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

I move:

That the Senate take note of the answers given by the Minister for Finance (Senator Cormann) to questions without notice asked by Senator Keneally and the Leader of the Opposition in the Senate (Senator Wong) today relating to taxation and dividend imputation.

It's quite clear that, when Labor puts forward responsible, principled, well-considered proposals for tax reform, the only response from those opposite is hysterical claims which, once again, bring down the quality of our national debate. For those people listening to this session today, there need to be a number of facts put on the table, because one would be forgiven for thinking that the sky was going to fall in relation to Labor's changes to the dividend imputation. It is clear that nothing could be further from the truth. Under Labor's plan, no-one will pay a single cent more in tax, no-one will lose a single cent from their super contributions, no-one will lose a single cent from their pension and no-one will lose a single cent from their share dividends. It's also important to note, for those listening, that none of the changes that Labor is proposing are retrospective. If Labor were elected, they would apply from 1 July 2019 under the announced policy.

I was quite gobsmacked yesterday when I was listening to the Insiders program on the ABC to hear Ms Bishop, the Minister for Foreign Affairs, saying in an offhanded comment that Labor's proposals were going to take away the savings of pensioners. That is just straight out misleading for Australians and causes unnecessary concern out there in the general public. That's what happens when we have Labor putting out principled positions on tax reform, sensible reform that is absolutely necessary. We have a provision in the tax system here that is unaffordable in the longer term. The government know that. They've done work in relation to this issue, but they won't come clean on it.

We know why dividend imputation was brought into existence. It was a Hawke-Keating era measure, but it was Prime Minister Howard and Treasurer Costello who made the changes to the system that have made it unaffordable. Even former Liberal leader John Hewson has talked about the fact that the tax refund aspect doesn't make any sense. We've heard credible commentators making the point that there is a need for change. We've seen a representative from KPMG making a similar comment. We've seen Saul Eslake coming out and talking about the commonsense aspect of this proposal. We know that what we are talking about is well-considered, and it is supported by a number of credible economic commentators.

If you were to listen to those opposite you would think that they were the party defending pensioners. Once again for the benefit of those listening to this broadcast, one just needs to put into context this famed indignation and objection of those opposite to Labor's responsible changes. What have they tried to do? They tried to cut pension indexation, a change that would have meant pensioners would be forced to live on $80 a week less within 10 years. They cut $1 billion from pensioner concessions, meaning pensioners in some states are paying more for things like rates and vehicle registration. I know that pensioners in Queensland are grateful for the work of the Labor government in stepping up to the plate and mitigating the impact of that cut. We've seen their changes to the assets test, which saw nearly 100,000 pensioners kicked off the pension entirely and cut the pension for more than a quarter of a million pensioners. We know the government are increasing the age pension eligibility age to 70—the oldest of comparable countries. This will deny the age pension for 375,000 older Australians over the first four years alone. This is a $3.6 billion hit to the retirement income of Australians.

Pensioners are facing higher power bills and greater out-of-pocket health costs, and yet here we have the government pretending that they are concerned about the impact of this change on pensioners. They are conducting a good old-fashioned scare campaign. The foreign minister made some comments yesterday on Insiders; we've seen the Treasurer coming out with hysterical claims about the impact of these changes—in fact, he's misleading people by saying that many of those who will be impacted are on low taxable incomes. Of course low taxable income means that people can still receive quite a lot in superannuation. This is a responsible reform and needs to be supported.

Eric Abetz (Tasmania, Liberal Party) Share this | Link to this | Hansard source

Labor's promotion of its ugly politics of envy seems to know no bounds. Jealousy and envy motivates Labor's policy settings these days, and that undermines the virtues on which our nation's success was built. Indeed, as Australia's great Prime Minister Sir Robert Menzies opined in his Forgotten People speech:

If the motto is to be, "Eat, drink and be merry, for tomorrow you will die, and if it chances you don't die, the State will look after you; but if you don't eat, drink and be merry, and save, we shall take your savings from you", then the whole business of life will become foundationless.

Wasn't he so right? And what he has shown is exactly what the Australian Labor Party are seeking to descend Australian society into.

The simple fact is that there are many hundreds of thousands of men and women right around Australia that have scrimped and saved to ensure that they are self-reliant in retirement. And what are the Labor Party seeking to do? Deny them the benefits and the rewards of that thrift and that self-reliance. We, in the coalition, want to build this nation by encouraging the virtues of thrift, savings and self-reliance, but Labor today seeks to tear down those virtues with scant regard for the actual consequences.

Senator Ketter suggested that the Labor policy on tax credits in relation to the shareholdings of pensioners and superannuants was responsible and well considered, and that the facts were on the table. Let me put one fact on the table. I wonder who said this: 'We will now complete the implementation of the imputation system by allowing excess credits to be funded to resident Australian shareholders, complying superannuation funds and registered charitable organisations.' Further on, it continues: 'Many thousands of pensioners who have modest investments in public companies currently obtain no tax benefit from the franked dividends they receive. The full value of these credits will now flow through to the pensioner shareholders.' That was the Australian Labor Party policy, in a bipartisan way, only 20 years ago. Men and women around Australia, on that basis—

Jenny McAllister (NSW, Australian Labor Party) Share this | Link to this | Hansard source

Things have changed.

Eric Abetz (Tasmania, Liberal Party) Share this | Link to this | Hansard source

The current Labor leadership in the Senate seeks to scoff at that, but people in their 40s and 50s, relying on that promise, scrimped and saved and organised their retirement income and lifestyle on the basis of that promise, only to have this current Labor leadership, which is motivated by jealousy and envy and class warfare, rip this rug out from underneath them. Those retirees, on the promises made by the Labor Party 20 years ago, ordered their retirement funds and income accordingly. The Labor Party in this place will scoff, but the simple fact is that, unless we as a community and a society are willing to support and salute those who are willing to help themselves, the burden becomes much greater on everybody else. That is why Robert Menzies was so right when he said: if you don't provide encouragement and if you instead say to people, 'If you save, if you set money aside and if you invest in Australian companies in the hope of receiving a retirement income, the government will snatch it away from you,' why would they bother investing in Australian companies? Why would you bother looking after yourself in retirement? You can just rely on all your fellow Australian taxpayers. You know what happens? You can have the tax grab today, but that is like killing the goose that lays the golden eggs. You will get the extra golden egg for one day, but the cost will be quite substantial in the years to come. That is why Labor's policy is so divisive and so short-sighted and needs to be rejected.

Jenny McAllister (NSW, Australian Labor Party) Share this | Link to this | Hansard source

I have to be honest: I find the government's approach to economic policy truly perplexing. We have as our Prime Minister a man who was so interested in and committed to economic reform that he put forward his own taxation policies and paid himself to have them costed during the Howard government. This is a man who toppled former Prime Minister Abbott because he felt that only he could provide the economic leadership that we need. Those were his words. Yet, having fulfilled his ambitions, having achieved the power to actually do things, he instead chooses to do nothing. I think many Australians find this genuinely disappointing. Many Australians are confused about where Q&A Malcolm has disappeared to. I'm not sure myself. It's possible that the Prime Minister is held back by internal division.

Richard Colbeck (Tasmania, Liberal Party) Share this | Link to this | Hansard source

On a point of order, it would be nice if the senator referred to the Prime Minister by his correct name or title.

Sue Lines (WA, Deputy-President) Share this | Link to this | Hansard source

Senator McAllister, I wondered if you were quoting, but you didn't say you were. I remind you, please refer to others by their correct title.

Jenny McAllister (NSW, Australian Labor Party) Share this | Link to this | Hansard source

I certainly will. It is hard, you have to observe, to move forward if you're always looking back over your shoulder at who's sitting behind you. I think it's the case that the only policies that he can put forward are the ones that no-one—absolutely no-one—in his party room can possibly disagree with, and we know that the only thing that really unites the coalition party room is attacking unions, attacking the representatives of working people. Or perhaps his ministers think that the purpose of government is to deliver for the rent seekers who show up for the meetings rather than for ordinary Australians. But it doesn't matter what the reason is; the result is the same: the government has no economic vision for Australia.

The government should be embarrassed that it has left policies like our reform on dividend imputation sitting in the desk drawer. Treasury and experts have been calling for this reform for years. In 2009, the NAB chairman and former Treasury secretary Ken Henry called for reform as part of his review of the tax system. It has become clear that Treasury considered dividend imputation reform in the lead-up to Treasurer Scott Morrison's last budget, creating a dossier entitled 'Tax policy: dividend imputation'. A white paper on tax reform commissioned by Treasurer Hockey in 2015 found there were some revenue concerns with the refundability of imputation credits. And it's clear what they meant: the department was receiving lower tax revenues than it expected. The department said:

… it provides a greater incentive for shareholders of closely held companies to delay distributions until a time when individual owners are subject to a relatively low tax rate, to receive a refund of tax paid by the company.

The government have received the advice. They know this is a good idea—they've considered it in the past—but they lack the courage or the will to follow through. Their only plan is to deliver corporate tax cuts for their donors, and, in the meantime, while they thrash around on the hook of a rational policy that would restore the budget and provide $11 billion extra in budget repair over the next four years, they cry crocodile tears for low-income earners in their retirement years.

Well, I'll ask you this: where was the concern when the government was busily trying to cut the rate at which the pension was indexed? Where was the concern of those coalition frontbenchers who've been so eager to climb all over the idea of people who've been disadvantaged by this policy? Where was their concern when they did a deal with the Greens political party to kick a whole lot of people off the pension by changing the asset test? Where's the concern even today, when it's clear from the remarks made by Senator Fierravanti-Wells that those on the pension are in fact a burden on the Australian taxpayer? Where is the concern in the remarks made by Senator Abetz that the virtues we look for are thrift, savings and self-reliance? I've got some news for Senator Abetz: you can work hard all your life and exhibit the virtues of self-reliance and of thrift and you still won't have a very large superannuation balance at the end of it—and that is the experience of the majority of Australian women.

People know, when they hear this, how ridiculous it is to hear the coalition, who, at every budget, have tried to cut the pension, cry these crocodile tears. Labor's policy is fair. It is a fair way to pursue budget repair, and it's a policy that ought to have been adopted by the coalition.

Richard Colbeck (Tasmania, Liberal Party) Share this | Link to this | Hansard source

It was interesting listening to the commencement of Senator McAllister's presentation, because it was almost as if the only thing she didn't want to talk about was Labor's policy. Labor talk about fairness, and you hear them talk about fairness a lot. Senator Ketter also talked about what Labor's policy wouldn't do, including that it wouldn't take the pension and wouldn't take dividends. But what Labor's policy is doing is taking away pensioners' and self-funded retirees' and part-pensioners' income.

These returns form an important part of their income. When you consider that more than half of the individuals receiving these refunded franking credits have taxable incomes of less than $18,200—more than half—and 86 per cent have incomes less than $37,000 and the discussion amongst members of the Labor Party is that perhaps the revenue from this measure, or the saving from this measure, could be put towards a tax cut, how fair is it that that tax cut is off the reduction in the direct income, the direct available funds, of people earning less than $37,000 or $18,200? With 86 per cent of these individuals having incomes less than $37,000, how fair is it that the rest of the community gets a tax deduction on the back of this measure? How fair is that?

How fair is it that a constituent who was in touch with me last week, with a total income of $23,000 including these franking credits, is going to lose $5,000 of that income? How fair is that? That is the on-the-ground, practical effect of what's going to happen. Now, this couple don't have a huge, multimillion-dollar retirement fund. They have a couple of hundred thousand dollars worth of shares, and that's what they live on. That is what they live on. This measure is going to directly reduce their current available funds to live on, $23,000, by about $5,000. How fair is it that that then goes into a tax deduction for someone who could be a millionaire or someone on $300,000? How fair is that?

If this is such a good policy, as Labor is claiming, why is it that Labor backbenchers are building dossiers to bring to Canberra to put before caucus to tell what a devastating effect this policy is going to have on their constituents, particularly in regional communities? A farmer sells their farm. After 20, 30 or 40 years on the farm, they've got $300,000 or $400,000. They put it into Australian shares. Three hundred thousand dollars at seven per cent is going to earn them about $20,000 a year. If they get tax credits on all of those, that's probably another $5,000 or $6,000. That's how much you're reducing their income. It's not hard to work this stuff out if you really think about it.

What is it that the Labor Party have got about people who have worked hard, have bought some shares, probably cumulatively over a long period of time, and are now fully dependent on the income from those shares for their daily living expenses? The Labor Party want to rip out, in some cases, 20-odd per cent of their income directly—just take it away. And then they'll go out and brag that they can give that away as a tax cut to the rest of the community. How fair is that?

Where is the Labor Party's so-called fairness nerve when it comes to this measure? Most of the impact is on people on low incomes, not the high-flyers that the Leader of the Opposition likes to portray it as. Most of the impact of this measure is on people on low incomes. You are taking away their living expenses. That is exactly what's happening. They're ringing our offices just the way that they're ringing Labor backbenchers' offices, because their income is being drastically reduced, and it's going to affect their way of living. (Time expired)

Kimberley Kitching (Victoria, Australian Labor Party) Share this | Link to this | Hansard source

Despite the government's rhetoric and their self-aggrandising talk of being good economic managers, they are not. They are poor economic managers. Let's look at the federal debt level as an example. They have more than doubled federal debt since they came into government in 2013. Federal debt is now about $600 billion. It's a toxic debt crater that will smoulder for generations to come. It's all rhetoric all of the time from those across the chamber, but their substance is rip-offs and the distortion of our tax system and—even worse than that—being too weak to desire, let alone make, any changes or make any reforms. They say they don't like deficits yet spend like drunken fiscal sailors. They are a government suffering from the ill-effects of having two weak treasurers, firstly Joe Hockey, the former member for North Sydney, and now the member for Cook.

It was the Labor Party that reformed the tax system. The Labor Party got rid of the double-taxation that occurred on the ownership of shares. In 1987, the then Labor government of Prime Minister Hawke and Treasurer Keating introduced imputation credits. When the federal budget was in surplus under former Prime Minister John Howard and former Treasurer Peter Costello—oh, those heady days; how the current members of the ERC must dream about having a surplus—it was they who introduced the scheme allowing people who were not paying any income tax to get cash back under the imputation credits scheme. The cash refunds actually avoid paying single-taxation on dividends. So, it went from double-taxation to single-taxation and, with the method that is in place now, if you are not paying income tax you receive the cash-back and you don't pay any tax at all.

My favourite definition of this scheme is from the member for Fenner, who calls it 'the cane toad of the taxation system'. That is because it cost around $500 million when it was first introduced, but soon it will cost around $8 billion. We heard Senator Cormann say that Treasury advice has been given on this. There have been discussion papers aplenty. Why? I bet Treasury is telling the government, telling the members of the ERC, that these cash-back payments are no longer affordable for our economy. We are the only country with a full refundable imputation system—and that is from the tax centre at KPMG.

What is the government doing? Well, they are weak. They are never going to make any big changes, because they know they are essentially an unstable government. They know they are tick-tocking closer to 30 Newspolls and they know there are murmurings and mumblings from all quarters of the government, so the question that is most pressing for some of those opposite is: should the Prime Minister be taken out in a one-stage or a two-stage process, and should that be done before the mid-year break?

Labor knows the resources accumulated by the state are and should be limited. They know this because it has been the Labor Party that has been the economic reformer in this country. This is because we are willing and we are able to make hard decisions. In a word, we are able and we are willing to govern. It was the ALP that made the hard decision to means test the age pension. No-one wanted to do that. The coalition opposed it, but imagine the state of the federal budget if that hard and difficult decision had not been made.

Senator Abetz says that this policy is motivated by envy. It is not motivated by that at all. It is motivated by knowing that the budget cannot be all things to all people and that hard choices must be made. It is not a divisive policy. It was announced before the Batman by-election. Imagine the hue and cry from those opposite if it had been announced this week: 'Oh, how cynical! You're doing it after the by-election!' Well, it was announced before the by-election. It was given full transparency and the people in Batman voted in Labor. The ability and capacity to make society fair and equitable is perhaps something only the ALP is able to do. (Time expired)

Sue Lines (WA, Deputy-President) Share this | Link to this | Hansard source

The question is that the motion to take note of answers, as put by Senator Ketter, be agreed to.

Question agreed to.