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

I ask Senator Cormann, acting for the Treasurer, my first question: why did the Treasurer choose to use male full-time average earnings instead of total average earnings or even median income in the Bills Digest and, I suppose, more broadly, to advertise and promote that this is legislation for middle-income or middle-class Australians?

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

The government has used average Australian earnings because, in our judgement, that is the most appropriate measure for the purpose of estimating the relevant impact of this personal income tax cut. The government has used the average full-time wage as calculated using the average weekly ordinary time earnings determined by the Australian Bureau of Statistics. This measures the average wage of a full-time worker. In 2014-15, it was $77,200 per annum and was forecast to exceed $80,000 in 2016-17. The Australian Bureau of Statistics classifies earnings as pre-tax earnings payable to award standard or agreed hours worked. It is calculated before deductions such as superannuation have been made. It does not include amounts that are salary sacrificed, overtime payments, bonuses not attributable to the reference period, government payments and reimbursements for travel and entertainment.

Conversely, the average wage measures both part-time and full-time average incomes. The average weekly earning in 2014-15 was $59,100 per annum. The Australian Bureau of Statistics classifies an employee as being full-time where they ordinarily work 35 hours or more per week. As I have indicated, in the government's judgement this is the most appropriate measure.

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

If you said $59,000, Senator Cormann—that includes, I understand, full-time and part-time earnings—how is that middle-class or middle-income Australia when your tax cut is $80,000, which is significantly above that number?

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

I suspect that the coalition government and the Greens would have to agree to disagree here as to what is good public policy. The whole purpose of this personal income tax cut for hardworking families is to encourage people to work more and to not get penalised by getting into the second highest income tax bracket by making additional effort. The reason it is appropriate for us to use the average earnings measure—the average full-time wage measure that we are using—is because the whole purpose is to provide an incentive for people to work more and earn more without getting penalised by a higher tax rate.

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

I still do not understand, Senator Cormann, why you did not use median income—why the Treasurer did not use median incomes. I am sure you understand; you have a good grasp of numbers and finance, and you have some very good people working for you who are around you today. Most experts would agree that median income is actually a better representation of the middle class in terms of groupings. Averages can be distorted by very large numbers. Of course, there are a large number of high-income earners in this country—all who, I may say, are going to receive this tax cut—that distort the numbers. I am going, I must admit, on 2014-15 figures. So, if you have other numbers there, I would certainly be interested to see those. All that was available to me were the ABS numbers from 2014-15. You may not be aware, Senator Cormann, that the average income for a full-time wage was $80,000 and $69,000, including part-time, where the median income was significantly lower. Why wouldn't you use median income as a better indicator for middle-income Australians?

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

I do not agree it is a better indicator. I do believe that Senator Whish-Wilson well understands the reason why the government has chosen the measure that it has chosen. It is just that we have a difference of opinion here. The government has put forward these personal income tax cuts. It is there for all to see what the effects of this measure is, if the Senate passes it, and obviously we commend it to the Senate.

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

Just to give you the quantum difference: the ABS median full-time income in Australia based on 2014-15 numbers was $69,000, while the average wage was $79,000. That is a $10,000 difference because that was skewered by high-income earners. I am still not convinced that you have provided an argument as to why median income would not be a better indicator of middle-class or middle-income earnings in this country. When you incorporate part-time earnings into those figures, they drop even lower. The median income in this country is $52,000—30-40 per cent below the bracket of tax that you are giving tax cuts to. Does the Treasurer agree that, even on your own numbers of $59,000, which includes full-time and part-time earnings, as your average income—$80,000 is significantly higher than that—you are actually giving a tax cut to high-income Australians, not to middle-income Australians?

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

No.

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

Can I ask Senator Cormann whether Treasury has done any modelling on the household impact on Australians based on the family tax cuts from the omnibus bill and the tax cuts from this bill to determine the impact of inequality in Australia?

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

Treasury modelled the long-term economic effect of the government's tax and superannuation plan announced in the 2016-17 budget, which included the personal income tax rate changes, as well as changes to superannuation. In the proposal to lower the company tax rate, Treasury also separately modelled the long-term economic effect of lowering the company tax rate to 25 per cent. The modelling suggests that the effect of our overall proposal would improve the growth friendliness of our tax system and it would increase the level of GDP by around one per cent over the long term, which of course will help generate better opportunities for people across Australia to get ahead, to get better jobs and better paying jobs. The modelling also suggested the overall tax and superannuation plan raises the long-term level of GDP by a similar amount. Treasury released results of this modelling exercise to the public on 3 May 2016 via its website. The economy-wide model examined how significant tax changes affect key income indicators, taking into account interactions between different taxes and second-round effects on incentives. The general point I would make is that, of course, all measures in the budget are modelled in terms of their fiscal impact, and that is reflected in the budget papers.

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

Senator Cormann, what economic stimulus have you modelled for the $6-a-week tax cut that you are giving to the 20 per cent of the highest paid Australians? What is the economic stimulus that you forecasted? Let's annualise it at $315 or $6 a week.

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

I do not agree with your characterisation of our measures. What is in front of the Senate is a proposal to increase the threshold for the relevant marginal tax rate from $80,000 to $87,000. The purpose here is to ensure that the average full-time wages of Australians will not move into the second-highest marginal tax rate. This is all part of an incentive for people to work harder and earn more, without being penalised by an increased overall tax burden. This is part of our broader tax reform agenda, which is designed to strengthen growth and create more jobs.

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

Could I perhaps rephrase that question and put it to you in a different way. Can you confirm the numbers? We are using numbers, as are other people, including the media, that equate to roughly a $6-a-week tax cut or a $315-a-year tax cut for all income earners above $80,000. Are those numbers correct?

The CHAIR: Senator Whish-Wilson.

I will ask again, Senator Cormann. I am just asking for confirmation on whether those numbers are correct. You did not answer my question. Six dollars a week is enough for a takeaway coffee and maybe a bite out of a muffin. For us in here who earn significant salaries compared to your average Australian on a median income or an average income that is not a lot of money. I am very interested in what your modelling shows you. You are doing this for a reason. You are giving a tax cut to Australians earning over $80,000 for a reason, presumably. I do not quite understand what that reason is. You have given us some spin and rhetoric around the tax and superannuation plan—the government's plan to give hardworking Australians an incentive to work harder and save more. So the very logic of what you have told us here tonight is that a $6-a-week tax cut to the most wealthy Australians is going to make a difference to our economy. I do not understand what economic stimulus that is going to have on our economy. So, Senator Cormann, I am disappointed that you cannot at least confirm that number. Could I try again? Could you confirm that those numbers are correct or that we are in the basic ballpark?

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

Continuing on this theme of tax cuts going to higher-income earners rather than to the people who would really benefit from an increase in their disposable income, we are in an era of increasing casualisation and increasing part-time work, so fewer and fewer people are in the range the tax cuts that you are offering. In particular, we are in an era where women, more so than men, tend to be in part-time or casualised work. Have you done any modelling on the different impacts on women compared to men? Does the government concede that, by using full-time average wages as its basis for these tax cuts, it is creating tax cuts that are going to benefit men more than women? Because it is women who are much more likely to be working part-time or in casual employment.

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

We are going round and round in circles. It seems like the Greens are interested in running a bit of a filibuster to keep income tax cuts away from hardworking families. So what I say to the Greens is to confirm again information that has previously been made public, so you are well aware of it. This bill will provide a tax cut to around 3.1 million hardworking Australians in 2016-17 and beyond. The Australian Taxation Office, of course, has already issued new withholding schedules giving effect to these tax cuts. The bill will keep 500,000 taxpayers out of the second-highest tax bracket in 2016-17, compared to current rates and thresholds, and all taxpayers with taxable incomes above $80,001 will receive yearly tax cuts. Those with taxable incomes above $87,000 will receive the maximum tax cut of $315 per annum, or $6 a week, compared to the current rates of thresholds which have previously been put on the public record.

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

The issue, which I think is very pertinent and that Australians need to know, is how are these tax cuts going to differentially impact and benefit some parts of the Australian workforce compared with others? Has the government done any modelling to look at that differentiation by comparing the impact on women compared with men?

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

We will just have to agree to disagree on the desirability of this measure. This is a measure that does not discriminate between men and women. It does not discriminate at all. It seeks to provide the same incentive to both men and women when it comes to working harder and earning more and not being penalised by a higher tax rate. This measure, which was announced in the 2016-17 budget, is specifically targeted, because without action the average full-time wage earner in Australia would face the 37 per cent marginal tax rate this year. As the government works to improve Australia's fiscal settings it will look for further opportunities to extend further tax relief to working Australians. The government, of course, has maintained the carbon tax compensation after the removal of the carbon tax, which means that the tax-free threshold increase from $6,000 to $18,200 has been maintained, providing a reduction in the average tax rate for taxpayers, but, most notably, for low-income earners. You have got look at all of this in context.

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

I have always thought you were one of the government's better performers in here, especially in the role you are currently playing, but it is only five or 10 minutes into the committee stage and you are refusing to answer questions. We cannot agree to disagree with you until you can provide some kind of confirmation to us about what we are asking you. Let me give you the figures that we got from the ATO. Our analysis based on recent tax office data finds that the cut will help 28 per cent of male taxpayers but only 13 per cent of female taxpayers. So less than half of female taxpayers, versus male taxpayers, in this country are going to benefit. Can you please confirm if that number is accurate or in the ballpark?

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

It is not accurate, because, with all due respect, Senator Whish-Wilson is making an assumption of future behaviour. More-attractive tax policy settings will provide an incentive for Australians to work harder without being penalised and with a higher marginal tax rate. The measure applies equally to male and female Australian workers.

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

That is very tricky, Senator Cormann. Nevertheless, the numbers as they stand now, based on the reported taxable incomes, suggest to us that this tax cut will significantly benefit male earnings over female earnings. Of course, apart from a broader economic inequality that is growing rapidly in Australia, as it is in many other countries around the world—which Professor Thomas Piketty is here to talk about this week—we know that gender pay, gender income equality, is a significant issue and one we need to deal with. So I presume that when the Treasury or the Treasurer—I am not exactly quite sure how the process goes—decides at election time to bring in a $4 billion tax cut, these issues are factored into your decision making. For $80,000 and above you raise a tax bracket threshold to $87,000 and that benefits anyone who earns over $80,000—$8 million, $10 million, $100,000. All I want you to do is confirm to us here tonight that these tax cuts that you are bringing in will benefit male earnings over female earnings. I will read it to you again: the tax office data finds that the cut will help 28 per cent of male taxpayers but only 13 per cent of female taxpayers. Is that number correct?

Another issue: could you tell me whether wages are growing faster for those in the $80,000-to-$87,000 range than those on lower incomes. I must say on record that the Senate Economics Legislation Committee did not have an inquiry into this. There was a very short submission period and then the committee wrote up the report. Even in the limited feedback the committee did receive, in the limited number of submissions that were put to us, it was suggested that if any income bracket needed a bracket creep adjustment, it was the bracket directly below $80,000. Could the Treasurer please answer that question?

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

We have not undertaken the sort of modelling that Senator Whish-Wilson is asking about. Let me just remind him though that every Australian earning up to $18,200 pays no tax on those earnings, and any earnings above $18,200 are taxed at 19 per cent. Obviously, as the saying goes, you cannot give a tax cut to somebody who pays low tax; that is somewhat difficult. Obviously a range of Australians go through the very low income ranges for a range of reasons, including during their studies, at the beginning of their career and working their way through their career. The whole purpose here is to target an income tax cut towards Australian workers on average full-time wages; the whole purpose here is to provide an incentive and to make sure they are protected from the increase to the 37 per cent marginal tax rate.

I know that the Greens hate tax cuts. I know the Greens are the high-taxing party of Australia. The Greens are worse than the Labor Party when it comes to the level of taxation. We can debate this for the next five weeks, and we will still need to agree to disagree. You are not pursuing these questions because you will genuinely change your mind at the end of the answers that you receive, you are trying to prosecute a political case because you are against tax cuts for hard-working Australian families. Let us not try and play a game here. Let us not try to pretend that you are genuinely seeking information so that you can then go to your leader, Senator Di Natale, and say: 'I got it all wrong. I never meant to recommend to you that we should oppose these tax cuts. I never meant to recommend that the Greens vote against lower taxes. I actually change my mind because the answers I've received have helped ensure that I see the light.' We all know that is not true, that is not the case. You are running through a political exercise. You are wasting the Senate's time. You know where this will end up, because there is no support in this chamber for your proposition. There is no majority support in this chamber for your proposition.

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

I am here to hold you to account, Senator Cormann. I am here told you to account for handing out $4 billion of taxpayers money willingly, seemingly with no economic imperative—

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

No modelling!

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

no modelling, no consultation, no committee hearing process and almost no time for submissions. It is ridiculous. We are here to hold you to account, so we are asking perfectly valid questions. It is our job; the Senate is a house of review. We are elected to this place to hold the executive and the government of the day to account, and that is exactly what my colleague Senator Rice and I are doing tonight. And the questions we have asked you—many of which you have not been able to answer or have simply refused to answer—do not look good for you. You either do not know the answers or the answers will embarrass you. Let us be very clear: this is very serious. This is not just serious because it is $4 billion; this is serious because it is going against the grain of what we need to do in this place—that is, tackle rising inequality: economic inequality across the board and inequality in terms of gender pay. That is why this is a very important debate and a very important piece of legislation. With my next question, if you would please answer it, I would like to know: is it true that the decision to have the benefits of this tax cut flowing to high-income earners on 1 October, ahead of its passage through parliament, is unprecedented? Is it unprecedented that the tax office or the tax commissioner has allowed you to do this? When has this occurred before?

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

I am advised that this is quite common, that this is quite commonly the way that tax measures are implemented.

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

Peter Martin reported in his paper that he contacted the ATO, and he quotes an ATO spokeswoman who said she could find no precedent for this having occurred before. Can you give us an example tonight of where there has been a precedent of this occurring without legislation?

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

Again, I have just relied on advice from the officials here in the chamber, who have confirmed for me that this is the way relevant tax changes are routinely implemented on the basis of certain conditions having been fulfilled.

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

Is it true that the tax commissioner, Chris Jordan, at first refused a request from Treasurer Scott Morrison to bring in the cut on 1 July, the cut we are discussing here tonight, saying he was only able to adjust tax scales in accordance with enacted law? Is that correct?

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

Let me just add to my previous answer, just to give you an example. The penalties, for example, under the multinational anti-avoidance legislation came into effect prior to the legislation having passed the Senate. That is just one example. I am led to believe that there are others, but obviously that is a matter that we can explore further down the track.

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

Thank you, but you did not address my last question about the tax commissioner, Chris Jordan. Did he at first refuse a request from Scott Morrison, the Treasurer, to bring in the cut on 1 July, saying he was only able to adjust tax scales in accordance with enacted law? To save time, I will ask you the second question on that. It was reported that he did back down in September, saying public statements by both Labor and the coalition had given him confidence that this bill was likely to pass with amendments—is that correct?

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

Senator Whish-Wilson is somewhat misrepresenting what Mr Jordan has said. Mr Jordan indicated that he would be able to make relevant adjustments to the tax scales once he had sufficient confidence that the law would pass. As you would be aware—again, it is a matter of public record—the Labor opposition, through their relevant spokespeople, indicated some time ago that Labor would support this tax cut for hardworking families. As such, it was evident that there was broad bipartisan support for this tax cut in this parliament—which meant that the tax commissioner had great confidence that the tax cut would pass the Senate, irrespective of the solitary filibuster that you are seeking to run here tonight.

It is noted in the Treasurer's media release dated 2 September 2016 that the ATO confirmed it would issue a new PAYG withholding tax schedule in the week commencing 5 September 2016. Taxpayers have started to receive the benefits of this measure in their pay packets from 1 October 2016. Any tax overpaid beforehand will be refunded by the ATO on assessment.

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

The quotes in the same article by Peter Martin—which were direct quote—said that the tax commissioner was only able to adjust tax scales in accordance with enacted law. But he changed his position. That was the question I was asking you. You have said that was false, or that I was misrepresenting his position. So I will go away and see if I can find those direct quotes myself and let you know if I have misrepresented his position. But that was quoted in The Age and in The Sydney Morning Herald by Peter Martin, who, as you know, has been an economics correspondent in this place for a very long time.

I suppose we are not going to have time to finish this tonight, Senator Cormann, but it was only three weeks ago, in here, when the omnibus bill passed with the support of Labor, that we talked about budget repair and the budget deficit. That was only two weeks after the Prime Minister had said in the papers that budget repair and debt reduction were 'a moral challenge of our generation'. How is giving $4 billion in seemingly 'unguided missile' form, without any modelling to support it, to the highest income earners in this country—a coffee and a bite of a muffin every week—helping your case of budget repair? If you do not want to answer that in broad terms, I would be very interested in following up with you when time permits tomorrow the budget impact of this bill out beyond the forward estimates and whether you have done any 10-year forecasts.

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

Firstly, I completely reject the Greens proposition that hardworking Australians earning between $80,000 and $87,000 a year are high-income earners. I completely reject that proposition. Secondly—and this just proves that we are going around and around in circles—the senator wrongly asserted again that no modelling had been done. That is wrong. I explicitly put on the record the modelling that had been done in terms of the economic impact of our tax reform package. The reason we pursue this particular tax cut for hardworking families—incidentally funded by a crackdown on, among other things, multinational tax avoidance—is we know that providing an incentive for Australians to work more, by ensuring that they are not penalised with higher marginal tax rates, will help growth.

An important way of repairing the budget is to increase the level of revenue that is generated by government and stronger growth. As we all know, stronger economic growth helps to deliver among other things stronger revenue flows to government. It gives people across Australia better opportunities to get ahead and it gives them opportunities to pursue better-paid jobs, which means that over time they will pay more tax. But, of course, you are the Greens—people often say that the Greens are really just the old communists in green cloaks—and we understand that you are the ultimate high-taxing party of Australia. We understand that you do not agree with tax cuts for hardworking families. We do. On this side of the chamber we are all in favour of giving hardworking Australians a fair go. We believe in providing incentives for people to work harder, to get ahead and to pursue opportunities to improve their quality of life— (Time expired)

Progress reported.