Mr SWAN (6:39 PM) —The Treasurer cannot have it both ways: he cannot criticise Labor for not bringing forward policies and then criticise us when we do. We will fight for the seven million Australians who will benefit from this package. Labor’s fifth and final amendment proposes to replace the existing low-income rebate under section 159N of the Income Tax Assessment Act 1936 with a new low-income and welfare-to-work tax offset. The proposed welfare-to-work tax offset will be calculated in a similar way to the existing low-income rebate. The amendment proposes that the value of the new tax offset commence at $500 from 1 January 2006 and increase in each year to a maximum of $680 in July 2008. Taxpayers on incomes of less than $20,000 per annum will be eligible for the full offset to reduce their tax liability, but only to nil. In other words, it is a non-refundable tax offset—if you can understand that, Treasurer.

Once fully implemented, the tax offset will provide for an effective tax-free threshold of $10,000 per annum by virtue of fully offsetting the tax that would normally apply between the $6,000 tax-free threshold and the amount of $10,000. As is the case with Labor’s proposed changes to the tax scales, a start date of 1 January 2006 for the new low-income welfare-to-work tax offset necessitates, for the 2005-06 income year, only a composite tax offset to enable an accurate calculation of eligible persons for the full year tax offset. This, in effect, is a simple average of the low-income rebate and the proposed low-income and welfare-to-work tax bonus.

As with the composite tax scales, a note attached to the composite tax offset table makes it clear that that old $235 low-income rebate and income test in effect applies from 1 July to 31 December 2005, and the new $500 welfare-to-work tax offset applies from 1 January to 30 June 2006. And that puts a complete end to all of the lies told by the Treasurer about this proposal.

The DEPUTY SPEAKER —The member for Lilley will withdraw that comment.

Mr SWAN —I withdraw. Again, this will allow the Commissioner of Taxation to adopt administrative arrangements from 1 January 2006 that would allow for the incorporation of the new benefit in the PAYG withholding schedules. While the existing low-income rebate is not incorporated in the PAYG withholding schedules, there is no legal impediment preventing the tax commissioner from incorporating the new welfare-to-work tax bonus in PAYG withholdings to enable the added incentives to be passed on each payday period to employees. For those outside the PAYG systems who do not pay tax regularly, they would benefit at the time of their tax assessment, as is the case with the current low-income rebate.

Senior Australians will benefit from the new tax offset in the same way as they do from the existing low-income rebate. They benefit in two ways. First, the increased value of the new tax offset will increase the level of taxable income where senior Australians begin paying tax—from $20,500, as currently applies, to $21,116 in 2005-06; from $21,819 in 2006-07; from $22,046 in 2007-08; and from $22,410 in 2008-09. Second, the increased value of the new offset will increase the income threshold where the senior Australians’ tax offset begins to be withdrawn at 12.5c in the dollar.

By adopting the existing formula set out in Income Tax Regulation 150AB(3), the enhanced value of the tax offset available to senior Australians would result in the income threshold for a senior Australian increasing from $20,500 to $21,279 in 2005-06, rising to $23,118 in 2008-09. It is also important to note that senior Australians will particularly benefit from Labor’s proposal to broaden the income range where the 17c rate applies by lifting the income threshold where the 30c rate starts to eat away at retirees’ investment returns to $26,400.

In total, these measures represent a greater benefit to senior Australians than anything the government has on offer. We have a proposal that is going to give a fair deal to seven million Australians who have been left behind by this arrogant government that does not have the guts to debate the merits of its proposal but that puts forward a set of distortions and lies about Labor’s proposal.

The DEPUTY SPEAKER —The member for Lilley will withdraw the word ‘lies’.

Mr SWAN —I withdraw. These proposals are a positive alternative. These proposals will deliver a fairer deal to seven million Australians. This government is so embarrassed by how miserly its offer is. (Time expired)