Jacinta Collins (Victoria, Australian Labor Party, Shadow Cabinet Secretary) Share this | Link to this | Hansard source

I rise to speak on the Tax and Superannuation Laws Amendment (2015 Measures No.3) Bill 2015. This bill contains two measures that Labor opposed when they were included in a previous tax laws amendment bill. The measures, which cut the rate of the research and development, or R&D, tax incentive and repeal the seafarer tax offset, were removed from that bill by the Senate in March this year. Now the government has reintroduced them in a separate bill, but nothing has happened in the interim to diminish Labor's opposition to the measures. We oppose this new bill in its entirety.

If passed, the bill would further degrade the R&D tax incentive, which, as Senator Carr reminded the Senate during the debate on the previous bill, is the most important mechanism in the taxation system for fostering innovation. The incentive has already been undermined by the Tax Laws Amendment (Research and Development) Bill, which was passed in February 2015 and sees the removal of the R&D tax incentive from all firms on expenditure of over $100 million. The bill would also remove a refundable tax offset that assists Australian shippers to compete with their international rivals, a measure which Labor also opposes and which my colleague Senator Conroy will speak on in more detail.

The government has failed to present coherent arguments in justification of these changes, especially with regard to the R&D tax incentive. This bill, like its predecessor, seeks to cut the incentive by 1.5 per cent. The measure reduces the rate of the refundable tax offset from 45 per cent to 43.5 per cent and the rate of the non-refundable offset from 40 per cent to 38.5 per cent. When the 1.5 per cent cut was first proposed, it was purportedly to preserve the value of the incentive relative to the company tax rate. That justification has already unravelled, because the government has dropped its plan to cut the company tax rate.

The truth is that the arguments the government has marshalled in defence of these changes obfuscate the real motive, which is to scrounge savings. Linking the incentive to the corporate tax rate was never more than a desperate distraction on the government's part. When Labor was in government, the national innovation agenda set out in Powering Ideas explained the relationship of the R&D tax incentive to the wider tax system. Powering Ideas stated that the replacement of the former R&D tax concession, which had been introduced in the 1980s, by the R&D tax incentive was to increase certainty by uncoupling the level of R&D support from the corporate tax rate.

The rationale for the change proposed in this bill and its predecessor undermines that uncoupling, even though the promised uniform cut in the corporate tax rate has been abandoned. The change risks creating an expectation that when there is a change in the corporate tax rate the incentive will be adjusted accordingly, but no-one would bother trying to understanding how cutting the R&D tax incentive can be rational innovation policy, because the reality is that this bill has nothing to do with innovation policy. When speaking on this bill in the House of Representatives, the Assistant Treasurer finally began to come clean. He said that cutting the incentive by 1.5 per cent would deliver savings of $810 million over the forward estimates, which would:

… contribute significantly to the government's task of repairing the budget …

In other words, short-term cash grabs at the expense of longer term growth continue to be the defining characteristic of this economically myopic government.

The government likes to preach about the need to reduce the deficit. Yet not only has the deficit doubled on the Abbott government's watch; but, with the measures contained in this bill, the government is pursuing a course that will impede growth and, along with it, the revenue streams Australia requires. The fact is that neither of the measures proposed in this bill will deliver savings that outweigh the cost to the economy of implementing them—the cost of impeding growth.

The government may think it has hoodwinked Australian businesses with its contorted arguments for cutting the incentive, but no-one has been fooled. I refer to a report by Joanna Mather, published in the Australian Financial Review on 10 June this year, in which she quotes Mr Damian Smyth of Swanson Reed, a firm that provides tax advice on research and development. He says:

The legislation from last year's budget was introduced on the basis that there would be a uniform reduction in the corporate rate to 28.5 per cent.

The corporate tax rate reduction is now only proposed to apply to very small companies with turnover less than $2 million. This means companies with turnover greater than $2 million will be subject to a drop in the value of their R&D claims.

This is a sneaky cut and any sort of tinkering is going to reduce the willingness of companies to invest in Australia.

In the same report, a statement on the R&D cut issued by the pharmaceuticals manufacturer CSL declares:

The rate reductions and cap are themselves unfortunate, but so too are the continual changes in R&D support arrangements, which increase the risk of long-term investment in R&D.

In CSL's view, these are retrograde measures. They make Australia a less attractive location for R&D and, because R&D is an essential complement to advanced manufacturing, detract from rather than enhance the prospects for advanced manufacturing in Australia.·

The reactions of Swanson Reed and CSL are entirely consistent with those of other companies and experts involved in R&D in Australia. In July, at a public hearing in Brisbane of the Senate Economics References Committee inquiry into Australia's innovation system, Dr Ian Nisbet, the deputy director at the Australian Institute for Bioengineering and Nanotechnology at the University of Queensland, described the R&D tax incentive as:

… the single best thing that has happened in innovation in Australia in the last 20, 30 or 40 years … It is exceptionally well known around the world …

At the innovation inquiry's public hearing in Melbourne, Dr Anna Lavelle from AusBiotech said that:

The R&D tax incentive is now seen by our members … as the No. 1 public policy issue for our sector that requires protection. The desire of government to reduce the benefit from 45 to 43.5 per cent is not welcome. It is a disadvantage more keenly felt by small companies …

These experts all understand what Tony Abbott and his cabinet ministers either fail to understand or recklessly choose to ignore: in advanced industrial economies, innovation is the chief driver of increases in productivity and enhancements in growth. Without a strong innovation system, Australia cannot build a more diverse economy. Without a more diverse economic base, future growth will be unreliable, fluctuating with booms and declines in commodity exports.

That prospect has been brought starkly home to Australians by the June quarter national accounts. The accounts figures show that the post mining boom economy is not faring well. Annual growth is below trend, at two per cent. For the first time in 20 years, more than 800,000 Australians are out of work. The unemployment rate has risen from 5.7 per cent to 6.3 per cent. Consumer sentiment is 10 per cent below where it was at the last election. The budget deficit has doubled in 12 months. To break out of this cycle, we must broaden the economic. We cannot do this without a robust national innovation system that increases our capacity for value-adding, rather than this government's plan of sticking with a plan that is not working.

Senators will recall that, during the debate on the government's previous attempt to cut the incentive, Senator Carr urged the government to heed the advice of the Australian Industry Group in its 2015 budget submission. That advice remains pertinent today. The Australian Industry Group argued:

… the Budget will only see a sustainable improvement when revenues improve, and for this to occur, we must see strengthening in industries across the economy from the anaemic pace of growth in recent years. Only when businesses lift their sales and profits and grow their workforces will there be a sustained pickup in revenues.

Consequently, Ai Group believes the Federal Government should continue with sensible programs of investment in infrastructure and skills and training as well as targeted programs to lift the rate of innovation among Australian businesses and encourage businesses to develop export opportunities.

Nonetheless, the government continues to do the exact opposite, in spite of the abundant evidence for the case that Ai Group has made.

As a report produced by the Department of Industry and Science called the Australian innovation system report has noted:

… innovation almost doubles the likelihood of productivity growth in Australian businesses … innovative Australian businesses are 78% more likely to report increases in productivity over the previous year.

The report also notes that firms that collaborate with research organisations and universities are almost 2½ times more likely to report increases in productivity.

In relation to the need for certainty, multinational companies, in particular, often need to make large, periodic investments in R&D capability if they are to undertake R&D in Australia. To attract those investment decisions, Australia must provide an investment environment that offers certainty, transparency and international comparability. But Australia is going backwards, and reducing the incentive runs counter to the international trend. The UK, Hong Kong, Singapore, Italy and France have all increased their R&D incentives in recent years.

The cut proposed in this bill can only erode certainty. The consequences of that perverse stance are clear to everyone except the government.    If the bill passes, the effect will be that which CSL predicted in the statement I cited earlier: the cut will discourage R&D investment in Australia. This will also be the case for small and medium sized enterprises. Small firms rely on the existence of a permanent and stable tax incentive to invest in R&D. Small companies are frequently starved of development funds. Many survive on seed funding, which all too often is difficult to obtain in Australia. For companies in this position, the R&D tax incentive is commonly the difference between whether or not a project proceeds. Because of the incentive, many projects have gone on to achieve commercial success, generating jobs, profits and export income. This government is evidently willing to see such projects fail, and jobs and future economic growth along with them.

As Mr Neville Mitchell, Chief Financial Officer of Cochlear Ltd, stated in regard to the previous attempt to cut the incentive:

Ultimately a reduction in the level of R&D undertaken in Australia will result in reduced employment and reduced corporate and individual income taxes.

Cochlear, as senators will know, is an Australian company at the forefront of manufacturing advanced medical technology. More than 250,000 people around the world benefit from Cochlear's implantable hearing devices. The vast majority of Cochlear's R&D activities are conducted in Australia, where more than 300 scientists and engineers are engaged in this work.    This company understands very well what tampering with the incentive means: declining investment, declining employment and in consequence declining revenue from corporate and personal taxation. That would clearly be a tragedy for Australia—and a perverse irony for the government. It is somewhat ironic that this debate is occurring at this moment, with what else is occurring in the parliament. Perhaps a change of leader will shift a change in government approach.

I turn now to the seafarer tax offset, which began in July 2012 as part of the then Labor government's maritime reform agenda, Stronger Shipping for a Stronger Economy. The measure provided a rebate to employers of Australian seafarers for part of the income tax withheld while they were on international voyages. The aim was to help Australian based shippers to become more competitive. We wanted to encourage the employment of Australian seafarers on ships and to increase the involvement of Australians in the global shipping industry. This goal was implemented through two tax changes: a zero rate of taxation for Australian ships on the Australian International Shipping Register and an effective zero rate for Australian seafarers working on those ships. The measure in this bill repeals the latter change. In other words, the government is intent on scrapping the incentive to employ Australian workers.    The government sees their employment merely as an addition to the cost of bringing goods into the country. Yet again, the economic myopia of the Abbott government prevails.

In conclusion, the measures in this bill are testament to the continued damage the Abbott government is intent on doing to Australia's capacity for growth.    The government likes to boast about its economic credentials, but degrading the R&D tax incentive and trashing the innovation system reveal that those credentials are worthless. The Abbott government is persisting with a campaign of economic vandalism that began with the cuts to industry programs announced in last year's budget and still includes the attack on Australian workers in shipping. This is an agenda that will leave all Australians worse off and will ultimately fail to achieve the government's stated goal of restoring the budget to surplus.

Janet Rice (Victoria, Australian Greens) Share this | Link to this | Hansard source

I rise to speak on the Tax and Superannuation Laws Amendment (2015 Measures No. 3) Bill 2015. The Greens are committed to maintaining strong protections for Australian workers and the industries that support them, and this bill is an attack on both of those. And it is Groundhog Daythat we see these measures coming back. The Senate gave an absolutely resounding 'No' to the government's previous attack on these important measures, just a few months ago. Is it because the government has no other legislative agenda that they are recycling their legislation? Or are they just trying to set up yet another trigger for a double dissolution so that we can have an early election under, perhaps, new leadership, but with basically the same old team with new clothes? You have to wonder why, if we have got such a strong agenda of government legislation being brought forward, we are being asked to consider and reconsider again the same legislation. So, as we did last time, just those few short months ago, the Greens will be opposing the changes to the seafarer tax offset and the research and development tax offset, because they are both essential measures for the future of a vibrant Australian economy.

I want to start with the seafarer tax offset, which this bill proposes to abolish. In its current form, the seafarer tax offset applies to a seafarer in a ship for which a company has the appropriate certificate and where the company employs the crew member for at least 91 days a year for these journeys. This tax incentive goes a long way to ensuring that Australian workers on overseas journeys can get paid a decent amount; it keeps their jobs viable. And it costs us the measly sum of $2 million a year. So, for the sake of just $2 million a year, the government is going to make it harder to employ Australian workers on our seas, and harder to have Australian-flagged ships plying our coast. And that is the last thing that we need to be happening now to our shipping industry.

This government is overseeing the decimation of the Australian shipping industry, at the cost of Australian jobs and the working conditions of the workers who are left. But it is completely consistent with its attacks through trying to repeal the coastal shipping act—completely consistent with what that bit of legislation was going to do. There was economic assessment of repealing the coastal shipping act. It showed that the repeal of the coastal shipping act and of the regulations associated with it were going to reduce Australian employment in coastal shipping from 1,100 workers to 88 workers. The repeal of the coastal shipping act would mean, it is estimated, that the only Australian workers employed on ships in domestic shipping would be those employed on the Spirit of Tasmania.

The government, not satisfied with those attacks on domestic shipping, is making attacks on international shipping. That basically means that there would hardly be a job left, whether in coastal domestic waters or on international journeys, for Australian workers. These proposed changes would have a disastrous impact on working conditions on and safe environmental conditions for ships that are in our waters. The saving the government is trying to achieve is tiny, and, for that, it is going to ditch security for workers and our shipping industry, at the very time they need our support. If we end up with virtually no Australian workers and no Australian-flagged ships, and with virtually every ship that is journeying along our coast or internationally being a foreign-flagged, foreign-owned ship with a foreign workforce, then we know that, inevitably, we are going to have a drop in the working conditions and we are going to have a drop in the environmental conditions. The evidence we have for that is: where we have ships that are only visiting Australian shores infrequently, they do not know the conditions and are much more likely to end up with incidents, and with environmental accidents with impacts on, for example, ships going through the Great Barrier Reef.

At the shipping summit that was held a couple of weeks ago that was convened by the ACTU, we heard from people across the industry how these changes to the government legislation are the very opposite to the direction that we need to be heading in. We also heard that what the shipping industry wants above all at this stage is certainty. They do not want to have to go to another piece of legislation and another set of regulations; the industry will not have the certainty to know where it is headed.

So we must not let it happen. It is the last thing that the shipping industry needs. The industry is already in a storm with the changes to the coastal shipping act that are being proposed. The last thing it needs is to be forced to navigate the storm that would be created if this tax incentive is abolished. The law as it currently stands promotes the professional development and training of workers by including this in the period deemed to be on a voyage, and this is an essential measure to train up Australian shipping workers and to give them the know-how to maintain our status as a major shipping nation. It is a status that we cannot afford and that we do not need to let go. We need to be maintaining every incentive we can, to be maintaining training and to be keeping the skill levels of Australian workers.

Again, at the ACTU shipping summit a few weeks ago, we heard how, by not having the opportunities for Australian sailors to be on our ships, all of the onshore jobs are also threatened, because it takes at least 10 years to build up the skills of a sailor or seafarer before they have the skills to be in a position to, for example, be a pilot—to navigate ships through our waters. If we do not have the opportunities for Australian workers to be at sea, we do not have the opportunity for them to be doing that training, and that means we will have even greater job losses—even more than the 1,100 jobs that are destined to go with the repeal of the coastal shipping act, and even more than are destined to go if we abolish the seafarer tax offset. It will mean complete decimation of the Australian workers being employed in shipping around the Australian coast and internationally. And this is when Australia, in fact, is the fourth largest seafaring nation. The amount of goods that are transported by sea around Australia and from Australia mean we have the fourth highest level of goods transported by sea of any country in the world. We need government to be supporting that industry and building it up. We do not need to be losing that industry. It should be a competitive strength of Australia's. Instead, we have government that has been hell-bent on letting it go.

We have options. We do not need these changes. There are constructive ways forward for us to maintain a strong, healthy, viable Australian shipping industry with good working conditions for seafarers and good environmental protections. Perhaps most importantly, the Australian shipping industry can be competitive with the rest of the world. It needs to be that. It truly is an international business. The industry operates in a market that is largely tax free in international terms. Seafarers on other countries' ships are given similar tax incentives. So this is just a matter of keeping our conditions here in Australia on a similar playing field as those in other countries. Taking this benefit away from our workers will be putting them at a disadvantage to the rest of the world just when we need to be doing everything we can in order to maintain their jobs.

The government argues that the seafarers tax offset has had a low uptake. But, while uptake numbers may appear low at first glance, the reality is that they reflect the number of Australian ships that are operating internationally. This is a vital industry. Rather than getting rid of it altogether, we need to be increasing the number of Australian ships operating and ensuring the safety of the people employed in industry. To achieve this, the seafarers tax offset is a measure that we must keep.

This bill also continues the Abbott government's attacks on science and research and development. The bill cuts 1½ per cent from the research and development offsets available to business and rips $620 million out of research and development over the forward estimates. We have a choice to make here. We can have either a prosperous Australia or an Australia devoid of the knowledge that we need to tackle the problems of the 21st century. In this parliament and in the Australian community it is accepted that increasing investment in research and science is the way forward. We know that our wellbeing, security and economic viability as a nation depend on maximising the innovation that Australians are renowned for. It is in areas that are underpinned by research in science and development that we are going to be able to compete on the world stage.

These cuts to research and development also come on top of the cuts to the research and development tax offset that targeted large company investment. This is not the direction that we should be going in. The insanity of these cuts is reinforced and underlined by the government's own figures on science expenditure. Even though we know that science increasingly needs to underpin our future as a nation, last year we spent less on science and research than we did in 1979. In 1979 I was a first-year science student. I would have thought, as a first-year science student, that as a country we would acknowledge the value of science and research and recognise the importance of science and research to our future and that we would be increasing our level of research. But, no. We are very much going back to a last-century outlook on the direction our country needs to be heading in.

We know that over the last three decades science and research have become increasingly important to our society and economy. The rot began under Labor in 2012, but Prime Minister Tony Abbott—however long he remains Prime Minister for—has taken spending on science and research to the equal lowest level since records began. Sadly, I do not think if we did have a change of leadership and a new Prime Minister that we would see any difference in the direction that this government as a group and as a party are taking our country in. It is not the direction we need to be heading in.

We have seen supported by all of the government, not just the Prime Minister, unprecedented cuts to clean energy programs. We have seen cuts to the CSIRO, forcing some of our world-leading scientists into early retirement. Again, we have skilled scientists who have decades of experience and are committed, capable and able to be continuing their careers and who want to be continuing their careers being forced to take redundancies or accepting voluntary redundancy packages so as to save the jobs of their younger colleagues. Now we are seeing these attacks on the research and development tax concessions.

We know that we cannot compete with China and India on wages, but we have the potential to be much stronger on research and innovation. To achieve this, we need secure and significant public investment. This is something that other countries have certainly twigged to. You would think that it would be something that in Australia we would acknowledge we need underpinning our public policy, given we cannot compete on low wages. But, no. We are trailing behind countries that are our competitors in the world—such as Germany, the UK and the US—and we are being outspent by key trading partners such as Korea and Japan.

We cannot afford to continue these cuts to spending on science, research and innovation. We know that the 'dig it up and ship it out' economy has had its day. We know that fossil fuel reliant industries such as mining have had their day. We have to look to the jobs of the future. We have to look to the jobs that are going to give us a clean, green, innovative, clever, prosperous future. We cannot allow the country's brain drain to continue, and that is what these cuts to science funding mean. They mean that bright Australian scientists are not able to find work in Australia.

I know a young scientist who has just finished a PhD in marine biology; his desperate hope is that he will find a job in his field—there is plenty of marine biology research that needs to be done and our economy depends on a good understanding of our marine biology—but he looks at the prospects for employment and he cannot see anything. He said to me: 'Janet, I want to stay in Australia.' But if you look at his prospects, you would have to think, 'What hope is there?' Another scientist whom I know has spent 15 years working as a climate scientist, but all those 15 years have been in short-term, insecure employment. So many scientists in her position have actually left working in science because they cannot rely upon it. They have mortgages to pay and families to support and they decide that, no, they cannot go from one post-doc to another post-doc to another post-doc—12 months here, 12 months there, perhaps another 18-month appointment there. Very reluctantly, they give up their passion, their commitment and their expertise in science and go off to find a job in some other industry that will give them more certainty. We should not be forcing our scientists to do that. We have so much useful, valuable, economically essential work that our scientists should be doing, but they are not being supported by this government and this government's approach.

We cannot allow the country's brain drain to continue. We must be looking to increase funding for research and development, so we can have the knowledge that the rest of the world is after. The Greens will always be committed to Australian workers—whether they are seafarers plying our shores or whether they are workers—and we are committed to their contribution to a prosperous thriving economy. The Greens are committed to maintaining innovation in our key industries. That is why we will be opposing this bill.

Joe Ludwig (Queensland, Australian Labor Party) Share this | Link to this | Hansard source

I rise too to speak on the Tax and Superannuation Laws Amendment (2015 Measures No. 3) Bill 2015. There is a good reason that it is No. 3. This government has been trying—not that they are really trying—to put this bill through this chamber for some time. Quite frankly, they have not got the message at this point in time, but they ought to get the message that the Senate does not accept this bill. It does not accept the two provisions contained in this bill. These two provisions have been sliced and diced into a bill that this side of politics does not agree with and does not think they do the work they are supposed to do. There are much better ways of doing it—such as, firstly, leaving the current policies in place.

The two measures are: Schedule 1 repeals the Seafarer Tax Offset with effect from 1 July 2015—and I will come to that shortly—and Schedule 2 reduces the rate of R&D tax incentives with effect from 1 July 2014. Certainly, we have gone past that date. The government has put a lot of effort into trying to explain their policy intent, but it is a failed policy intent. The government says that both measures are being taken to achieve budget savings. These savings over the forward estimates in respect of the Seafarer Tax Offset are about $12 million and a reduction in R&D tax incentive rates of about $620 million from 2014-15. I am never one to say that these are small amounts. They are significant amounts, but the policy intent behind them—which is to create a saving out of what is effectively a reduction in R&D expenditure and in Australian seafarers around our coastline—are failed policy directions by this government.

In fact if you look at the Seafarer Tax Offset, you would have to wonder whether it is another slice of WorkChoices being served up in another way to attack the Maritime Union of Australia, to attack seafarers who ply Australia's coastal waters. When you look at the work that the government has done, you would be surprised to discover that it has not only provided briefing notes on the MUA for politicians to try to understand how the policy intent of Seafarer Tax Offset would work, but it has done a lot of groundwork to try to convince politicians, the MUA and many others that this is a good outcome. It is a poorer outcome. The approach that this government has taken to regulating coastal shipping in Australia is a disaster. It is not the end of it, if it remains in government too much longer.

The government has a range of attacks on coastal shipping which it is intent on producing, but this bill does not do it. I do not wish to correct Senator Rice that it will create a double-D trigger for the government. That is not the case, but it does not lessen the impact of this bill. Why would this government continue to push this bill forward? The only logical reason is, as Senator Rice did say, that the government does not have much legislation. It has no policy formulation measures and no legislative agenda. In fact, the government's plan is very hollow; it is paper thin; a plan with a title and not much else. The abolition of the seafarers tax offset—which effectively reduces the rate of tax offset available for the seafarers—will ultimately have a disastrous impact on the opportunity which the Labor government put in place. What the Labor government put in place was the opportunity for coastal shipping companies to improve the lot of seafarers, to create a level playing field—or as near as practicable as you can—and to encourage the industry to grow and to employ Australian seafarers on coastal shipping.

The government, as part of the truer reason and as part of their attack on workers—their salami slice of Work Choices that they are not game to serve up again—is found out here. The refundable tax offset originally started from 1 July 2012 for employers of certain Australian seafarers. A company employing Australian seafarers on prescribed overseas voyages made by certified vessels may be entitled to claim the seafarers tax offset. The government makes much ado about there not being many claimants. With any policy it should be allowed to run its course and to develop the opportunity for companies to see the benefit of employing Australian seafarers.

When the Howard government was in power they wanted to destroy Australian coastal shipping and this government is following that same rulebook. They wanted to ensure that they could have foreign-flag vessels, that they could have foreign crews on ships plying our coastal waters, with no opportunity for developing the Australian coastal shipping industry. The Maritime Union noted that there were six international voyaging ships and each ship would employ approximately 34 seafarers—approximately 204 seafarers in total. The industry saw the benefit and supported the policy of ensuring that the tax offset would remain. In its submission to the Senate Economic Legislation Committee’s inquiry into the previous bill, the ASA, which is the major employer body in the industry, stated:

The Seafarers Tax Offset provides a rebate to the employer of Australian staff for part of the income tax withheld while working in international trades, thereby making the employment costs more comparable with international seafarers.

The industry saw a significant benefit from this outcome. The industry saw that this was a government policy that would benefit and create certainty for their industry. I suspect what this government has done is a reflection on Mr Abbott's tin ear. He did not listen to industry and he did not understand that industry wanted to maintain a policy that would encourage this outcome. But it is not surprising at the end of the day that this industry was not listened to by Mr Abbott. In fact, the list of industries that Mr Abbott has not listened to is more telling of the position. The major area, when you examine it in more detail, is the benefit that will flow. We are talking about $12 million over the forward estimates—it is a significant amount but not a crucial amount for Australian jobs and the Australian coastal shipping industry.

This bill also includes the R&D tax offset. This is again one of those staggering issues where ultimately you have to think the government has lost its way. Rather than promote research and development, rather than look at how you can ensure companies can have good outcomes in R&D, this government has relinked it back. Implementing this provision—which Labor opposes—will reduce overall the outcomes that companies will utilise in research and development. The current R&D system came in on 1 July 2011. The R&D tax incentives assist businesses to offset some of the costs of doing R&D and fundamentally aim to promote innovation. Labor believes that ultimately we need to promote innovation in business if they are to continue to grow and to prosper in the Australian economy. This government does not agree with that statement. The program is to be administered jointly by AusIndustry on behalf all Innovation Australia and the ATO. The R&D tax incentives replace the previous R&D tax concessions. Fundamentally that is where this government is at. You can have an alternative policy position on this issue, and I think Mr Bowen summarised it very well when was speaking in the House about this $620 million cut to the research and development tax concession. He said:

I will say a number of things about this. Firstly, the support given to research and development through the incentive in the tax system has been very important in Australia's research and development efforts. What the government is doing here is relinking the concession to the corporate tax rate. The previous Labor government explicitly delinked the corporate tax rate and the research and development incentive. We did that to provide certainty so that Australian companies investing in risky research and development ventures knew the sort of support they would receive from the government when they were undertaking the difficult decision about how much to invest.

I think that is by far the better way to go. This government does not agree with that and wants to effectively go back to the old system. I think business also wants certainty about R&D development. This bill does not provide that certainty.

This government has taken the approach of relinking the corporate tax rate for research and development incentives, and that is an alternative argument. I just do not think it is the right argument, Labor do not think it is the right argument, for corporate businesses who want to invest in innovation and in research and development. The area which is of most concern underlines, I think, the government's position: on research and development, this government has been shown to be missing in action. Their treatment of research and development corporations in the agriculture field, their attacks on the CSIRO—these underscore the government's approach to research and development. Fundamentally, they think it is a matter for business and that the government should not play much of a role. In this area I think government does play an integral role in supporting innovation so we can meet the challenges of the 21st century in research and development.

The rates of the refundable and non-refundable tax offsets will effectively be reduced by 1.5 per cent from 1 July 2014, from 45 per cent to 43.5 per cent for companies with an annual turnover of less than $20 million and from 40 per cent to 38.5 per cent for all other companies. This will preserve the value of the R&D tax incentive relative to the company tax rate, which will be cut by 1.5 per cent from 1 July 2015. All of this tells us that this government is about reducing the outcomes in this field.

More can be said about this tax position that the government has taken, but I want to touch again on the abolition of the seafarer tax offset. Opposing this offset shows the government's view of employees. The original seafarer tax offset was about revitalising Australian shipping to ensure that we would have a shipping industry in Australia in the next 10, 15, 20 years. The object was to stimulate opportunities for Australian seafarers to be employed or engaged for overseas voyages and to acquire maritime skills. These skills do not come overnight. You cannot train someone to be a seafarer overnight. There needs to be a policy to encourage employers to invest in skills acquisition by allowing employees to acquire those skills over time so that they become worthwhile contributors to the maritime industry. This government decided to take a short cut and simply say, 'We'll import the skills for coastal shipping.' So, before the seafarer tax offset is even two years old, the government has moved to abolish it. The offset should be given the opportunity to develop and to run its course, because Australia needs to maintain and expand its maritime skills base.

This tax initiative is one of several that arose from the lengthy industry consultation that led to Labor's shipping package. I applaud the then minister for the foresight he showed and for the work that he did in bringing forward a good shipping package that was the subject of wide consultation and met the approval of the industry. That is because what this industry wants is certainty, not reform after reform after reform. What this industry needs is the ability to revitalise the Australian shipping industry, an industry in its own right. It is not, as the coalition would say, 'just the cost of doing business'.

The coalition should stand up for Australian shipping rather than continue to do what it has done over the past year—that is, walk away from the practical aspects of supporting Australian jobs and defending Australian skills. We know the coalition will soon try to walk away from supporting Australian coastal shipping because it wants to open the coast to increased numbers of foreign vessels, with crews on Third World wages, which is bad both for the environment and for safety, but it is unsurprising coming from this government.

The Australian Shipowners Association oppose this policy. So, not only do shipowners oppose this policy; the companies that are affected by the R&D change oppose it as well. You wonder who the government were listening to when they wrought these changes. The Australian Shipowners Association believe the seafarer tax offset was a key element of the 2012 reforms and that it helped to reduce the operating costs of Australian vessels, increase the competitiveness of Australian shipping and provide a significant opportunity for employment of Australians in the international trade, and that its abolition will have a severe impact with regard to future opportunities. That is the industry itself saying directly to this government that these changes are bad, are unsustainable and should not be implemented.

But this government, hell bent on ripping money out of everywhere, has not looked at the policy objective and has not considered how the policy will impact negatively on Australian workers. It just decided to do this. You wonder who is in charge of the show—and, until later tonight, no-one probably knows the answer to that.

Chris Ketter (Queensland, Australian Labor Party) Share this | Link to this | Hansard source

I rise this evening to speak against the Tax and Superannuation Laws Amendment (2015 Measures No. 3) Bill 2015. I make the observation in commencing my contribution that today is a historic occasion in that Mr Turnbull, in the other place, has decided to announce a challenge to the Prime Minister. I noted in watching Mr Turnbull's statements that one of the grounds which he is relying on to support his candidacy for that position is the fact that this is a government which is not displaying economic leadership and it is not able to demonstrate that it has anything in the way of economic credentials. That is quite relevant to the bill before us because there is no other example of a government which has a very short-term approach, a myopic approach, to economic management. This is a classic example of putting short-term savings against the prospect of longer term growth. We know how important long-term growth is for the jobs of the future and our economy. We know that the real purpose behind this particular bill, as Senator Collins indicated in her contribution: to scrounge savings in the area of the R&D tax offset of something like $810 million over the forward estimates. We know from various stakeholders in this area that this move is going to impede growth, and that is one thing that we cannot afford to do with the economy of this nation.

Tonight I begin my contribution with respect to the research and development tax incentive. I feel very strongly about this and I call on the government, whoever is in charge as of tomorrow, to review its position in relation to this important matter. As other contributors have indicated, these are identical measures before us today which have already been defeated in the Senate once before, on 2 March this year. In our view nothing has changed to warrant a different conclusion coming out of consideration of this bill. I urge the government to listen to the business community and other stakeholders in this area. The government seems to operate on the mythology that it has superior economic credentials. It really does have a tin ear when it comes to this particular matter. If it does not review its position in relation to the R&D tax incentive in particular, I believe that this government will be condemned by history for these acts of economic vandalism.

I will make general observations about the R&D tax incentive and the importance of it. It goes to the fact that, in advanced industrial economies, innovation is the principal driver of increases in productivity. Firms that innovate are more competitive and can sustain more highly skilled and highly paid jobs. Tax incentives are one of the most effective tools available to government for stimulating an attractive investment in innovation. This is something that we heard from witnesses to the Senate Economics References Committee inquiry over and over again: the significance of the R&D tax incentive. This investment in turn is critical to developing dynamic and highly productive industries able to compete at the top of the global value chain. Of course, the R&D tax concession is something that Labor introduced in the 1980s, making Australia one of the first countries in the world to foster innovation through the taxation system. We updated the scheme in 2011 and the positive effect of the new measure was almost immediate. The R&D tax incentive was a landmark reform building on Labor's record of investment in innovation and R&D.

The most pressing concern for stakeholders is the increasing uncertainty that the measure before us today will create for the business community by actively discouraging investment in R&D. This is precisely the situation that the Labor government was trying to avoid when it introduced the R&D tax incentive, making it independent of the company tax rate. The uncertainty and policy inconsistency created by the proposed change cannot be overstated and concerns about the impact of this change on R&D investment in Australia are repeated in almost all of the submissions to the Senate Economics References Committee. Ernst and Young, for one, noted:

This type of inconsistency can discourage R&D investment by both small and large companies within Australia.

KPMG noted:

The rate reduction limits companies’ ability to plan their long term R&D investments.

KPMG went on to say:

Through its conduct, the Government is actively dissuading companies from doing R&D in Australia.

It is absolutely mind-boggling that we have a government which wants to go down this path.

Labor understands the importance of innovation to our economy. In Mr Shorten's budget reply speech, the following points were made:

Innovation offers opportunities everywhere: smarter farming and safer food, more livable cities and better transport.

New ways of learning from each other, working and communicating with each other and caring for each other.

It is the key to the jobs of the future, the jobs that a Labor Government will deliver.

Mr Shorten said that Labor sees the future as 'one defined by science, technology, education and innovation'.

There are a number of reasons in particular why I oppose the changes to the R&D incentive. Firstly, there is the point that I made briefly about the ongoing uncertainty and inconsistency which discourages firms from investing in R&D. This is in addition to the recent tinkering that has happened to the incentive under this Prime Minister, the changes which included the $100 million cap, which was passed, the reduction in the rate, which has not been passed, and reviews through the tax white paper and flagged in the government's response to the Boosting the commercial returns from research discussion paper. All of these announcements add to the uncertainty in this area.

Secondly, we are talking about a government which is proposing to punish business, particularly small to medium enterprises, that rely on a permanent and stable R&D tax incentive in order to invest in R&D. Recently AusIndustry data shows that over 70 per cent of firms accessing the incentive are SMEs and over 30 per cent of companies accessing the incentive are manufacturing firms. Thirdly, another reason for opposing goes to the fact that the changes discourage investment in innovation at a time when we need it most by reducing the benefit for R&D and the development of new technologies.

Fourthly, the measure ignores the importance of government leadership in investment and in innovation and R&D, and I place on record here Labor's latest commitment to devote three per cent of GDP to R&D by the end of the next decade. Fifthly, a further reason is that supporting the measure would significantly undermined Australian R&D and investment in innovation, science and research, damaging our reputation, especially in the business community. Finally, I would also argue that the measure is highly retrospective and would apply in the income year commencing 1 July 2014.

It is not just Labor talking about the damage which these measures will cause. A number of witnesses in the Senate Economics Committee inquiry provided significant submissions, and I know that Cochlear has already been referred to. Cochlear Ltd is a significant company, a top 100 ASX listed company focusing on research, development, manufacturing and distribution of implantable hearing devices. This is a company which says that it is very concerned about the reduction in the rate of the R&D tax incentive for companies that actively seek to improve Australia's economic competitiveness. They say the proposed reduction is the equivalent of a 10 per cent cut for small companies and a 15 per cent cut for large companies, and Cochlear has skin in the game here. They typically spend in excess of $100 million on R&D annually, but they do ominously make the point that this will need to be reviewed in light of recent measures to cap eligible expenditure at $100 million. The proposed changes to the R&D tax offset rate will be a contributing factor and an important consideration in Cochlear's decision to continue to grow its R&D investment in Australia, and they make the point that a reduction in the level of R&D undertaken in Australia will result in reduced employment and reduced corporate and individual income taxes.

The business uncertainty here is very bad news for Australia. I also note the contribution made by KPMG who have stated: 'We are concerned that the proposed reduction counters the global trend to increase R&D investment as a way to boost economic growth and jobs. For example, Hong Kong, Singapore, Italy and France have all increased R&D incentives in recent years.' They went on to state: 'Faced with a reduction in support by Australia and increased support in other countries, many companies will rethink doing R&D in Australia. Ultimately, a reduction in the level of R&D undertaken in Australia will result in reduced employment and reduced corporate and individual income taxes.'

Another company which made a submission was AusBiotech. They expressed bitter disappointment at the government's move to reintroduce legislation to cut the R&D tax incentive. They have urged the Senate to reject the legislation. I believe that perhaps Dr Anna Lavelle has already been referred to in previous contributions by senators this evening. She has stated:

While this cut and its flow-on impact may appear small or inconsequential, it will specifically disadvantage small pre-revenue and start-up companies, which runs completely counter to Government rhetoric and indeed the policy intention of the R&D Tax Incentive.

She goes on to make the point that:

… the constant threats and tweaks to the R&D Tax Incentive are unsettling for biotechnology developers and undermine business confidence at a time Australia can least afford to falter.

These very important companies in this area of research and development are all coming out and opposing what the committee is proposing to do. CSIRO, unsurprisingly, has also made some comments in relation to this matter. It has made the point that only 30 per cent of Australia's R&D workforce is employed in industry, which is very low by OECD standards and compares particularly poorly with innovation powerhouses the US and Japan who have almost 80 per cent of their R&D workforce in industry. It made the point that this low percentage not only limits the ability of Australian industry to undertake its own R&D activities but also limits business-to-business collaboration and business-to-research-organisation collaboration. These changes can only further exacerbate the problems that the CSIRO has already identified.

I want to leave consideration of the R&D tax incentive at that point and focus the remainder of my remarks on the other aspect of this bill, which is the proposed abolition of the seafarer tax offset. It is important to note—and Senator Ludwig has made these points—that, when in office, Labor understood that the Australian shipping industry had been in a state of decline. We noted that under the Howard government the number of Australian-flagged vessels working domestic trade routes had plunged from 55 in 1996 to 21 in 2007. So we introduced these changes to revitalise the Australian shipping industry. This followed the unanimous recommendation of a 2008 parliamentary inquiry and an extensive consultation program with all stakeholders between 2010 and 2012. Our aim was simply to support the ability of the Australian shipping industry to compete within its own borders.

This measure has been operating for a relatively short period of time, but it is very important for our national and security interests to revitalise the Australian shipping industry. We are an island nation. We have one of the longest coastlines in the world. One tenth of the world's trade goes to or from Australia, and we have the fifth largest shipping task in the world. The object of the seafarer tax offset was to stimulate opportunities for Australian seafarers to be employed or engaged on overseas voyages and acquire maritime skills benefiting employers of Australian seafarers. The measure was a direct benefit to employers, providing an offset for tax paid by the employer when employing Australian seafarers engaged in international trade. It assisted in equalising the relative costs of Australian seafarers with the costs of foreign seafarers, providing an incentive to employ more Australians than otherwise would occur.

It is significant to note that the Senate inquiry into the abolition of the seafarer tax offset received no submissions supporting its abolition. There were a number of stakeholders involved, including Maritime Industry Australia Ltd, formerly known as the Australian Shipowners Association, Shipping Australia and the Maritime Union of Australia. The Australian Shipowners Association made the point that:

The Seafarers Tax Offset was a key element of the 2012 reforms which helped to reduce the operating costs of Australian vessels, increased the competitiveness of Australian shipping and provided significant opportunity for employment of Australians in international trades … the impact [of abolition] is severe with regard to future opportunity.

This government is attempting to abolish the seafarer tax offset barely two years after it was introduced, without giving it the opportunity to effectively develop and expand Australia's maritime skills base. We note that the MUA has also made submissions in relation to support for the seafarer tax offset. They have drawn on research which demonstrates that other countries around the world have for some decades adopted fiscal and other measures to address the adverse effects of foreign competition on their national shipping fleets.

This bill deserves to be defeated yet again. It is a terrible waste of the Senate's time to be considering a measure which is so short-sighted in its approach, one approaching the category of economic vandalism. I urge the Senate to reject it.

Glenn Sterle (WA, Australian Labor Party) Share this | Link to this | Hansard source

I look forward to making a contribution today on the Tax and Superannuation Laws Amendment (2015 Measures No. 3) Bill. It is a pretty dull, boring, colourless day in Canberra, but I thought that I would come down and liven it up a bit. The worst part of going further down the pecking order is that most of your colleagues have said the things that you wanted to say. But it would not be remiss of me if I just threw a few more suggestions around. It is not very hard for those opposite to realise that, unfortunately, I do not have a great deal of confidence in our current minister when it comes to shipping. It has been proved that he is anti Australian shipping, anti Australian jobs. They love to wrap it all up as an attack on the MUA.

Two Fridays ago I had the pleasure of attending the shipping summit down in Melbourne. The shipping summit was put together—before they all start jumping up and down—by a very impressive array of people who actually have skin in the game in shipping. It was convened by the ACTU and Senator Madigan. They came together and said, 'Let's get together the people who are going to be affected by this ridiculous decision by this crazy government over there to kill off Australian shipping jobs.' It was well attended because there were—it is not very often that I read speeches, but I am just reading a couple of notes—the MUA, of course; shipowners were there; Shipping Australia were there; ANL were there; the cement industry was there and there was an array of senators. Apart from Senator Madigan there were Senator Lambie, Senator Rice and me. I am sure Senator Rice will concur with me that it was a worthwhile event. I stayed for the whole day. The sad part, as Senator Rice would know, is that no-one from the government bothered. Not one single government representative could be bothered to go to a shipping summit and actually listen to the effects that this and other crazy legislation would have on Australia's seafarers and Australia's shipping industry.

They did not give a damn about doing away with Australian jobs. They did not stop to think for one minute about the implications that would be created or the knock-on bad effects, like the possibility of 1,100 seafarers being put out of work and being undermined by foreign labour. Don't you dare call me xenophobic, you lot over there. I will always stand up for Australians jobs. If we do have foreign seafarers, they need to be paid the same conditions and wages as Australian seafarers. But to come blindly charging out and make yourself feel so proud that you are going to get rid of Australian jobs, it makes me want to vomit. Not only are the seafarers the ones who are going to lose but so will Australian businesses.

The hypocrisy of that lot over on that side has no limits, because they just do not want to listen. The classic example of what it meant to Australian business was none other than a Mr Bill Milby. We have read about Mr Bill Milby. If you have not heard about Mr Bill Milby, you have been on another planet for the last week and a half. Mr Bill Milby represents North Star Cruises. North Star Cruises has that wonderful yacht, True North. I have actually been on it. It is magnificent. Mr Milby employs about 40 Australians. They predominantly live in Western Australia, down south, and they predominately are a lot of young people, plus the experienced skippers and the masters. He also has employees who live in Broome. They are all Australian. That is one business up there in the Kimberley in Broome, in God's country, right up the top there. Don't worry about what the eastern staters say; that is God's country.

But there are also another 16 Australian companies who are based up there. They do the tours and those wonderful cruises from Broome all the way through to Darwin. They pick up some of the most spectacular scenery in the world. But they also work very, very closely in conjunction with the traditional owners, because there are certain parts of that coastline that are off limits, because the traditional owners have certain places that are men only and women only. Those companies not only contribute to Australian jobs but they contribute to the economy; their taxes are being paid in Australia. Everyone wins.

This government, under this incompetent minister, is doing everything it can to kill off not only Australian jobs, as I said, but also Australian businesses. To make matters even worse, Mr Bill Milby heard from the minister. I will paraphrase. Mr Milby said, 'What I going to do about my jobs?' I am led to believe that the minister pushed him off to officials from the department of transport or whatever they are called now. You know the acronym—regional development and all that sort of stuff. There were bureaucrats from Surface Transport Policy. I do not have to mention their names, because they were exposed at the hearing that we had here last Monday night. Senator Bill Heffernan called them out. To give them credit, they did not lie.

They actually agreed—you know how they can get a little bit weaselly on their words—about what they said to Mr Milby. He asked, 'How am I going to be competitive if I have got to get rid of Australian jobs and there'll be foreigners coming in? How do I do that? Foreign crews, foreign ships.' They told him explicitly, 'You're living in a different world now. You'll just have to go offshore and deflag your Australian vessel. You'll have to go offshore to get a flag of convenience or do something, and then you have to get rid of your Australian crew and you have to employ foreigners.' And these clowns over here think they are doing a fantastic job! It makes me absolutely livid because it is beyond the realm of just wanting to attack the unions, which is all they ever want to do. They have gone that far: they are not just happy attacking the unions. This is just ground zero; they will blast everything out.

Mr Deputy President, I do not have a lot of time. I am not going to seek to continue my remarks. But I will go back to this bill: here is another classic example where a bill was put in under the previous Labor government that gave Australian shipping companies the opportunity to compete in tax offsets. But what does this government want to do? They want to kill it off. Here is another arrow in their artillery to shoot through the heart of Australian employers and Australian workers. I do not know what possesses them to think that this is intelligent policy.

It is getting to the stage where they even had a follow-on. Not only did they shoo Ford and Holden off our shores and not only have they done some grubby deal to have submarines built offshore—let's face it, they have not come back and said these submarines will be built in Australia—but thousands of jobs are going. Yet they are still not content. They want to kill off another 1,100 jobs. Those 1,100 seafaring jobs were figures that were supplied to us at the summit and they were also backed up at the Senate inquiry last Monday night.

I do not hear anyone rushing into the chamber here to take me on. I can tell you another thing about this: in the last round of Senate estimates, the mob from Surface Transport Policy—the same ones, these people are unbelievable; there must be a certain criteria when you join certain parts the public service that you take your brain out and leave it at the door—they came in and espoused this wonderful new initiative by this same Minister Truss called 'setting the course'. I said, 'What the hell is setting the course?' They are telling us—which, der, I have been saying it years, because I knew it back in the nineties—that Australia's road freight transport task is going to double by 2020. Their solution is: 'Good, we will put it all on ships.' Absolutely fantastic! Everyone out there better know that they will not be Australian ships and they will not be Australian crews.

In fact, it led me to the point where I got that frustrated with the bureaucracy that I even suggested that they should set the course for the door, because it is just disgraceful that Australian bureaucrats think that this is a good idea. It leads me to the question: who is leading who by the nose? Is the minister that incompetent that he cannot put his hand on his heart and say to his bureaucracy, 'Whoa, stop, I am not going to trade off Australian jobs.' Or are the bureaucrats that dumb that they are following this terrible piece of legislation and coming up with worse pieces of legislation? They then put their hands on their hearts and say, 'Haven't I done a great job? I've still got my job. I'm all right. I'm protected.'

As my colleagues Senator Ludwig and Senator Ketter said, we are an island nation. For crying out loud, we have got the fifth largest shipping task in the world. We should be proud of what we have done over the years. But to just outsource it offshore to foreign workers on shocking wages, with shocking conditions and with shocking safety? Let's not forget the flags of convenience show that was on Four Corners about when two seamen and an engineer were killed. There is the sort of nonsense, let alone when we start talking about the environment.

As the previous minister, Anthony Albanese said, this is WorkChoices on water. This is a classic example of an incompetent government who does not give a damn about Australian jobs and is running up the white flag. It is not the Australia flag on the back of our ships; they are running up the white flag. Let's hope they all run up the white flag at the next election, because Australia deserves far more than what this lot are delivering. Yet they dare to attack us because we want to stand up for Australian jobs through this ChAFTA—or whatever it is called now: the Chinese export agreement. How great they are!

You know what? A true leader of this nation would unite its citizens. A true leader would do everything he or she possibly could to create opportunity for all Australians—as many Australians as possible. They would not stand up here in this place—here in Canberra—and divide our nation, setting workers against workers and companies against companies. Australia deserves a lot better and hopefully tomorrow—no, I will take that back. It will be all the same stuff, like a pair of old, dirty shoes. You can change the socks, but it is still the same old dirty shoe. I am not supporting the bill.

Sitting suspended from 18 : 30 to 19 : 30

Matthew Canavan (Queensland, Liberal National Party) Share this | Link to this | Hansard source

I am happy to support the Tax and Superannuation Laws Amendment (2015 Measures No. 3) Bill 2015, which is part of a broader package of policies and legislation aimed at repairing the Commonwealth budget after years of neglect and failure to control our nation's budget. One of the primary tasks the Australian people entrust to us in this place is to manage their money properly. It is not the primary task, which is making sure we keep Australia safe and secure from external and internal threats—and that is something that both sides of politics do a reasonable job of at all times—but it is a very important that we, as elected representatives, make sure that we spend Australian people's money carefully. We should be careful to ensure that we do not spend more than we can afford and burden future generations with the undue sacrifice of having to pay for the lack of frugality of those in present positions. The government has made a big attempt to do that. It has been frustrated at some levels, but, at the same time, the government has delivered more than $50 billion in savings since coming to government. This bill provides two additional policy areas of savings to that overall $50 billion package. In the overall scheme of things, they are relatively small savings, but they are still, nonetheless, contributions to that broader effort.

There are two schedules in this bill—one dealing with the seafarer tax offset and the other dealing with R&D tax offsets. The first schedule amends the Income Tax Assessment Act 1997 to abolish the seafarer tax offset, which currently provides a refundable tax offset to companies for 30 per cent of salary, wages and allowances paid to Australian resident seafarers. In order for the offset to apply, the Australian resident seafarer must be employed by a company to undertake overseas voyages on a qualifying vessel for at least 91 days in the income year. The seafarer tax offset was introduced by the former government and it was admirably intentioned at the time. It was implemented as part of a range of packages to try and grow Australia's shipping industry. Other countries apply some tax benefits to their local industries, and the then Labor government sought to do something similar. The offset became available for use after 1 July 2012. However, this government, on coming to power, decided to abolish the tax offset because it has not been used and has been proven to be ineffective in achieving its original objective of growing Australia's shipping industry.

When the package was announced by the former government in the 2011-12 Mid-year Economic and Fiscal Outlook, the seafarer tax offset was estimated to cost around $39 million over the then four-year forward estimates period. That cost has been revised down progressively because the offset has failed to be used as much as was originally expected. Indeed, the forward estimates were revised down at the time of the 2013-14 MYEFO, which was the first budget outlook that was provided by the new government. Abolishing this offset reverses the cost, or revenue lost, which is a more accurate way of describing it, across the four-year forward estimates in the 2013-14 MYEFO.

Why is the government abolishing this offset? The former package, as I said, did seek to stimulate investment in and revitalise the Australian shipping industry and to foster the industry's global competitiveness. We are abolishing this tax offset because it is not achieving its policy intent, which was ultimately to stimulate opportunities for Australian seafarers to be employed on overseas voyages and to gain maritime skills. The savings from this measure will be redirected by the government to repair the budget and fund other policy priorities. The measure will reduce administrative expenses by around $16 million in fiscal balance terms over the forward estimates and in underlying cash terms it will improve the budget bottom line by around $12 million over the forward estimates. As I discussed earlier, those estimates are lower than the original $39 million cost of the scheme because it has not been taken up as much as originally anticipated.

The measure's abolition will not affect a substantial number of companies. The 2013 Australian Maritime Industry Census report published by the Department of Infrastructure and Transport includes statistics on the total number of Australian resident seafarers working in the maritime industry. The report indicates that there are just over 1,000 seafarers directly employed by organisations in that sector. The department also publishes statistics on the number of certificates issued to companies deeming them eligible for a range of shipping tax incentives, including the seafarer tax offset. Certificates apply per company, per vessel and per income year. According to these statistics and Australian Taxation Office information, less than five companies would be affected by the abolition of this tax offset, representing just under 10 per cent of the employment in this sector.

The purpose of this tax offset was to stimulate investment. Clearly it has not done that, given that only five companies have availed themselves of the opportunity to take this offset up. It is not possible to precisely determine why the tax offset has not been taken up to a greater degree, but a number of factors may be at play. Firstly, the competitiveness of the Australian seafaring industry is affected by a range of economic factors, including the Australian exchange rate, which has been relatively elevated in the past few years. Secondly, there are significant differences between Australian wages and conditions in the shipping industry and those of some other countries. The seafarer tax offset is unlikely itself to be sufficient to bridge the gap between those differences. Finally, the seafarer tax offset is a refundable tax offset to the value of 30 per cent of salary, wages and allowances paid to Australian resident seafarers. The benefit offered by the seafarer tax offset may be small relative to the scale of shipping companies, and, of course, it is only refundable—not a direct grant.

The measure is actually separate from the government's other reforms to the Australian shipping industry, notably those affecting the coastal shipping industry. They have been subject to separate reviews and a separate response to the issues there. I will draw some links between the issues around the lack of use of this seafaring tax offset and the broader Australian shipping industry. Of course, there is no argument that the Australian shipping industry faces challenges, particularly challenges around profitability and economics. The very fact that it has been a difficult economic time perhaps indicates why this offset has not been taken up and also why we should seek to correct the underlying profitability issues with the sector before introducing tax offsets themselves. Ultimately, if shipping companies are not making money, a refundable tax offset is not going to change that. By definition, they would need to be making money before they could benefit from a refundable tax offset.

The coastal shipping industry is a part of the broader Australian shipping industry. Unfortunately, in the past decade or so, it has been declining as a share of our nation's freight task and declining in absolute terms as well. That is notwithstanding similar attempts by the former Labor government to stimulate investment and uptake in coastal shipping—notably, the changes that the Labor government introduced in 2012, called the Coastal Trading (Revitalising Australian Shipping) Act. It did not quite meet the lofty goal set for it in the title of the bill. That is not unusual. Often people who are trying to hide something else include various words in bills that do not actually achieve things. That is not just true of bills. The German Democratic Republic was hardly democratic, and Labor's Coastal Trading (Revitalising Australian Shipping) Act is hardly a revitalising piece of legislation. In the first two years since that bill was introduced, there was a 63 per cent decline in the carrying capacity of Australia's coastal trading fleet. It was a piece of legislation that was intended, in fact, to grow our coastal trading effort, but the coastal trading fleet fell by 63 per cent in tonnage terms over just two years.

Taking a longer term view, the fleet of major Australian ships over 2,000 deadweight tonnes with coastal licences is in sharp decline, plummeting from 30 vessels in 2006-07 to just fifteen in 2013-14, halving the number of vessels in just seven years. Over a 12-year period between 2000 and 2012, shipping's share of Australian freight fell from 27 per cent of our freight tasks to just under 17 per cent, while the volume of freight across Australia grew by 57 per cent. Even looking forward, the picture is not much rosier. Between 2010 and 2030—over broadly the next 20 years—Australia's freight task is expected to grow by 80 per cent but coastal shipping itself is only expected to grow by 15 per cent, meaning that its relative share of our freight task will continue to decline.

That decline is being driven by basic economics and basic costs. I am often told by manufacturers in particular that the cost of bringing or moving Australian freight along coastlines is so excessive that it is much cheaper to import from overseas products that compete against our domestic manufacturers or farmers, because of the differential in freight costs. One example that I will mention is that a soft drink manufacturer in Melbourne reported to me that it is cheaper to import sugar from Brazil than to import sugar from North Queensland. That sugar is priced on a world market, so there is no difference in the price of the raw sugar FOB, but the difference is completely to do with the difference in the freight costs and other transaction costs of shipping between overseas shipping and coastal shipping in Australia. So something has to be done.

The government has a plan to liberalise the stagnant and stultifying regulations that were introduced by the Labor Party. The government has a plan to increase the amount of freight that goes by coastal shipping and, ultimately, to also increase the number of Australian employees on those ships. We will set minimum numbers of Australian employees on coastal ships as part of those reforms. Unfortunately, those reforms are being blocked at the moment. There will be no sunlight for the Australian coastal shipping industry if we simply maintain the existing set of regulations, which are clearly not doing anyone any favours.

I support schedule 1 of this bill because it will deliver those multimillion dollar savings, albeit small savings in the context of the entire budget. But you count your pennies and eventually you end up saving pounds, and that is what this government is doing with this bill here. This bill also looks at the research and development tax incentives and offsets that exist in our legislation, and it seeks to slightly modify those. I am a big supporter of R&D tax system. Indeed, we were a trailblazer among the world in introducing R&D tax credits of the kind that we have in Australia. Other countries—particularly developed countries—ultimately, have largely followed us in introducing things like this. But the good thing about our R&D tax system is that it is largely generic and it does not seek to pick winners or identify particular sectors where we here think we know better than private businesses and private financiers in the real world. What we seek to do is provide a generic support for all types of R&D across our economy, and, ultimately, let those who are putting their own money at risk make the decisions about which businesses deserve their particular support and funding.

In saying that, it is a costly element of the budget. Indeed, I do not have the figures in front of me, but when I was an economist at the Productivity Commission we used to estimate government assistance at around $17 billion a year, and a good $8 billion or so of that was made up just of this particular measure. As I say, it is something that should be supported and is supported by both sides of politics; nonetheless, it is a very costly form of industry assistance on the whole. So the government has announced a slight reduction in the offset rates for the R&D tax incentive. The current offset rates of 45 per cent and 40 per cent, depending on the size of the business, will reduce by 1.5 percentage points to 43.5 per cent and 38.5 per cent respectively.

The change from a tax concession to a tax incentive was made in 2011 by the former government. In the 2014-15 budget it was announced that these offset rates would be reduced by this margin of 1.5 per cent. We know from the stats that around 9,500 consolidated groups claimed the R&D tax incentive in the 2012-13 year. The government's original decision to reduce these offset rates was to commence on 1 July 2014, keeping in mind the need to repair our budget, as I said in my opening remarks. The changes were estimated to provide the budget savings of $810 million in fiscal balance terms over the forward estimates and $740 million in underlying cash terms over the forward estimates. That estimate has since changed, given the change in timing of this bill, particularly in getting it through the Senate. The current estimates are for savings of $620 million in fiscal balance terms and $550 million in underlying cash terms.

It is important to note that this measure will not affect the eligibility of companies or the broad workings of the R&D tax incentive, which has general bipartisan support in this chamber, and that will not change. All that will change are the offset rates themselves. Combined with the government's change to the company tax rate for small businesses, the benefits of the R&D tax incentive will not change in net terms, because while the tax offset will reduce by 1.5 percentage points, the government has also changed the corporate tax rate for small businesses with a turnover of less than $2 million by 1.5 percentage points. So, in net terms, there will not be an impact for smaller businesses. Data from the 2011-12 income year indicates that approximately 4,400 companies with aggregated turnover of less than $2 million claimed the R&D tax incentive. Those firms will not be affected. The only firms that will have a slight reduction in their ability to claim offsets will be larger companies that have not been able to benefit from that corporate tax change.

I have spoken to some in the industry about this particular measure. While there is some concern that we have not been able to achieve a 1.5 percentage point reduction in the corporate tax rate overall, again, that is a function of the tight budget we have and the difficulty where we cannot perhaps do all we would like to do in this area. In saying that, there is a Senate committee is currently conducting an inquiry into innovation. It has looked closely at this issue as well as a broad range of issues affecting innovation. While that inquiry has been going on, the government has announced plans, particularly in relation to STEM industries—science, technology, engineering and maths—and particularly to implement a range of industry growth centres focusing on delivering innovation in key sectors across our economy. This change should be seen in the context of those other support measures that the government has bolstered over time, which will continue to ensure that Australia has a strong innovation sector, a strong research and development sector and an industry which largely relies on encouraging private actors to take initiative, to take a risk, to have a go and to see if they can make a new product that is better and more cost efficient and that ultimately delivers better outcomes for the Australian people.

I return to the core reason for this bill, which is to ensure that we do not leave the next generation with a greater burden than that which we face. Clearly, on the current trajectory that we are on, even notwithstanding these kinds of measures, we are set to do that. Whatever you think of the assumptions in the Intergenerational report, they clearly show that we would leave our grandchildren with a burden somewhere in the order of $60,000 to $120,000 in debt per person, and that is not something I want to deliver. I will do everything I can in this chamber to ensure that that does not happen. This bill will help moderate that increase, and I hope it achieves the support of this chamber.

Carol Brown (Tasmania, Australian Labor Party, Shadow Parliamentary Secretary for Families and Payments) Share this | Link to this | Hansard source

I rise to speak on the Tax and Superannuation Laws Amendment (2015 Measures No. 3) Bill. The measures in this bill are characteristic of the Abbott government, a government that has failed to protect and promote Australian jobs, a government that has no proposal for the jobs of the future, a government that has rejected science and innovation at every turn, a government with no vision for this nation. The only plan that this government has is the plan to tear down everything that Labor has built.

There are two substantive measures in this bill: the reduction in the research and development tax offset and the abolition of the seafarer tax offset. Labor opposed these measures when they came before this place in the Tax and Superannuation Laws Amendment (2014 Measures No. 5) Bill and we will oppose them again in this bill. The proposal in this bill is that the research and development tax incentive offset be reduced from 45 per cent to 43.5 per cent for companies with an annual turnover of less than $20 million, and from 40 per cent to 38.5 per cent for all other companies.

Short-sighted attacks on science and research have been a hallmark of this government. The 1.5 per cent reduction in the offset was originally linked to Mr Abbott's signature policy, his paid parental leave scheme, and the 1.5 per cent tax on large business that was to be introduced to fund the scheme. Mr Abbott's PPL scheme has disappeared, but unfortunately the cuts to the research and development tax incentive remain

So now the only purpose of this reduction to the offset is to provide the government with a saving of $620 million over the forward estimates.

However, this is no surprise. This is exactly what we have come to expect of this government's antiscience agenda. In the two years since coming to power, the Abbott government has repeatedly attacked, undermined, rebuked and ignored science and research in Australia. Over two budgets, this government has sought to cut $3 billion overall from science, research and innovation. These two budgets have seen Commonwealth investment in science as a proportion of the budget fall to a 30-year low. This is in spite of the Prime Minister's promises to Australia's science sector.

After being elected, Mr Abbott promised to support science and asked Australia's scientists to judge his government by its performance. In his speech at the 2013 Prime Minister's Prizes for Science, Mr Abbott told the gathered audience of Australia's science and research sector:

I'm pleased to pledge the incoming Government to continue to support science to the fullest extent possible.

…   …   …

… I'd say to all of you, please, judge us by our performance …

I would concur—Mr Abbott should be judged by his performance. And there is no doubt he will not be judged well.

Mr Abbott's war on science has seen cuts to almost all of Australia's science agencies and many major research programs: a $300 million cut to the Sustainable Research Excellence in Universities scheme, a $115 million cut to CSIRO, a $75 million cut to the Australian Research Council, a $107 million cut to the cooperative research centres, an $8 million cut to the Australian Institute of Marine Science and a $28 million cut to the Australian Nuclear Science and Technology Organisation. But unfortunately the cuts do not stop there. There was also a $16 million cut to Geoscience Australia and a $120 million cut to Defence Science and Technology.

The Abbott government simply has no credibility when it comes to science and research—and this bill is just another example of this fact. Cuts to incentives for research and development, especially in the form they take in the bill, are particularly short-sighted and ill-advised.

In November of last year, the Minister for Industry and Science, Minister Macfarlane, told Manufacturers' Monthly:

The Government is putting in place the policies and programmes that will provide incentives for manufacturing firms to invest in technology, and research and development, in order to foster a viable, competitive and successful manufacturing industry.

Yet what we see here in this bill is exactly the opposite. These cuts will stifle innovation; they will cost investment, supress development and stop companies from being as competitive as possible.

Mr Abbott and Mr Macfarlane have sold out Australian science and research, gutting them with short-sighted and crippling cuts. Labor is the only party that is proudly committed to investing in science, research and innovation to build and sustain the jobs of the future. This is a government with no plan for the jobs of the future—no plan for innovation and development in industries that are vital for our economy.

The other substantive change in this bill is similarly baffling and short-sighted. It also threatens Australian jobs. The other substantive measure in the bill is yet another attack by the Abbott government on Australian shipping. This bill is short-sighted and is little more than another attempt by this government to undo the hard work Labor did to revitalise shipping in this country. It is a continuation of this government's war on Australian workers. It is aimed at killing future jobs for Australians in the maritime industry.

The seafarer tax offset was introduced by Labor in 2012 to level the playing field between the Australian shipping industry and the foreign shipping industry. It was part of a carefully designed package to help Australian shipping companies compete against their international rivals. The seafarer tax offset provides a rebate to employers of Australian staff for part of the income tax withheld while those staff work on international voyages. Put simply, it offers a tax break for companies who hire Australian seafarers to work on international voyages. It is payable for each employee a shipper hires, for at least 91 days in a year, on voyages to and from places outside of Australia. The amount of the offset is equivalent to 30 per cent of the seafarer's pay.

The aim of the rebate is to help strengthen the shipping industry in Australia. And who could argue with that? Surely it makes good sense when you consider that Australia is an island continent. We also take into account that 99 per cent of our exports and imports are moved by sea. We hear a lot from the Prime Minister about security and protecting our borders. Well, it is in Australia's national and security interest to have a vibrant shipping industry. This government should be standing up for the shipping industry and doing all it can to save jobs in the industry and ensure that skills are not lost.

I am sure that all Australians want to see a competitive shipping industry in Australia. The seafarer tax offset is strongly supported by the employer body, the Australian Shipowners Association. The Shipowners Association wants the seafarer tax offset retained and also expanded to the offshore sector. I am at a loss as to why the government wants to abolish this tax offset. The payment is not made to individual workers or trade unions. The tax offset is paid to a company. So it is unclear why the government is attacking the stand of the Australian Shipowners Association, which is an employer group—and an employer group which sat down over the course of a year with the Labor government and worked out this policy. This is a policy that is, first and foremost, about supporting Australian industry and supporting Australian jobs.

The agenda of this government for shipping is very clear. This bill is just one small part of their agenda against the Australian shipping industry. In other legislation we have seen the government's intention to introduce Work Choices on water. This government does not care about workers, and especially those working in the maritime industry. We saw that when the crew of the Alexander Spirit were sacked in favour of cheap overseas crew, some of whom will be paid less than $2 an hour. The crew of the Alexander Spirit wrote to many parliamentarians, including me. I would like to quote some of their letter. They wrote about their future and said:

Once unemployed, our prospects are limited given there are more than 500 seafarers out of work.

Some of us are too old to retrain and the younger members of the crew have families to support and mortgages to pay.

They went on to say:

Australia is an island nation and seafaring used to be an integral part to this. Once, going to sea was considered an honourable, long-term career option for Australia's youth. Now we look at an Australia with a rising unemployment rate, a shameful youth unemployment rate and the future is looking bleaker.

They are right. The future for seafarers under this government is bleak—and it will be bleaker still if the seafarers tax offset is abolished.

As I said earlier, the tax offset was introduced from 1 July in 2012 and was part of the Labor government's shipping policy reform Stronger Shipping for a Stronger Economy. From the outset and before the offset had been in place for two years, the Abbott government had it in its sights. It wanted to abolish it. The offset tax did not get the chance to work. We know it must be given time to work because we know that Australia must maintain and expand its maritime skills base. Instead of wanting to abolish it, the government should be working to ensure it stays in place and is a success. But we know that this coalition government has little concern for workers and that it also wants to wreck coastal shipping in Australia. It wants to open Australia's coastal shipping to more overseas vessels who pay their workers low wages. This will be a disaster for Australian workers and it will be bad for safety and our maritime industry.

As my Tasmanian colleague Senator Urquhart has previously highlighted in this place, if the coalition's coastal shipping legislation is passed, two-thirds of Australian shipping workers on the Bass Strait will lose their jobs. They will be forced to join the unemployment queue, just like the workers on the Alexander Spirit. Thousands of Australian jobs are at risk in both coastal shipping and on international voyages. We cannot stand by and watch the shipping industry be destroyed by a government hell-bent on pursuing ideology over sound policy. We cannot stand by and watch workers lose their jobs. Nor can we stand by and watch innovation and development in Australia wither and die. It does not matter who the Prime Minister of this government is; they support this job-wrecking, innovation-and-development-wrecking bill. For this reason I oppose this bill.

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

I, too, have real difficulties supporting the measures contained in this bill. In fact, if the bill is brought to a vote tonight, I will be voting against it. This bill has a number of retrograde measures. Senator Brown has raised a number of very legitimate concerns in relation to this bill.

The first of these measures is the abolition of the seafarer tax offset. This is another kick in the guts to an industry that is already on its knees. What is worse, the predicted savings achieved by the scrapping of this tax offset are miniscule—just $12 million over the forward estimates. I question whether there is no other place the government can find such modest savings, particularly in light of the challenges facing the shipping industry in Australia.

The seafarer tax offset is a refundable offset provided to companies for 30 per cent of salary, wages and allowances paid to Australian resident seafarers on international voyages. Importantly, it provides an incentive for Australian seafarers to be employed on vessels that travel through international waters. These experiences improve Australian seafarers' skills base, making them desirable employees. What is more, this tax offset provides an incentive for employers to hire Australian resident seafarers. Based on allegations made by Mr Bill Milby of North Star Cruises that he was advised by government officials to replace local staff with international crew in order to compete with foreign ships, it is clear Australian seafarers need all the help they can get.

I am concerned that this measure does not appear to be part of a plan to boost Australian shipping in this country. One of the points that has been put to me—and I do not dismiss this lightly—by Senator Abetz, the Leader of the Government in the Senate, and others, including shipping operators and the Deputy Prime Minister, the Hon. Mr Truss, is that there is a concern that it is more expensive to ship sugar from Bundaberg in Queensland to Melbourne by sea than it is from Thailand. If that is the case, we need to look at why that is so and whether there are efficiencies that can be made and work practices that need to be altered. My understanding is that maritime workers are not against having greater efficiencies in the sector. Maritime workers are not against being part of the solution, if that is the case. So I think we need to do a bit of fact checking so that that assertion that it is cheaper to bring in sugar by ship from Thailand to Melbourne than it is from Bundaberg can be verified and substantiated. If there are productivity impediments in the seafaring industry, we need to look at those and find reasonable, practicable ways to deal with them.

But one way we should not deal with them is by effectively saying that we will gut our local seafaring industry and replace it with workers who are being paid on wages way below Australian award rates. We have rules on cabotage here in Australia. That is something I have been quite active on in the past in relation to the airline industry in respect of Jetstar, for instance, when there were foreign crews, generally Thai based crews—and I have spoken to some of those crew members—being paid an absolute fraction of what Australian based crews are paid by Jetstar. This is something that arose several years ago. I understand there has been some improvement in relation to this where they would be involved in crewing domestic flights. From Darwin to Sydney, for instance, it might be the extension of an international flight, even though 90 per cent of the passengers on that flight—if not all the passenger—were domestic passengers. That to me is not what it should be about; that to me is an abuse of the cabotage principle.

We also need to look at what they do in the United States. The Jones Act, the Merchant Marine Act 1920, in the United States is in clear contrast to what is going on in this country. It is a federal statute that provides for the promotion and maintenance of the American merchant marine industry. I should say that is a line direct from a very quick Wikipedia reference that I dug up now, but it makes the point that under section 27 of the Jones Act, or the Merchant Marine Act 1920, they are much stricter and much tougher in ensuring that there is a domestic seafaring industry. In fact, I understand that even the ships that go coast to coast or port to port in the United States have to be made in the United States of America. They have a much more active approach to local industry participation than we do.

I think we should look at the impact of the legislation and what we can learn from it here. If there are, however, productivity issues in relation to our seafaring industry, let's deal with those in a sensible, rational, consultative manner rather than going down the path of throwing the baby out with the bathwater—of getting rid of this measure, which, while modest in scope is still very important to the local seafaring industry.

The second measure contained in this bill proposes a reduction in the rates of tax offsets under the research and development tax incentive. In a country with a long and proud history of inventors, of inventions and innovations, it seems the importance of encouraging research and development is critical. From the humble rotary clothes line, the Hills Hoist, to the black box flight recorder to the photocopier to the bar code, the depth of talent in Australian inventors cannot be underestimated. The potential for our economy of this innovation must not be lost on any government. In my home town of Adelaide, SupaShock is gaining attention around the world for its development of a shock absorber that is credited with the Ford racing team winning V8 supercar races because of what it does to a car's handling. Defence industries around the world are looking at it. I know one German defence contractor is looking at the way these shock absorbers work and the ride they give. The mining industry is talking to SupaShock because these shock absorbers will make a massive difference to heavy mining and earthmoving equipment. They will significantly reduce the levels of injuries in the workplace, particularly back injuries, because they will absorb the shocks of that heavy equipment.

I am concerned about the impact of these changes. It is worth reading a letter from the Cell Therapy Manufacturing Cooperative Research Centre of 11 October 2014. It was a submission to similar measures to the Senate Standing Committee on Economics. They said:

The CRC program provides funding to build critical mass in research ventures between end users and researchers to deliver significant economic, environmental and social benefits across Australia. There are approximately 40 CRCs across Australia and all have been established to address major challenges that require medium to long-term collaborative efforts.

The CRC also said:

Under the R&D Tax Incentive, our industry participants receive either a 40 percent non-refundable or a 45 percent refundable tax offset, depending on their turnover. This equates to a 10 or 15 percent permanent tax benefit. Under the proposed reduction, this would reduce the benefit by 10-15 percent. Such a large reduction will directly reduce R&D funding.

That is what the submission said, and it is directly relevant.

I want to put on the record that after much negotiation with Minister Cormann I supported changes to the R&D for large companies—those big companies that some would say are big enough and ugly enough, and I do not mean that in a pejorative way, to look after themselves—companies with massive turnovers, massive levels of revenue and income. But these changes will affect those innovative companies—those small and medium businesses that are the future of our advanced manufacturing and are at the cutting edge of research and development and are bringing forward innovations in this country to provide the jobs of the future.

And so I cannot support these changes. It is a change that will have a retrograde effect on small and medium businesses involved in research. With those remarks, regretfully, I cannot support these changes. I think that our shipping industry—our merchant marine industry—does have many challenges, but these proposed changes for our seafarers will not solve the problem; they will only make it worse. When it comes to R&D, we need to keep those current incentives in place so that those 200,000 jobs, which could well be lost in Victoria and South Australia by the end of 2017, once Ford, Holden and Toyota depart as car manufacturers from this country, can be replaced. For those reasons, I cannot in good conscience support this bill.

Catryna Bilyk (Tasmania, Australian Labor Party) Share this | Link to this | Hansard source

The Tax and Superannuation Laws Amendment (2015 Measures No. 3) Bill abolishes the seafarers tax offset and reduces the research and development tax offsets. Labor opposes both of these measures but in my contribution tonight I intend to speak mainly about the seafarers tax offset. The seafarers tax offset was introduced by the former Labor government in 2012 as part of a package of reforms aimed at revitalising Australian shipping. The reforms were the result of extensive consultation with the shipping industry. These reforms included changes to taxation to allow Australian-based companies engaged in international shipping to compete on a level playing field with their international rivals. Under Labor's reforms, two tax changes were introduced. One was to have a zero rate of company tax for Australian ships that were registered on the Australian International Shipping Register. The other was to have effectively a zero rate on Australian seafarers who worked on those ships. The seafarers tax offset, the measure this bill would abolish, is the latter of the two.

The purpose of this measure was to provide an incentive for the employment of Australian seafarers. More Australian jobs in shipping is not only good for Australian seafarers and their familiesbut also it is good for the Australian economy, particularly the local economies in port communities that rely on the industry. This represents one of the government's many ill-thought-out cost-cutting exercises. In putting these kinds of blunt instruments forward as budget savings measures, the government once again fails to account for the costs of making the cut. After all, overseas-based workers in the shipping industry will pay zero tax and we will lose the economic benefit of Australian workers spending their wages in Australia. Sadly, the Abbott government has failed to stand up for Australian workers in our shipping industry. What we are starting to see under this government is the slow death of Australian shipping.

I mentioned in a previous speech to the Senate that I had spoken with Australian workers from the shipping industry as part of Labor's Fair Work Taskforce hearings about their concerns for the future of their jobs and job security, and the financial security of their families. Other than providing employment for Australians, and the associated revenue that flows through to the Australian economy, there are plenty of other reasons to maintain a strong Australian shipping industry with Australian-flagged and Australian-crewed vessels. While job security was obviously at the forefront of the concerns of the seafarers I spoke to back in June, they were also worried about safety at sea and Australia's marine environment. They simply could not understand why the Abbott government has not only stood by while jobs in Australian shipping continue to decline but also is seeking to actively encourage it. Just last week we had the spectacle of SeaRoad Holdings telling a Senate inquiry that it had no choice but to sack its Australian staff and replace them with a foreign crew under the government's new shipping laws. The Abbott government is attempting to introduce 'WorkChoices on Water'. The evidence from SeaRoad Holdings should be of no surprise to them. If other shipping companies are adopting foreign flags and employing foreign labour on foreign wages and conditions then it puts enormous pressure on those companies who employ Australians to do the same. How else are they going to compete with crews that are being paid as low as $2 an hour or less?

I believe I recounted this story in my previous speech, but in the Fair Work Taskforce I remember one of the seafarers telling us that he used to conduct inspections for the ILO and he came across a foreign-crewed vessel whose crew were being paid nothing, and they were fishing off the side of the ship to feed themselves. What do you think would happen in any other freight or transport sector if we allowed foreign workers with foreign wages and conditions to enter the industry? It is inconceivable that we would allow in workers from overseas on foreign wages and conditions to drive trucks or load rail cargo, yet this is exactly what this government is proposing to do in Australian shipping.

I think many Australians would be surprised to learn—shocked even—that under the Abbott government's proposed legislation foreign-flagged vessels with foreign crews working for companies paying Third World wages could actually operate entirely within Australian waters, sailing from one Australian port to another. No industrialised country in the world allows the kind of unfettered access to its domestic shipping industry that this government is proposing. This government claims to be about creating jobs, yet it is doing nothing to stop Australian crews being replaced with foreign labour and they are doing plenty to encourage it. The abolition of the seafarer tax offset would be another nail in the coffin of Australian maritime jobs. It makes us wonder whether this is just a cynical attempt to destroy the Maritime Union of Australia, with the Australian economy and jobs being used as collateral damage. I know that is a pretty cynical view to take but with this government absolutely nothing would surprise me.

The seafarers tax offset is overwhelmingly supported by Australia's shipping industry. Here is what the Australian Shipowners Association has had to say about the offset:

The Seafarers Tax Offset … helped to reduce the operating costs of Australian vessels, increased the competitiveness of Australian shipping and provided significant opportunity for employment of Australians in international trades ... the impact [of abolition] is severe with regard to future opportunity.

Another peak body in Australia's maritime industry, Shipping Australia, is also strongly supportive of this offset. It would be easy to dismiss this proposal as nothing more than a cynical cost-cutting exercise but it is much more than that. This proposal is one in a long line of attacks on Australian workers—on their jobs, on their wages and on their conditions. I sometimes wonder how often will I and my colleagues on this side of the chamber have to come into this place and defend Australian workers against another attack from the government that promised WorkChoices was 'dead, buried and cremated'. I will not go through the examples that I have gone over before about attacks on penalty rates, attempts to introduce AWAs via the back door and so on, except to say that, whether it is in the shipping industry or any other part of the Australian economy, this government not only fails to stand up for Australian workers but also consistently undermines their rights, their hard-won conditions and their job security.

The government says it expects to make a saving of $12 million over the forward estimates from this measure. This is a very small amount of money in the context of the overall budget, and it begs the question whether it is really worth the cost. The fact that for such a small saving the Abbott government is willing to scrap a measure that has been in place for only a few years and that has the support of the industry speaks volumes about where its priorities lie. They are certainly not with maintaining an Australian shipping industry or supporting Australian maritime jobs. Nor is it the government's priority to support the communities across Australia that derive economic benefit from the salaries of Australian seafarers. This is just another short-sighted cut from a mean and out-of-touch government.

We know that the Liberal government does not care about maritime jobs. We have seen media reports about Western Australia's North Star Cruises—in fact, we have probably all seen the TV replays of the Senate committee hearing—saying they were told by the bureaucrats to hire foreign workers, not once but twice. Twice they were told to do that. Recently, Bill Milby, a spokesman for the luxury cruise line, stood by the accusations he made in his evidence to the Senate committee and recalled a conversation with a senior transport department official in May. He said:

She said to me, there and then, well we are in an international environment, so we have to learn to compete on the international market.

Maybe you should look at de-registering as an Australian ship—in other words taking it off the shipping register—and perhaps put on a foreign flag, which will allow you to put on foreign crew, which will reduce your wages costs.

That is what Mr Milby told ABC Perth radio. He said:

I was staggered, I was really surprised that it was somebody from Canberra representing this department, telling me that.

This is shameful behaviour by this Liberal government. The government does not care about jobs in our maritime industry and it does not care about jobs in the R&D sector. In fact, tonight there is quite a lot of speculation that the only jobs they care about are their own. But it is not just tonight that there has been that speculation, let me tell you. I call upon the Senate to oppose this terrible bill as we on this side will be opposing it.

Glenn Lazarus (Queensland, Independent) Share this | Link to this | Hansard source

On behalf of the people of Queensland and, more broadly, Australia, I am voting against this bill. The Tax and Superannuation Laws Amendment (2015 measures No. 3) Bill 2015 comprises two components, both of which I am opposed to.

The first involves reducing tax incentives to businesses investing in research and development in Australia. Specifically, the bill reduces the rates of tax offset available under the research and development tax for the first $100 million of R&D expenditure. In effect, this bill will reduce the higher, refundable rate of the tax offset from 45 per cent to 43.5 per cent; and reduce the lower, non-refundable rate of the tax offset from 40 per cent to 38.5 per cent. This bill penalises businesses for investing in research and development in Australia, by removing some of the tax incentives.

As a nation we cannot compete with the rest of the world on the basis of labour costs. We have tried and, as a result, we have lost much of our manufacturing industry to South America, Asia and other countries that offer lower labour costs. Our future as a nation rests on our ability to innovate, create, develop and invent. We are known for quality and hard work. The world will pay good money for technological and medical breakthroughs which extend life, improve quality of life and minimise and eliminate illness. As a nation we need to invest in research and development to create the breakthroughs and inventions that the world will pay top dollar for. The last thing we should be doing is reducing incentives for businesses to invest in R&D.

It is for this reason that I am opposed to this component of the bill. I see this component of the bill as nothing more than a cash grab by a government devoid of ideas to grow this country. Judging by the latest news coming out of the coalition tonight, my view is shared by Malcolm Turnbull and many others who feel the government needs a change of direction.

The second component of this bill, which involves abolishing the seafarer tax offset, is nothing more than another cash grab, a grab which will only further cripple an already fragile shipping industry. The seafarer tax offset was introduced in 2012 to provide an incentive for companies to employ Australian seafarers. The seafarer tax offset is essential to allowing Australian businesses to compete in international waters. Australia being an island nation, our professional seafarers are critical to its prosperity. They work as our pilots, our harbourmasters and our marine surveyors to ensure safe passage for ships in and out of our ports. Without them, our nation's trade would grind to a halt. We would be left having to rely on the rest of the world to move goods in and out of our country by sea and around our country by sea. There are approximately 15,000 seafarers in Australia, and this number is down by 35 per cent from five years ago.

Our jobs are being taken away by foreign ships which are registered in other countries where they pay little to no tax. Many ships servicing our waters are registered in Singapore, where they pay zero tax. The Australian seafarer tax offset helps Australian businesses employing Australian seafarers to compete with international ships that have international workers who are paid much, much less than our workers. This tax relief measure helps to level the playing field for the Australian shipping industry. It has only been in place for a couple of years and needs to be given a chance to work, to build our international shipping capability.

This bill is an attack on Australian jobs and on the Australian shipping industry. It is also an attack on our national security. It would only take a few altercations with a trading partner or a shipping company servicing our waters to bring our nation to a complete standstill. By decimating our shipping industry, we are putting our nation at risk of not being able to trade, not being able to manage the terms of our own import and export businesses and not being able to access goods critical to our nation's survival. We already have very few fuel refineries in Australia. We have, at best, only a few weeks of fuel supplies in our country. We rely heavily on the rest of the world in order to survive as a nation. We need Australia's shipping industry to survive, grow and prosper for the sake of jobs and our future.

I cannot and I will not support any measures which put our country at risk and which do not support Australian jobs for Australian workers. I hope that the Senate votes this legislation down.

Fiona Nash (NSW, National Party, Assistant Minister for Health) Share this | Link to this | Hansard source

I would like to thank those senators who have contributed to this debate. The Tax and Superannuation Laws Amendment (2015 Measures No. 3) Bill 2015 represents another chapter in the government's commitment to implement our Economic Action Strategy and to repair the budget.

Our Economic Action Strategy is about setting Australia up for the future. It is about making some tough decisions now so that we can build long-term prosperity, so that we can make sure Australia has a social safety net which is strong and sustainable and so that future governments have the resources available to allow them to make decisions that are decent to and compassionate towards the Australian people. We have outlined a way forward to achieve this goal. This includes reprioritising government spending, to spend less on consumption now and more on investing in our future. It includes ensuring that taxpayers' funds are spent wisely. Taxpayers deserve value for money from the government. It also includes an expectation that everyone will contribute to budget repair. Both measures contained in this bill take us a step further on our path to achieving that goal.

Collectively, the measures in this bill will return around $826 million to the budget in fiscal balance terms over the forward estimates. Separately, both measures in this bill tell their own story about different groups of people. Schedule 1 abolishes the seafarer tax offset. This was a failed policy of the former government. It provided a refundable tax offset to eligible shipping companies for 30 per cent of salary, wages and allowances paid to Australian resident seafarers who were employed to undertake overseas voyages on qualifying vessels if the company employs the seafarer on such voyages for at least 91 days in the income year. The rationale for the introduction of the seafarer tax offset was to stimulate opportunities for Australian seafarers to be employed on overseas voyages and to gain maritime skills. The government is abolishing the seafarer tax offset because it is not achieving this policy intent. There are significant differences between Australian wages and conditions and those of some other countries. Accordingly, shipping companies that employ Australians for overseas voyages typically have other reasons for doing so, such as English language skills or knowledge of Australian ports. The seafarer tax offset has not led to any appreciable increase in the employment of Australian seafarers. Its repeal will return $16 million to the budget over the forward estimates.

Schedule 2 reduces the rate of the tax offsets available under the research and development tax incentive by 1½ percentage points for income years commencing on or after 1 July 2014. This was a difficult decision. However, repairing the budget must be done as fairly and equitably as possible. It is only fair that everyone makes a contribution. The changes to the R&D tax incentive are simple and straightforward. The changes will not affect the eligibility of companies for the incentive, the way that companies claim the incentive or the administration of the incentive more generally. The R&D tax incentive will continue to provide generous, easy-to-access support for thousands of eligible companies in all sectors of the Australian economy. This measure will provide a gain to revenue and savings of around $810 million over the forward estimates period. The measures contained in this bill represent a careful and reasonable approach to reprioritising government revenue. They bring us a step closer to reducing our debt and a step closer to a stronger, better and more compassionate Australia. I commend this bill to the Senate.

Debate adjourned.

Ordered that the resumption of the debate be made an order of the day for the next day of sitting.