hansard source

As a member of the coalition government and as someone who will be affected by the temporary budget repair levy, I want to very briefly speak today in favour of this levy. It is part of our government asking everyone to pull their weight in repairing the mess, the $667 billion debt, that was left to us by the previous Labor government. It was common during Senate estimates, which was held recently, you will remember, Mr Acting Deputy President Bernardi, for opposition and Greens members of this Senate to roll their eyes and groan when the economic mess created by the previous government was mentioned, as though you could somehow wish it away, as though it were not a reality, as though it did not happen. It did happen, and I for one—and I know many others—will be pleased to have the opportunity to contribute towards fixing it.

This levy will raise $3 billion over the time that it is in place. It will affect about 400,000 taxpayers. I am somewhat bemused by the attitude of the Greens, who on the one hand want to have every promise of the government maintained but on the other hand suggest that this levy should be made permanent and think that that is somehow okay. They not only want it made permanent but want to ensure that there are no changes to the top income tax bracket. I would have thought, given their views on the subject, that they might even think that increasing it might not be a bad thing to do.

I continue to be distressed by the views around the top end of town, the big end of town, and the idea that somehow we can take every benefit away from every company in Australia, we can increase the taxes on every company in Australia and somehow, miraculously, they are still going to generate more jobs. I am sorry; that is just not how it works. What we need to do to fix the economic mess that we have is to give companies, businesses, individuals, every opportunity to grow their businesses so that they can employ more people, so that they can take the chance on employing someone who has perhaps been unemployed for a couple of years—because it is a chance and it requires extra support to employ someone in that situation. Labor should not suggest that somehow there is this endless pot of money in the big end of town, although I guess we should not be surprised about, because Labor thought the same of Treasury—that it was just an endless pot of money. There is not an endless pot of money. It is by supporting the employers of Australia that we will repair our economy.

This is, in my view, a good, honest and worthwhile contribution that can be made by the top individual income earners of Australia towards repairing the damage that has been done. I commend this bill to the house.

Ursula Stephens (NSW, Australian Labor Party) Share this | Link to this | Hansard source

It is good to follow Senator Boyce in this debate. Senator Boyce and I are here for our last two weeks in the chamber so it is good that we are able to continue to work right to the end and beyond, as Senator Boyce has suggested.

Today we are debating a suite of bills including the Tax Laws Amendment (Temporary Budget Repair Levy) Bill 2014, which has many names—the debt levy or the debt crisis levy—as we have heard from other speakers. But we also debating the 14 other bills that are associated with this measure to enable the government to go on the most extraordinary search for funds to fund some of its most perverse projects and commitments in the budget.

Senator Siewert, in her contribution to this debate, addressed the inequity and the extent of the impact of this measure and it will be the poorest people in Australia who are going to carry its weight. Of course this is a temporary budget levy that is going to run out in 2017-18 whereas all of the impositions that are going on such as the Medicare co-payment, the changes to Newstart, the cuts to government expenditure for support services to refugees, those with mental illness and for community services will continue. The Youth Connections program is gone. These are the long-term structural impacts that are going to change Australia's society and economy forever.

This debt levy will last for three years and there are some debates about how much it will actually raise. The financial impact statement from the government in its legislation suggests: in the year 2014-15 it will raise $600 million; in 2015-16, $1,150 million; in 2016-17, $1,200 million; and in 2017-18 $150 million. But in fact we already know that those are very questionable figures. The Prime Minister went to this election with promises that there would be 'no more taxes', 'no new taxes' and the coalition reiterated that there would be 'no changes', 'no cuts to pensions' and that they would not do anything that was 'going to disturb the economic balance in our society'.

Yet the raft of things that have come in this budget have been really offensive to many people. People have been horribly shocked at the extent to which the government has just sliced and diced lower income earners in Australia. I know that Senator Moore really worked hard during the most recent Senate Estimates to try and extract some information. One of the really frustrating things was to ask officials from the Department of Social Services about what would be the impact of this six-months-on, six-months-off Newstart arrangement that was going to be put in place for people who were on unemployment benefits. It was like pulling teeth to actually get the department officials to acknowledge that the $320 million that the government had estimated they would be saving from this measure would be going to an emergency relief fund for people who could indicate that they could not survive on Newstart—and they could not survive on 'no start', which is the six months without any payments—and so they would be able to go to a welfare provider and seek some emergency funds. That to me was probably the most insulting thing I heard throughout the whole estimates process.

We are setting up a process in Australia to create what this government considers to be the 'deserving' and the 'undeserving' poor—that is really what this measure amounts to. It is going to be that some volunteer in the Vinnie's shop down the road in Woop Woop is going to have to make a call about whether someone who is homeless, who is desperate, who cannot pay for their medication is going to be given some of those emergency funds. I think that is an insult to the way we think about people who are vulnerable in our communities. Thinking that we have 'deserving' and 'undeserving poor' is not the Australia I grew up in and it is certainly not the Australia that I want my children and grandchildren to grow up in.

Where are we at? Several speakers have already talked to some of the 14 pieces of legislation and talked about the impacts of the different parts of the legislation cascade. What we have seen from the budget first of all has been a sense of budget shock. We have seen a retraction of consumer spending and we have seen a reduction in consumer confidence because people just cannot get their heads around the cumulative impacts of these bills and what they are going to mean. The Treasurer has tried so desperately to propose the notion that we have to be a nation of lifters not leaners and that we all have to be carrying the burden. Well, it has been proven time and again and demonstrated even by the most recent reports that the burden is not going to be shared equally across the community.

NATSEM's report showed that families with children will be the most significantly impacted. Those in the most affluent fifth of the population will see less than half a per cent of reduction in their disposable income, while those in the poorest fifth will see a five per cent reduction in their disposable incomes. That is despite the fact that inequality has been on the rise for a generation. This is not a budget that is fair across the board; it redistributes income from the poor to the rich.

Today's report from Oxfam said, as Senator Siewert so rightly noted, that the notion that more than three-quarters of Australians think that the wealthy are not paying enough tax includes the fact that the nine richest Australians—including Gina Rinehart, Anthony Pratt and James Packer—have a net worth which exceeds that of the bottom 20 per cent of all Australians and that those nine individuals, who also include Andrew Forrest, Harry Triguboff and Frank Lowy, are estimated to have a combined net worth of about $58.6 billion. That is more than the shared fortunes of the country's poorest 4½ million people. Sixty-four per cent said that the widening gap between the rich and the poor was making Australia a worse place to live. I say, again, that that is not the Australia we all think about. It is not the Australia of the fair go. In fact, that is why the report is called Still the lucky country?

Having said that, going back to the specific bill: the Economics Legislation Committee considered the bill, as it does, and the 14 other bills and made some very important recommendations. But it also made observations around the impacts to the fringe benefits tax, which are really quite important. They go to show that the bill, drafted in haste, creates real disincentives and opportunities for rorting which need to be addressed because they represent significant flaws in the design of the bill. The role of the committee in its investigation is to determine how best the bill could be improved to ensure that there are not unintended consequences.

The thing that concerns people about the fringe benefits tax has been raised with me in my office, and I know others have mentioned this too. It is that there is actually a mismatch between the introduction of the income tax increase and the commensurate increase in the FBT, which creates a significant tax arbitrage and tax avoidance opportunity. That has been reported quite widely in the media, including the idea that the fact that changes to the fringe benefits tax do not come in until next April means that people are able to rearrange their affairs, as several people have discussed this morning. They are able to rearrange their affairs so that they can continue to minimise their tax.

In both the first and the third years of this measure, taxpayers are able to shift income out of the salary and into the fringe benefits to avoid tax. The income tax increases commence on 1 July, as it is proposed. The FBT increase does not occur until 1 April next year. Then, in the third year, the fringe benefits tax increase will cease on 31 March 2017. So there are nine months in the first year to reorganise your arrangements and three months in the final year where the fringe benefits tax will not be aligned with the top marginal tax rate. That means that the tax increase will only apply in full for one year.

Again, this goes to the integrity of the estimates of what this measure will actually raise. Treasury officials identified and acknowledged that fringe benefits loophole during Senate estimates and suggested that it will reduce the revenue of the tax levy by hundreds of millions of dollars. In fact, a Treasury official answered Senator Wong by suggesting that it is the difference between taking $600 million and $1.15 billion.

As I said, the Senate Economics Legislation Committee, when examining the bill, had submissions to this effect. Significantly, I think the prominent economist Saul Eslake stated that this levy will be likely to be avoided by:

… making greater use of the myriad provisions in the income tax system which offer preferential or concessional treatment for particular types of income, forms of business organization or categories of investment vehicles.

Taxpayers Australia—I think Senator Thorp may have mentioned their evidence—also demonstrated that the tax can easily be avoided by using a combination of the fringe benefits tax loophole and other tax minimisation strategies.

Many admitted to the fact that they are advising their clients to do exactly that. But, more importantly—I think we can acknowledge that tax advisers and accountants will help people to minimise their tax legally if they can—there are unintended consequences here where taxpayers who earn less than $180,000 can be impacted by the increase in the FBT. The Tax Institute actually raised that concern when they said:

The increase in the FBT rate corresponding to the increase in the Levy, applies in respect of all employees, not only those employees earning taxable income over $180,000.

That can create quite a perverse circumstance where the wealthiest avoid the tax by using some aggressive tax planning and those who are just in the PAYE system and perhaps are salary sacrificing—but earning less than $180,000—end up making up some of the shortfall.

These are the conundrums that we have. The debt levy, of course, goes to the issues in what the government is saying about the shameless, parlous state of the nation's economic situation. We have had that refuted across the board. Many people have spoken about that already and many more will continue to speak about it.

I just want to raise the problems that we are seeing emerging out of the government's huge cuts. First of all, there are the job losses. This weekend, the Australian Local Government Association—ALGA—released its report on the state of the regions. They highlighted the impact of the mining boom, the end of the GFC and the changing shape of Australia's economy on our regions, recognising that Western Australia had a 30 per cent increase in its gross state income, but to the detriment of states like Victoria and South Australia who have lost their manufacturing bases.

As well as that, the ALGA, which is meeting this week in Canberra, is confronted by one of the measures in this bill, a $930 million freeze to the financial assistance grants to local government. This is devastating to rural and regional councils, which by this one measure are going to be put into financial straits which may mean some of them will have to look at forced amalgamations or winding up a council. I think the focus on this is quite extraordinary.

We have also seen $1.7 billion worth of cuts to Commonwealth home support programs for the most vulnerable in our community—things like Meals on Wheels and home care support. These cuts to programs are going to represent for regional Australia that persistence of an unfunded mandate to local governments and local community organisations—to try to pick up the slack to deal with the most vulnerable in our communities. It is the cumulative effects of what this debt levy is seeking to do, and the impacts it is having across the board. The impacts of this budget are really quite horrific, particularly for regional Australia.

I want to raise my concerns today. We are supporting the debt levy because the level at which it cuts in—$180,000—is income. Labor recognises people who are in the fortunate position of being able to organise their affairs. Less than 50 per cent of people in Australia are PAYE taxpayers. It is those people who are caught in the PAYE system—who are doing the right thing, paying their taxes, paying their fair share—that are going to carry the burden of this budget repair levy legislation that is before us today.

I think this is a shameless piece of grandstanding and fudging by the government. I think that what we have here is a convoluted budget that is all about ideology; there was never any kind of systematic tax reform. Several speakers have talked today about how, if we had pursued some of the measures that were in the Henry review of taxation reform, we would be in a far better place; instead of attacking the Australian way of life and the Australian economy with this piecemeal, haphazard, patchwork effort that has gone on in this budget, as part of what is being seen as responsible fiscal economic reform. It is nothing like that at all. It is very easy to avoid this debt levy. It is a shameless piece of political nonsense. While we are supporting it, we have many reservations about how haphazardly it has been brought about.

Sam Dastyari (NSW, Australian Labor Party) Share this | Link to this | Hansard source

I rise today to join my colleagues in the Labor Party in offering our tentative support for the Tax Laws Amendment (Temporary Budget Repair Levy) Bill 2014 and related bills. But I also want to take this opportunity in the time that is allocated to me to put on the record that I think this is an example of poor policy that has been poorly considered and is being poorly executed. These bills have been cobbled together.

We are sceptical of the revenue that the government proposes will be raised as part of these measures. We note that this temporary tax will have no impact on the long-term structure of Commonwealth revenues. So let's be honest and call it what it is: a quick political fix which is merely a wind-up for wealthy Australians. It is really a measure designed to cover up the reality of how much the budget attacked lower- and middle-income earners.

It has been widely reported that those with the means to do so will inevitably have their tax planners come around—and they will use their creative ways and their fixes—and find ways of avoiding and minimising this tax payment. That being said, any measure that is about increasing the burden of responsibility on those higher income earners deserves to be considered. Again, although the Labor Party has made it very clear that this is perhaps not a measure we would have introduced, we are happy to give the government our tentative support; but we have argued in this place and in other forums that there are better ways of doing it.

The Treasurer, the honourable member for North Sydney, Joe Hockey, offered this bizarre semantic response when quizzed about whether the temporary budget repair levy was a levy or a tax. He said: 'You want to call it a tax? You can call it anything you want. You can call it a rabbit.' This was of course a squirming response to the bizarre semantics of the Prime Minister who had promised voters 'no new taxes' on the eve of the election.

The temporary budget repair levy is of course a tax. A tax is a tax is a tax. There is no doubt about it. The pundits have dubbed this measure 'the debt tax'. This is no rabbit. There is nothing sleek about it. This is a lame duck. It is an elephant or a gorilla. It is an old dog. It is a silly goat.

Tony Abbott spent his years in opposition crying about the Labor government's Keynesian measures to ride out the global financial crisis. As opposition leader, the Prime Minister promised time and time again not to introduce this tax increase, and in fact in his own words, he said:

A coalition government will keep current income tax thresholds…

He also said:

What you will get under us are tax cuts without new taxes.

And

… there should be no new tax collection without an election.

Then what do we get straight after the election? Straight after the election on this measure, as with so many other measures, we have a broken promise. We had one thing said to us before the election and the reality of what came after the election.

After the election, the Prime Minister cobbled together a few friends from the Business Council. They went through a Commission of Audit process to argue on one side the proposition that Australia must make structural adjustments to the mechanism it uses to raise and spend taxes. I think he would be surprised to find that there is actually no argument from anyone in either house of this parliament that structural adjustments must always be considered, and these structural adjustments to our tax system need to be debated in both chambers of parliament. Again, structural adjustments to our tax system need the consultation of our tax experts, our tax academics and, most importantly, we need to take these decisions to our taxpayers large and small.

The Australian Labor Party has a proud record of making structural adjustments to our taxation system. That is not what this is. This is a temporary measure. It has no effect on the structure of the taxation system. It is petty politics as practised by some ideologues on the other side of this chamber much to the disgust of other sensible voices in the government's backbenches—many of whom have been prepared to speak out privately and anonymously at times. It is simply a measure that has been designed to cover up the reality of how much this budget and the budget measures are really targeting lower- and middle-income Australians. It is a political manoeuvre, and I dub it an expensive cheap shot,

I repeat: the temporary budget repair levy will have no effect on the structure of our taxation system, and I think that is one of the major faults with this piece of legislation. But that is not the only problem I have with this bill: the temporary budget measure is poorly considered in terms of its actual implementation and the avoidance opportunities it is going to provide so many Australians. The major design flaws in the tax lie in the fact that it will allow many wealthy Australians to avoid paying this tax and will likely drive even more into the already thriving tax minimisation industry to avoid the top rate of income. That is what we always have to be careful of when we are looking at these kinds of measures.

As I said earlier, it is not that there is a fundamental issue or problem—I am in fact sympathetic towards the case that says those on higher incomes should be paying more—but let's also understand that, when you start increasing this on higher income Australians, you are also growing a tax minimisation industry. We know that, of the almost 300,000 individuals earning more than $180,000, almost 20,000 of them use tax minimisation techniques to reduce their taxable income below $180,000. That is just under 10 per cent of Australians who would otherwise be captured by this.

It should also be noted that these figures include the 75 people in this country who earned in excess of $1 million and paid zero income tax in Australia last year. Let's just think about this for a minute: there are 75 Australians who earn over $1 million of income who did not pay a single dollar of taxation in this country.

The government has announced the time frame in which it intends to impose the levy, allowing those with the means to shift the balance of their incomes to the most convenient years of the forward estimates. Again, by announcing from the outset that it is going to be a temporary measure and only going to be for this period of time, they have given the tax minimisers a dream opportunity to restructure their payments to make sure they are minimised. Taxpayers who would ordinarily have a taxable income of more than $180,000 will look for ways to avoid paying the levy for certain income years.

During the recent budget estimates, Treasury officials conceded this measure could end up costing hundreds of millions of dollars in lost revenue, because those with the resources do so, those on the highest incomes, will use their power and leverage, certainly within their organisations, to structure their payments in such a way that they are forced outside of this period.

Another significant concern we have with this proposal is the way the income tax increase is actually going to impact the fringe benefits taxes, the taxes paid by employers for non-cash benefits. There is a major mismatch between the introduction of the income tax increase and the commensurate increase in the FBT which creates a significant opportunity to negotiate various forms of tax avoidance and tax structures.

What does this mean? In both the first and third years of these measures, there are opportunities for taxpayers to shift income out of salary and into fringe benefits to avoid the tax. The income tax increase is going to begin on 1 July 2014; however, the fringe benefits tax increases will not occur until 1 April 2015. Let's be clear: the tax increases happen on 1 July 2014; the FBT increases do not occur until 1 April the following year. That is a nine-month window where the FBT rate will not be aligned with the top marginal tax rate. This is a tax minimiser's dream scenario which will allow them to start shifting income into fringe benefits.

Again, in the third year, the FBT increase will end on 31 March 2017, providing a further three months where the FBT rate will not be aligned with the top marginal tax rate. In effect, this will mean that this tax increase will apply in full for only one complete year. During budget estimates, Treasury officials themselves revealed this FBT loophole and said that it is going to reduce anticipated revenue by hundreds of millions of dollars.

I said this idea is a duck or a dog or a goat, but what is so amazing is how poorly it has been introduced through this legislation. Given the astonishing lack of public consultation by government and the astonishment that rippled through the good people in Liberal electorates like Warringah, North Sydney, Wentworth, McKellar, Kooyong, Higgins, and Curtin, we can expect that the next few years will be good ones for the tax planners catering to Australia's millionaires, and we are right to be concerned about just how much revenue will be raised by this measure.

Concerns about the fringe benefit tax loophole have been repeated in submissions to the Senate legislative committee inquiry into this temporary budget repair levy. Certainly a lot of experts in this field and others have shared the real concern that what we are doing is creating a tax minimisation avenue. Economist Saul Eslake stated in his submission that it will likely be avoided by 'greater use of the myriad provisions in the income tax system which offer preferential or concessional treatment for particular types of income, forms of business organisation or categories of investment vehicles.' What does this mean? It means that the debate we should be having, and the debate that should have happened as part of this, is: how do we close down loopholes? How do we close down these opportunities that are giving a few Australians an incredible opportunity to avoid paying the rate of taxation that they should be paying? But that is not the debate that we have had and it is not what this legislation proposes to tackle.

Taxpayers Australia, a non-profit who state they are focused on improving fairness and transparency in the tax system, also raised concerns about how easily this tax will be avoided using this FBT loophole and other tax minimisation strategies. They say in their submission:

Treasury estimates are therefore likely to be overstated because considerable amounts of relatively straightforward tax planning is likely to take place which have the effect of reducing taxable income, often to beneath the $180,000 threshold.

We note that most of this planning is relatively straightforward and is already being actively marketed by many tax advisers. In short, it is clear that in practice only the wealthy but poorly advised will be paying the Debt Tax.

This loophole raises the obvious question of just how serious the government are about 'sharing the burden' of structural adjustments to our tax system. If they were serious, they would have closed loopholes in their new tax measure with the same zeal with which they are cutting services and raising taxes on the poor, the sick and the young.

As I said before, largely what we have here is a measure that has been used as a political fix to disguise some of the horrendous elements of the most recent budget. I am talking here about the cuts, for example, that have happened in the university sector. Young Australians looking at going to university, with the 30 per cent cut to university funding that has already been proposed and, in addition to that, the deregulation of fees, are going to be put under a kind of debt burden they have never experienced before. That is what we should be talking about. We should be looking at taxation measures to make sure that those kinds of things do not happen.

At the moment we are looking at a taxation system and certain measures that have been proposed in this budget that I and others on this chamber will be opposing in coming weeks, like the fuel excise tax and the Medicare levy. The fuel excise tax is going to be a tax on every single Australian every time they get into a car. The Medicare levy is about making sure that the cost of seeing a doctor is going to increase for all Australians and that the idea of a universal healthcare system is something that will be coming to an end. They are the measures that this budget was about introducing. They are the measures that the government wanted to introduce.

They wanted to sugar coat it, they wanted to cover it, and they wanted to show that they were somehow sharing the burden by saying, 'We are also going to be increasing taxation on the wealthiest Australians.' Will we be supporting this measure? Yes. But, if the government were serious about actually sharing the burden on the most wealthy Australians, we would certainly be having a debate about tax loopholes and negative gearing. They are not the debates that we are having. Rather, what we have before us is a measure which is going to be avoided. The tax planners of Australia would not be able to dream of an easier piece to get around. It is a measure that is not going to raise anywhere near the revenue that is proposed.

After getting to the end of the budget and realising that, with what they were doing with Medicare, with the university cuts, with the fuel excise tax, with the cuts to programs across the board—for example, the $500 million of cuts to Indigenous program—and with the cuts to the SBS and the ABC, they were damaging and attacking a lot of things that mean a lot to middle-income earners, they needed some fig leaf that they could point to and say, 'We are also attacking the wealthiest Australian as well.' That is simply what this measure is.

I reiterate that this temporary budget repair levy is an example of poor policy. It is poorly considered and it is being very poorly executed. Frankly, the government could have done a better job at sharing this burden.

David Bushby (Tasmania, Liberal Party) Share this | Link to 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.

Don Farrell (SA, Australian Labor Party, Shadow Minister for the Centenary of ANZAC) Share this | Link to this | Hansard source

I rise to speak on the legislation before us, the Tax Laws Amendment (Temporary Budget Repair Levy) Bill 2014 and related bills, and to try to deal with it in a slightly broader context, perhaps, than some of the previous speakers on either side. However, I noted Senator Dastyari's contribution, and I thought that dealt very adequately with some of the more specific issues that related to the legislation. I would like to talk about the legislation in its broader political context and, in particular, the way it interweaves with all of the other changes that this government has sought to introduce as part of its budget for this year. I particularly want to draw your attention, Acting Deputy President, to what I think are some issues that have not been adequately explained to the Australian people about this legislation.

We are having this legislation—which the opposition will support—because it raises the tax levy on high-income earners to pay for what the government says is its budget crisis, a budget emergency. I do not think that you have convinced the opposition or, more importantly, the Australian public that we have a budget emergency that requires these sorts of changes. I just do not think the Australian population believe you when you say you have a budget crisis.

David Fawcett (SA, Liberal Party) Share this | Link to this | Hansard source

Why do you say that?

Don Farrell (SA, Australian Labor Party, Shadow Minister for the Centenary of ANZAC) Share this | Link to this | Hansard source

Why do I say that? One very obvious reason is that the rating agencies which tend to downgrade governments that have a genuine budget crisis continue to give the Australian government a AAA rating. If we were in a budget crisis, Acting Deputy President, I know that you would know that our rating would be downgraded. When you compare our deficit situation compared to GDP with any of the other countries which ordinarily you would make comparisons with, we are just not in the same league. We do not have a debt crisis the way some of these other countries do. I know that you know that. I suspect the rest of the government knows that. But you have made up this manufactured story in order to put through what I think are ideological changes.

As you know, for the next couple of weeks my job is to represent veterans in my shadow capacity as spokesperson for veterans' affairs and the Centenary of Anzac. As part of those duties, I have been running around the countryside talking to veterans. I went down to Launceston with the RSL. I went up to Coffs Harbour with the RSL. I have been over to Ingleburn with the Vietnam veterans. At every one of these meetings, do you know what these veterans, these people who have risked their lives for this country, have said to me? I will tell you. I can see you. The camera cannot record that you shook your head, but you said no. I will tell you what they are saying to me. They say, 'We're not opposed to this two per cent temporary levy on high-income earners. It doesn't affect any of our people so we're not opposed to it. But do you know what the government is proposing to do to us and in particular to our veterans pension? From 1 September 2017 they're proposing to remove the concept of fair indexation.' What is the concept of fair indexation?

In the past, pensions were indexed based on CPI and it was generally believed, certainly by the former government, that that did not necessarily reflect the costs associated with the basket of goods that pensioners would buy. So in government the Labor Party broadened the measure by which pensions would be indexed. We looked at three potential measures or guides to determine it. CPI was obviously one of them, average male weekly earnings was another and a separate basket of goods which more closely reflected the sorts of things pensioners buy was the third. The structure we put in place in government was that we said that in the twice-yearly indexation of pensions we would look at those measures and pensioners would then get the highest of those. As an aside, you might be interested to know that the CPI would only be the highest of those three measures once in 10 times. The rest of the time, the other two measures would be higher. So pensioners would get the benefit of that higher rating. So over a five-year period with two increases each year there would be only once when the CPI would be the measure. From 1 September 2017 that is all that pensioners and in particular people who are recipients of veterans pensions are going to receive by way of the increase.

How many people are we talking about? I notice you are shaking your head again, Deputy President Bernardi. I asked this question of Mr Lewis, the secretary, at the estimates two weeks ago. The answer is this. There are roughly 330,000 veterans pensions paid to 280,000 veterans—a very significant number of Australians who have put their lives on the line to defend their country. I noticed on the weekend that Mr Abbott is talking about going back into the Iraq.

Brett Mason (Queensland, Liberal Party, Parliamentary Secretary to the Minister for Foreign Affairs) Share this | Link to this | Hansard source

He did not say that.

Don Farrell (SA, Australian Labor Party, Shadow Minister for the Centenary of ANZAC) Share this | Link to this | Hansard source

I need to respond to that because a question mark has been raised about whether or not we will be going back into Iraq and I think it would be handy if we got some clarification of this issue. Potentially that means there will be more of our soldiers going overseas and ultimately more people in receipt of veterans pensions. As I go around the countryside to Launceston, to Coffs Harbour, to Ingleburn, veterans say to me, 'The government is increasing this levy on high-income earners. It is a temporary change. It is for a couple of years while they raise a certain amount of money. You say it is going to be $3.1 billion. There are some question marks about that and it might not even be that much. But the changes you are going to make to veterans, to the people who have put their lives on the line, are not going to be temporary. Those changes a permanent reduction in the increases they will receive in their pensions.' At estimates I asked Mr Lewis how much this is going to be in the first eight or nine months and it is $46 million. So $46 million is going to be taken out of the pockets of Australian veterans, money which should have gone to them by way of the fair indexation system. Veterans say to me, 'You're raising the money on high-income earners on a temporary basis, but the changes you're making to our pensions to pay for your so-called 'budget crisis' are permanent. You're going to permanently reduce the way in which pensions in this country will be received. Explain that to us. Why are the rich making only a temporary contribution to the so-called budget crisis and pensioners, who have gone off to war to fight for this country, are making a permanent change?' I do not think there is a satisfactory answer to that. I could not think of one. The minister, who has been at most of these functions with me, certainly did not come up with one and I have not seen anything from Mr Abbott or Mr Hockey or from any of the other people who are defending this budget to provide a satisfactory explanation as to why veteran pensioners are carrying the can for these changes. If there were a real budget crisis, why are the rich not making an ongoing contribution to the cost of solving the crisis? Why do they get off scot free after a couple of years? Of course, Senator Dastyari and Senator Stephens talked about the potential for avoidance of this levy.

Let me tell you what the veterans of this country are saying. They are saying: 'There's no way we're going to be avoiding this reduction in the increase of our pension. That'll be coming right off the top; there'll be no way we'll be avoiding that.' As I said, in nine out of 10 cases that will be a lower increase than they otherwise would have expected.

I notice Senator Bushby coming back into the chamber. He certainly did not address this when he mentioned pensions in his contribution. There is no satisfactory answer to this, and I think it simply reflects the issue which people—and not just veterans and pensioners—are now talking about in this country. Broadly in the community they are saying: 'This budget is not fair.' As I say, I do not accept the proposition that we are in a budget crisis here, but, even if you do accept that proposition, the fair way to solve that is not to make life more difficult for the people who need most help in this country. And I categorise veterans and veterans on pensions as people who do need help in this community. We should be looking after them because of the service that they have given us, and we are not. We are not looking after these people, and there has been no satisfactory explanation as to why we are not.

Let us be quite frank about this. I cannot be sure what the position is that the opposition will take on this issue after I leave in a couple of weeks' time.

Brett Mason (Queensland, Liberal Party, Parliamentary Secretary to the Minister for Foreign Affairs) Share this | Link to this | Hansard source

We'll miss you, Don; we'll miss you!

Don Farrell (SA, Australian Labor Party, Shadow Minister for the Centenary of ANZAC) Share this | Link to this | Hansard source

I'll miss you, too, Senator! But what I think I know is: we will be sticking up for those veterans, and we will be saying to them: 'We don't think you should have a reduction in your pension in the way in which Mr Hockey is proposing. Fair indexation was a fair system; it was a good system. We should continue with that.' So the veterans of Australia will have a choice at the next election: do they vote themselves a reduction in the increase, or do they stick with what I think is a fair system—the current one? Right across the community, Australians are talking about the co-payments, or the cuts to Newstart or whatever. And Australians reject them, just as they did——and you might remember this, Acting Deputy President Bernardi—Work Choices. Do you remember that concept? You are shaking your head. Well, let me tell you about it. It was a scheme that the former Prime Minister, Mr Howard, dreamed up to cut the wages of working Australians. He managed to do it because, for a very brief period of time, the government had a majority in its own right in the Senate. I do not think the Australian people will make that mistake again—certainly not with a Liberal government. Australians rejected that concept because they instinctively knew that it was not fair. What you are doing with this piece of legislation is making exactly the same mistake.

It is not fair for the rich to make a temporary contribution to fixing your so-called debt crisis but for pensioners and other groups in the community to make a permanent contribution. When people think about this over the next two years, in the lead-up to the next election, they are going to say: 'No, you're right—this isn't fair; we are not being treated fairly in this country, and we don't accept the changes that are being made.'

The other thing that I am being told at these meetings I am attending is: 'We're concerned that if the federal government is going to take away the fair indexation principles that the Labor Party introduced when it was in government then what does this mean for the Defence Force superannuation scheme?' You might recall that a very strong campaign was run by veterans' groups in the lead-up to the last election. What was their argument? They said: 'You've provided fair indexation for veterans' pensions, but the beneficiaries of the Defence Force superannuation scheme are stuck with the CPI.' They ran a very successful campaign, and the current minister said, 'That is a good argument; we're going to introduce that.' And, sure enough, they did. As the minister points out, we had opposed it in government. I took the argument to shadow cabinet and we supported it.

What are these veterans' groups now saying? They are saying this: 'You've just given us this fair indexation on our Defence Force superannuation. You've done it on the basis that the rest of the pension community is in receipt of this system. You've now taken that away from veterans' pensions and pensions for the rest of the community.' But it is not just veterans you are taking it away from. You are also taking it away from TPI recipients. It does not take much of a leap of logic to say, 'If you have taken it away from all of these other groups, and this was the basis upon which you gave it to the Defence Force recipients, then it's not going to be very long before you take it away from us.' I see the Minister for Defence, Minister Johnston, coming into the chamber. I think he may wish to explain to veterans why it is that this government has introduced a temporary levy on high-income earners but a permanent change to the rate of increase for pensioners. I think those questions need to be answered. We have not had a satisfactory answer to them. We are prepared to support this legislation, but we need some answers about why this budget is so unfair to and so inequitable for the Australian people.

Christine Milne (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I rise today to make it clear that the Greens will not be supporting this bill. We will in no shape or form give any credence or credibility to the government's lie that there is a budget emergency in Australia which requires a budget repair levy and which requires the biggest hit on the poor in Australia that we have seen in a very long time. It is a trick, it is a fig leaf, or, as a former Prime Minister has said, it is how do we dress it up to make it look good. That is what this debt repair levy does: it is a temporary measure, a wink wink, nudge nudge to the big end of town, to the extremely wealthy, saying, 'Don't worry about it. We are going to bring this in for a very short time and in the meantime we are going to permanently attack the level of welfare and support in Australia that we have provided.' It is an ideological attack and has zero to do with the budget, zero to do with a budget emergency and everything to do with a long-held, ruthless ideological attack set out by the Treasurer, Mr Hockey, when he made a speech in London in 2012. If you want to know where this was coming from or how it was coming, just go back and look at that. Just go back and look at what Rupert Murdoch has had to say. Look at what the Institute of Public Affairs have had to say. All of these initiatives in the budget that take away welfare, that extend the age of the pension, that attack the universality of Medicare—all of those were there long before any suggestion of a budget emergency.

To buy into a discussion of this levy and to give it any credence suggests you are buying into the frame and the discussion about how the burden should be shared. There is no burden to share, there is no budget emergency. What we need to address is the fundamental issue of income and wealth inequality in Australia. I am very pleased to say that my colleague Senator Siewert will be bringing forward a proposal for a Senate inquiry into just that, because that is one of the major issues the World Economic Forum has identified, that up there with climate change wealth inequality is something that is going to bring incredible disruption around the world and is already doing so. I was pleased to hear Senator Farrell say that this should be a permanent issue, a permanent change. That is what the Greens have said all along: if you are serious about redistribution of wealth then you need to get serious about permanent changes, not a permanent change for the least well-off and a temporary wink wink, nudge nudge change for the big end of town, especially in the light of the fact that the Prime Minister has hinted to make it palatable for the big end of town. Why do you think they not screaming about it, Mr Acting Deputy President? I will tell you why: because they have been told privately and it has been alluded to publicly that from the 2016 election the government is going to bring in a permanent tax cut for the big end of town, with permanent attacks and undermining of support for our whole social fabric, for our whole social contract in Australia. That is what is going on here and that is why the Greens are not going to buy into this in any shape or form.

We are told that the sole purpose of the revenue raised is to pay off the debt. If that was true, why on earth are we buying joint strike fighters? Why did we put $9 billion into the Reserve Bank for a capital buffer that they did not ask for? Why did we do those things? It is a confected situation, a confected 'budget crisis'. There is none, and we still have never had a satisfactory explanation from the Treasurer as to why he put that $9 billion across to the Reserve Bank unasked for. The fact that it is called a budget repair levy proves what I am saying. In terms of the $180,000 threshold, already this weekend's Financial Review had a whole section on how you can salary package, how you can salary sacrifice, how can you can use negative gearing, how you can use your superannuation concessions to get your income down below $180,000 so that you do not have to pay it. Already the loopholes in it mean that for a lot of people it is not even going to be for the length of time that has been suggested. On the one hand you are being told that but on the other hand out there in the wink wink, nod nod, we all know about it, and it is get your tax down, get your income sorted through these salary sacrificing and other provisions, and novated leases are the classic case. Why isn't the government out there explaining to people why they are going to keep on with this rort so that the more expensive the car you buy the more you can bring your income down and get yourself into a lower tax bracket? Like all giveaways, this temporary budget repair levy, the so-called burden, is temporary and more than fully offset by the profits accruing, as I have just said, through superannuation concessions, company tax cuts, ongoing fossil fuel subsidies and the novated leases to minimise taxable income.

While the Greens support the need for good economic management and long-term structural reform, most of the submissions on this bill found that the temporary repair levy as proposed does nothing to address the long-term structural issues of the budget. The gap between those who have and those who have not continues to grow at a fast rate. As I indicated, the World Economic Forum took that view and they have said that a lost generation is looming that will face high unemployment and precarious economic futures, with the systemic risks likely leading to social unrest. That is from the disparity of wealth and income. So while there needs to be structural adjustment so that revenue streams match expenditures into the future, this temporary budget repair levy will do nothing to address that.

In a submission to the Senate inquiry into this bill the Grattan Institute argued that 'the levy has no impact on the long-term structural position of the budget as it will cease to exist in 2017-18'. In another submission Saul Eslake raised the point that 'it does not make any lasting contribution to fixing the budget in any structural sense'. So let's just forget all this nonsense about a budget emergency, the levy does not make any lasting contribution to fixing the budget in a structural sense; the fact of the matter is that it is a bit of icing on the top to try and disguise a poisoned cake.

It is clear that shielding the rich from any lasting burden is absolutely on the minds of the Abbott government. It is why they have given an amnesty to people to bring home their billions of dollars from tax havens around the world. They are saying, 'If you bring it home now, before there is a global push on tax evasion at the G20, we'll give you an amnesty; you won' be prosecuted, you won't find yourself in jail.' But go over to the Centrelink offices and you will soon find people who are persecuted if they make mistakes or infringe the rules. If you are a Newstart recipient and you cannot or do not turn up for your requirements, you get punished. But if you have got millions and billions of dollars stuck offshore, deliberately evading tax, you are told you can bring it home in an amnesty and nothing is going to happen to you. I think that gives a pretty good insight into where the Abbott government are coming from.

If you accept the need for a temporary levy, it buys you into the notion that you accept the budget emergency and therefore accept these vicious permanent cuts to the poor. We are not going down that path; we do not believe any of that is necessary; it is just a contrivance. What we do know is that there is a need for permanent structural change to ensure that the rich do pay a permanent new marginal tax rate. That is what the Greens will pursue—a permanent new tax rate—not a con job that sees a tax cut coming forward at a permanent level in 2016. I move:

At the end of the motion, add:

but the Senate calls on the government to:

(a)   extend the provisions of the levy beyond the 2016-17 financial year, making the levy permanent; and

(b)   guarantee that no tax cuts will be made, or promised, for the top income tax bracket, prior to the 2016 election.

In other words, no tax cut, or promise of one, is permitted before the 2016 election. That would test the mettle of this. If you are serious about a permanent change for those who earn more than $180,000, you would have no concerns at all about supporting this amendment. I call on both the government and the Labor Party to support this amendment. We are not going to let the government off the hook with their temporary levy. We are not going to stand by and watch what is going to happen—that is, everybody else suffers while the rich get ready to organise themselves to not pay it, to minimise their income, and get ready for the tax cut in 2016.

At a recent Senate hearing Senator Cormann said:

We are very conscious of the fact that high-income earners already do a lot of the heavy lifting when it comes to contributing to Commonwealth revenue. But in the context of this budget we decided and judged that it was necessary to ask everyone across the community to make a contribution, including asking high-income earners to make an additional effort on top of the significant effort that they are already making.

But the Grattan Institute made it clear that 'it does not share the pain very effectively as it will only have a short-term impact on high-income earners; and, by contrast, the spending cuts will have a disproportionately large effect on lower income earners and they are permanent'. And Saul Eslake made the point that 'it will encourage at least some higher income households to take more active steps to engage in tax minimisation or avoidance activities, including by making greater use of the myriad provisions in the income tax system which offer preferential or concessional treatment for particular types of income, forms of business organisation or categories of investment vehicles'. Exactly as I have said. If ever there was a con job on the Australian people, this is it. I am surprised that the Labor Party are falling into it. By buying into the idea that you need a temporary budget repair levy, they are buying into the idea that they somehow left the budget in a state where it needed to be repaired. I reject that absolutely.

But what I do accept is that we need to be able to raise the revenue to pay for the services that we want to deliver. That is exactly why the Greens have stood up throughout this whole budget process and said this is the way you could raise the money and, at the same time, address the issue of inequality when it comes to income and wealth. That is why we have said that, if we fix the mining tax and remove fossil fuel subsidies for the mining industry, the government would find itself an extra $48 billion in revenue over the forward estimates—fixing the mining tax and removing fossil fuel subsidies for the mining industry. Compare that to the $3.1 billion that this temporary budget repair levy is expected to raise over the forward estimates. So why wouldn't you end fossil fuel subsidies to the big miners and improve our response to global warming? Ask yourself the question: 'Why are established businesses that are making superprofits getting a corporate welfare handout?' Really, why is this occurring? They have been in business for a long time and they are making a lot of money. It makes no sense whatsoever to do that.

We also know that current spending is sitting in line with historical levels. We are one of the lowest taxing countries in the OECD. Our debt levels are manageable and they are far below the global averages. Economists are unanimous in their assessment of Australia's economy as fundamentally healthy. However, many of them warn against large and unnecessary budget cuts due to the effect that this could have on the wider economy—and we are already seeing it with reduced consumer and business confidence. Go out there and look at the number of sales that are on earlier than expected. People are really concerned. The people who are going to be impacted most are saying, 'We simply can't afford to consider buying some of the things we might have considered previously.' They are taking a real review of their own personal situations. The Greens are certainly not going to support a measure that will be doing nothing to redistribute wealth or prevent tax evasion due to its temporary nature.

The cuts to the most vulnerable in our society will have long-lasting, permanent impacts, and that is why the Greens will fight against all of the measures that penalise those most in need. We will block the attacks on universal health care and vote against the $7 GP co-payment. We will block the cruel changes to the living and studying allowances for young people and students. We will block the unfair and regressive user-pays model proposed for our universities. We will do everything we can to stop the destruction of our clean energy package, which has delivered help to so many to reduce their energy bills and ecological footprint. And, of course, we will block everything that attacks those who are seeking a job—that is all they are trying to do—many of whom have already done training but live in areas where there are no jobs available.

I think it is cruel indeed for the government to talk to people in north-west Tasmania, for example, where there is a very high level of unemployment and the number of unskilled jobs has fallen, and say, 'You can just do temporary fruit picking somewhere, or you can move to the mainland.' How? On what? How do you move to the mainland? First of all you have to get there, and, when you get there, where are you going to live on no money at all? How are you going to be able to present yourself to secure a job? It shows that the government is completely out of touch with the day-to-day reality for people living in north-west Tasmania, north Adelaide or right around Australia.

People are looking at one another and saying, 'How will we cope?' If you have not got a family who can support you, you are in serious trouble. We are going to be looking at poverty and homelessness on a level that we have not yet seen. It is already bad enough, but it is going to get worse because of this budget. We are not going to buy into tricks that try to pretend that somehow there is an equitable burden shared. As John Hewson recently said:

The budget proposed in simple terms a cut of some 12% to 15% in the disposable income of the lower-income groups, single-income families, families with children, but only less than 1% cut in disposable incomes for those on higher incomes.

What a disgrace.

The Greens want to make sure that the big miners, the bankers and the polluters pay their fair share first. We can raise $79.2 billion in revenue and avoid all of these cruel budget measures and this ideological attack—because that is what it is. It is not about a budget measure; it is an ideological attack by a group of people who have the view that the current safety net needs to go. It is as simple as that. It is an attack on our social contract. That is the fundamental position that you are coming from, and we see you coming from that area very clearly. It is about having a dog-eat-dog world and a divided society. If anyone had any doubts about that, we heard the Treasurer say, 'People are having to pay tax and work for a month in order to keep these people on welfare.' That was a divide-and-rule tactic, saying, 'Why should you have to look after them?'

I want to say that all of us could find ourselves sick, all of us could find ourselves disabled and any of us could find ourselves unemployed. The same applies to our entire families, to the people we know and to communities, and Australia has a sense that we do care about one another. We do understand that at some point any of us could find ourselves in that position, and, as a community, we want to think that we would look after each other. That is where we are coming from, and that is the exact opposite of where the government is coming from. That is why we have said: apply a public insurance levy on the four big banks that are too big to fail, which is $11 billion; impose the $2 levy on thermal coal exports, $929 million; go back to the proper mining tax, $35.58 billion; and so on.

I want to finish with a quote from American Senator Elizabeth Warren. She said:

People have hearts, they have kids, they get jobs, they get sick, they cry, they dance. They live, they love, and they die. And that matters. That matters because we don't run this country for corporations, we run it for people.

The Greens say that we do run this country for people, and 'for people' means getting rid of inequality and stopping this legislation. (Time expired)

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

I indicate that I will be supporting the Tax Laws Amendment (Temporary Budget Repair Levy) Bill 2014 and related bills, and I would like to outline the reasons for that. I will make reference to some commentators in this debate that I think have added to the public discourse, some on the conservative side of politics, some on the other side of politics—the progressive side, or however you want to put it—and some in the middle, because I think it is important that we put this in context.

I do not believe that there is a budget emergency in the terms set out by the government, but I do believe that we have some serious structural issues in relation to the budget and in respect of our economy that must be dealt with. It is interesting to see what Jennifer Westacott, the CEO of the Business Council of Australia, said in last weekend's The Australian. She said:

Let's get some facts on the table. By 2050, there will be fewer than three people working to every retiree, compared with about five people today. This will place huge pressure on our tax base, huge pressure on services, and huge pressure on our competitiveness.

I agree with what Ms Westacott has said. This is something that we need to consider as a nation. If we do not consider it, we are in a fool's paradise. I also agree with Ms Westacott when she says:

If we look at our competitiveness, we are currently 21st on the World Economic Forum ranking, down six places in the past five years and the first time Australia has ever slipped out of the top 20.

Another commentator, who is known as a conservative commentator—and I do not say that in a pejorative way—is Maurice Newman, who has a role on the Prime Minister's taskforce on business and productivity. He has made the point to me that our level of individual household and corporate debt is very high. I do not have the figures in front of me, but we have household debt at 100 per cent of GDP, which is the highest level since 1988 and among the highest in the developed world. So we need to take into account corporate and personal household debt.

Professor Richard Blandy from the University of South Australia, someone whom I have known for many years and whose advice I have valued—I particularly valued his advice during the electricity privatisation debate in South Australia in the 1990s—made the point in an opinion piece in The Australian towards the end of 2012 that Australian productivity growth was the third lowest amongst a list of 10 countries he set out, just nosing Spain into second last spot. South Korea's rate of productivity has been about 3.5 times Australia's across the past 20 years. Finland and Sweden's rates of productivity growth have been about double Australia's, and that of the US is about 70 per cent faster than Australia's. So we do have some real structural issues in our economy in terms of productivity and economic growth. It is worth mentioning that, when Donald Horne wrote The Lucky Countrywe usually just take the title of the book—what he actually said was:

Australia is a lucky country run mainly by second-rate people who share its luck.

So these are matters that we need to deal with.

Conservative commentator and economist Henry Ergas—it is a pity that Senator Cameron is not in the chamber, because any mention of Mr Ergas gets him going!—said in a recent opinion piece in The Australian:

The fiscal outlook speaks for itself: Labor left an unsustainable legacy. With spending growth primed to explode, gross debt was set to reach $700 billion by 2023-24, at which time more would be spent on interest payments than on aged care: and that optimistically assumed economic expansion would continue unchecked.

And he was critical of former Treasurers Swan and Bowen, who, he says:

… craftily shifted the steepest increases to just beyond the forward estimates, with spending projected to rise by 5.9 per cent in 2017-18 alone, a rate of growth only exceeded in the massive fiscal stimulus of 2008-09.

These are some of the issues that we must face as an economy.

The reason I support this measure is that I think it is important that we share the load reasonably and evenly. I do not think this budget does that. This is just one small part of it where I think it is fair that higher income earners—those that earn $180,000 a year or more—pay more in income tax. And I would not have a problem with this levy going beyond three years. I say that because, if you look at the context of this budget, there are some real issues of inequality. It is worth referring to a piece by Peter Hartcher, the political editor of The Sydney Morning Herald:

… as Britain's conservative prime minister, David Cameron, said in 2009: "Per capita GDP is much less significant for a country’s life expectancy, crime levels, literacy and health than the size of the gap between the richest and poorest in the population."

I have a real concern that this budget will actually make the level of inequality in Australian society much greater, that it will widen the gap between the richest and poorest in this nation, and I do not think that is a good thing for the long-term societal and economic benefit of this nation.

The work that has been done by NATSEM at the University of Canberra is valuable if we need to put this into perspective. NATSEM provided modelling for the coalition government, at the time of the advent of the GST, about the impact of the GST. It was something that the coalition government back then relied on. NATSEM also costed election promises for the coalition back in 2010. I think the Prime Minister has said publicly that they are the best modelling agency around. They are a credible body that do some very good work, and I am grateful for the contribution they make to the public discourse in this country. NATSEM are very concerned about the way the budget has targeted some of these welfare cuts. The evidence indicates that, while the cuts to welfare will be permanent, this levy is only temporary. It is worth also noting that the poorest fifth of families would contribute $1.1 billion more to the government's budget repair task than the richest fifth, according to NATSEM. That is not fair. If we are going to share the burden, we should do it in a way that is much more equitable than this. I believe that Australians have a strong, innate sense of what is fair, and I believe that there are many aspects of this budget that are not fair. But I acknowledge the government does have some real structural issues to deal with.

In terms of structural issues, Richard Dennis from the Australia Institute—categorised as a left-wing or left-of-centre think tank—has made a considered and valuable contribution to public debate, in the same way that people like Henry Ergas make important contributions to the public debate about how we deal with economic issues. Richard Dennis has made the point—and I have met with him in relation to this—that tax concessions for superannuation are projected by Treasury to grow at an average of 12 per cent over the next five years. He says that, if, like the Commission of Audit, we simply assume that things grow at their trend rates indefinitely, then, by 2050, tax concessions for superannuation will cost $2 trillion per year, which would be almost 100 per cent of Commonwealth revenue. Clearly that is not sustainable.

Peter Costello, in his first budget, imposed a tax on superannuation funds for high income earners and I think that is something we need to look at. We need to look at some structural reforms of super that are fair and are considered but that avoid what appears to be a rort in some circumstances for people who are particularly high-income earners and who have particularly large super funds. That is what is killing the budget and that is something we need to address as a matter of some urgency.

It is also worth noting that there are other budget measures that, I believe, will lead to greater inequality, lead to a much greater sense of unfairness and lead to greater levels of unemployment. I unashamedly support the automotive sector in my home state of South Australia. I note Senator Madigan's work in his home state of Victoria in this. The decision was made by Holden, Ford and Toyota to leave Australia as original car manufacturers. They will still be here as strong brands—and that is a good thing—but they will not be making cars here in Australia after the end of 2017. The automotive component sector makes up 33,000 jobs, the vast majority of jobs in the automotive sector. There are 140 businesses ranging from 50 employees to 500 or 600 employees that are involved in this sector.

Slashing the Automotive Transformation Scheme will mean that those companies will not be able to retool, reengineer, find new markets or find innovative new products to produce. The Automotive Transformation Scheme ought to be supported. By failing to support it, my fear is that we will see mass unemployment in this sector in the next two to three years and that there will be a so-called 'valley of death' next year when the funding is cut from $300 million to $100 million. We need to restructure the Automotive Transformation Scheme to take into account the realities of car manufacturers leaving this country and to support those small and medium businesses to be able to do something else.

We need to have a debate in this country, not an ideological debate but a debate about what works for us best in an Australian context. It is quite interesting what they are doing in Nordic countries. I agree with an editorial in the Economist of February last year which made the point that politicians from both left and right could learn from the Nordic countries, where they have all sorts of innovative programs, where they are not shy of having higher tax rate if there is a reason for it. The Economist makes the point:

The main lesson to learn from the Nordics is not ideological but practical. The state is popular not because it is big but because it works. A Swede pays tax more willingly than a Californian because he gets decent schools and free health care. The Nordics have pushed far-reaching reforms past unions and business lobbies. The proof is there. You can inject market mechanisms into the welfare state to sharpen its performance. You can put entitlement programmes on sound foundations to avoid beggaring future generations. But you need to be willing to root out corruption and vested interests. And you must be ready to abandon tired orthodoxies of the left and right and forage for good ideas across the political spectrum.

I believe that is the sort of approach we need. We need to go beyond ideology to see what would work here in an Australian context.

I want to finish off by making reference to Ella Wilcox's poem, which, I believe, might be the basis of the 'lifters and leaners' comments by the Treasurer during the budget speech. Ella Wilcox, a great American poet, who was born in 1850 in Wisconsin, wrote:

There are two kinds of people on earth today,

Just two kinds of people, no more, I say.

Not the good and the bad, for ’tis well understood

That the good are half-bad and the bad are half-good.

No! The two kinds of people on earth I mean

Are the people who lift and the people who lean

There are two kinds of people on earth today

What I suggest to those who may be followers of Miss Wilcox's poetry is this: sometimes people need to lean because of injury, illness or other personal circumstances. By all of us giving them support then they in turn will no longer need to lean and they can, in turn, become lifters. If there are people in future who need our support, who are disadvantaged, who have fallen on hard times, who for whatever reason are struggling then we can, as a broader community, give them that support as lifters. This budget has too much emphasis on knocking those who lean and does not take into account the circumstances in which they have become leaners—for want of a better term. I think it is a pejorative term in the context that it was used. I support this budget measure because it means that those who can afford it can make their contribution for dealing with structural issues in the budget.

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

I thank all of the senators who have contributed to this debate on the Tax Laws Amendment (Temporary Budget Repair Levy) Bill 2014 and related bills. In closing the debate, let me make a number of observations as well as respond to some of the issues that have been raised during the debate.

Firstly, in response to Senator Milne's assertion that there is no budget emergency, let me remind Senator Milne and the Greens of the facts. After the previous government inherited a strong economy, a strong budget with no government net debt, a $20-billion surplus, more than $50 billion in a net positive asset position and the government collecting—I stress 'collecting'—more than $1 billion a year in interest payments on the back of a positive net asset position, the previous government turned that situation negatively around very quickly through massive unsustainable and unaffordable increases in spending to the point where the previous government delivered $191 billion of accumulated deficits in its first five budgets. It left the last budget with another $123 billion in projected deficits. It left behind a situation where government debt was heading for $667 billion, and that was assuming that there would be absolutely no correction or adjustment at all for 'bracket creep', which means that middle income earners, progressively, would have been expected to fall into the highest income tax brackets. Once you take into account potential corrections of income tax rises to take into account bracket creep, the debt trajectory that we were on—as a result of decisions of the previous government—actually was taking us to $748 billion of debt and rising within the decade.

At various times, various people—I have heard the Greens say it, and I have heard Mr Palmer and others say it—have said: 'Don't worry. The debt position in Australia is not really that bad when you compare it to other parts of the world, like in Europe and the US.' The only reason we are not yet in a worse position is because of the strength of the budget back in 2007. The trajectory we are on is one of the fastest-growing spending trajectories in the world. We are on one of the fastest debt growth trajectories in the world. If we stay on the trajectory that we are on, the destination where we end up will be the same destination that others have already reached before us.

It is an emergency. When you have government spending on track to increase from $409 billion this year to $690 billion in 2023-24, or to 26.5 per cent as a share of GDP, up from 23.1 percent as a share of GDP in the last year of the Howard government, then you are in a crisis situation. You are in a situation where you are forcing government spending onto an unsustainable spending growth trajectory. Even in this budget, with all of the hard decisions we have had to make, we are still looking at $60 billion of projected deficits over the forward estimates.

When we talk about deficits, what are we actually talking about? We are talking about borrowing from our children and grandchildren in order to fund our lifestyle today. We are not talking about investment in productivity-enhancing infrastructure or social infrastructure, where it is appropriate for future generations to share in the cost of infrastructure that they will be able to share the benefits of.

What the previous government did over their six years in government—and the trajectory that they put Australia on—was to force the government to borrow in order to fund consumption and in order to underwrite consumption, in order to underwrite our lifestyle today at the expense of our children and grandchildren, who would have to pay back the cost of our lifestyle today with interest. We do not think that is right. We do not think that is fair. We think that today's generation should live within its means. We believe that government should live within its means and not impose those burdens on our children and grandchildren.

Senator Dastyari and Senator Milne also both said that the temporary budget repair levy will have no impact on structural tax problems. Quite transparently and quite honestly, we have never suggested that it will. The temporary budget repair levy will not have impact on any structural issues with our tax system. The temporary budget repair levy is not designed to address the structural tax system. The temporary budget repair levy is designed to be in place for three years. It will raise $3.1 billion over the forward estimates period to assist with the task of repairing the budget.

I heard another Greens senator in the chamber assert that somehow I was not able to answer the question in Senate estimates about what repairing the budget means. Let me say it again very clearly. While some might not accept the answer and the explanation, our answer very clearly is that repairing the budget is getting us back into surplus. Over the forward estimates, repairing the budget is getting us back onto a believable path back to surplus, which is, of course, what we are doing.

The government has committed on the structural side to produce a comprehensive tax white paper to provide a longer term, considered approach to tax reform which is consistent with the government's core principles of fairness and simplicity. We have said very transparently that we would take any proposals for reform coming out of the tax white-paper process to the next election for approval by the Australian people.

Senator Siewert and Senator Stephens said that the temporary budget repair levy was inequitable and the levy should be permanent. The proposition was that all of the changes on the spending side are permanent, so why would we not make changes on the revenue-raising side permanent? The decisions that we have made are focused on ensuring that all Australians contribute to the task of repairing the budget.

An important point that I need to make here is that not all expenditure cuts are, in fact, permanent. There are a number of measures affecting transfer recipients for a limited time—for example, pausing indexation of income and assets test thresholds for three years. Non-pension payments and allowances will be paused from 1 July 2014. Pension thresholds and various other thresholds will be frozen from 1 July 2014. Indexation of family tax benefit A and family tax benefit B payment rates will be paused for two years from 1 July 2014. That is not permanent.

Senator Stephens suggested that taxpayers will seek to reorganise their arrangements. I point here to some very good and clear evidence that was provided by Treasury on this point during the inquiry by the Senate Economics Legislation Committee. I quote:

As the income tax system, in large part, taxes individuals based on the amounts they receive and spend, individuals are able to affect the amount of tax they pay by altering their income or expenses for an income year. Similarly, as the tax system provides different treatment for certain types of payment or certain types of entity, individuals are able to choose to receive payments in a certain way or through a certain entity with the result that they receive different tax outcomes.

While such flexibility does provide individuals with some scope to reduce their tax liabilities, especially where the rates of tax change, it is a necessary feature of a tax in which liability is tied to individual's actual income for a year. … denying choices where they might result in tax benefits would be complex and impose considerable compliance burdens.

Senator Siewert also suggested that the budget repair levy is not progressive. We do not agree with that assertion at all. The temporary budget repair levy does apply to individual taxpayers earning above $180,000—individual taxpayers, I might add, who are already making a significant contribution through the tax system to the revenue raised by government. It is progressive, and it will apply at a rate of two per cent on individuals' annual personal taxable income. For example, an individual earning $200,000 will pay an additional $400 per annum; an individual with a taxable income of $300,000 will pay an additional $2,400 per annum on top of the tax that they are already paying.

Senator Wong suggested that there were tax arbitrage opportunities, given the misalignment between fringe benefits tax rates and top income tax rates due to different application years. Let me say here that, while the fringe benefits tax rate is aligned with the highest marginal income tax rate, plus the Medicare levy rate, income tax and fringe benefits tax have always applied over different periods. As these periods differ, to have any rate of play over the same period would require at least one tax to have a split period in which two different rates would apply. The compliance burden imposed on business by such an arrangement would be entirely disproportionate to the benefits of alignment. It has long been accepted by this parliament, with either side of parliament in government, that where the relevant rates are changed there will be a period or periods in which rates are not aligned. The small size and temporary nature of the levy will limit the likelihood of taxpayers taking action to avoid the levy. Converting salary and wages into fringe benefits comes at a cost to the taxpayer, and these costs often outweigh any benefit from differential tax rates. The flat levy design was based on a similar model; although not with the FBT rate change, because it only applied for one year.

My good friend and valued colleague Senator Macdonald made the point that he thought the bill did not go far enough and that the levy should be imposed not only on individuals but also on corporate taxpayers. He is of course right when he says that he has been consistent with that proposition all the way through. I well remember during the debate on the flood levy—I was the responsible shadow minister dealing with the legislation—Senator Macdonald made a similar point. Ultimately, we as a government have made a judgement. We want all Australians, all individuals, to contribute to the repair of the budget; and companies ultimately are made up of individuals, and individuals are liable for personal income tax on dividends from those companies. Raising the tax for corporate taxpayers would ultimately only lower the funds available for further corporate investment. So we have made a judgement that, in these circumstances, to increase company tax would not be appropriate. We want to continue to build a stronger, more prosperous and more resilient economy where more jobs can be created and where more Australians with well-paid jobs will pay more income tax to government.

There are of course a number of changes we put forward in the lead-up to the last election that are reflected in the budget—including: a company tax cut of 1.5 per cent, designed to help us build a stronger economy moving forward; and a 1.5 per cent temporary levy on a certain number of companies that are particularly profitable, to help introduce and pay for the fair dinkum Paid Parental Leave Scheme that we took to the last election. Again, that is an important part of our policy to build a stronger, more prosperous, economy and to create more jobs.

Specifically in relation to the Paid Parental Leave Scheme, one of the structural challenges we are facing as an economy with an ageing population is that we have falling levels of participation. In order to turn that situation around, we need to ensure two things. Firstly we need to ensure that older Australians stay in the workforce for longer. Secondly, we need to lift women's workforce participation. In order to do this, we need to ensure that we have a fair dinkum Paid Parental Leave Scheme in place, which helps keep women in touch with their employment while they are having babies. Secondly, we need to ensure that we have appropriate childcare arrangements in place—and that is being pursued through the Productivity Commission review as we speak.

I understand that different people will have different views about the Paid Parental Leave Scheme. However, we have taken it to two elections; we think it is an important economic and social reform, and we will be implementing it in the not-too-distant future. In relation to the budget repair levy, I understand the concerns of colleagues who say that we should not be increasing taxes. I do not like increasing taxes. I believe that lower taxes lead to stronger growth and create more opportunity. However, given the budget mess that we have inherited from our predecessors, the only alternative to not proceeding with this temporary budget repair levy would be to impose 100 per cent of the burden to repair the budget on those who receive payments from government, and that is not what we think would be right. We think it is important to spread that effort fairly and equitably. But I am happy to answer further questions from Senator Macdonald, if he has them, in the committee stage.

I might just deal with a few other issues that have come up now. Senator Whish-Wilson asked why we were not taking a structural approach to tax reform and the tax system. As I have previously said: we are. We are doing that through the tax white paper review process, not through this particular measure. With those few words, I commend the bill to the Senate.

Bills read a second time.