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Thursday, 26 June 2008
Page: 3521

Senator CHAPMAN (2:15 PM) —I direct my question to the Minister representing the Treasurer. I refer the minister to Labor’s decision to reverse the Howard government’s family trust changes. Is the minister aware of the punitive capital gains tax consequences of trusts having to vest their assets once generations up to and including grandchildren have died, under their changes? Is the minister also aware that this will have a devastating impact on farmers and small business proprietors whose business or farm is held in a family trust structure? Is this by deliberate design or is this yet another unintended consequence from a government that does not know what it is doing?

Senator CONROY (Minister for Broadband, Communications and the Digital Economy) —As part of this government’s pre-election savings commitments, we announced that we would reverse the family trust changes made by the previous government to fund more urgent budget priorities. Before finalising the implementation details of this measure, the government listened closely to the concerns affecting taxpayers, their agents and tax professionals. Some of the amendments introduced in 2007 were largely technical improvements to the family trust election system. The government has decided not to reverse all of the changes. Instead, only two of the changes will be reversed.

The government will amend the law to restore the previous definition of ‘family’, which did not include lineal descendants other than the children or grandchildren of the test individual or the test individual’s spouse. This change will take effect from 1 July 2008. The government will also preclude family trusts making a once-off variation to the test individual specified in a family trust election, other than in relation to a marriage breakdown. This change will have effect from the 2007-08 income year. The government’s pre-election commitment would have entailed reversing all seven of the family trust changes made by the previous government. This savings measure is largely consistent with the pre-election commitment and will provide cost savings estimated at $24 million over four years, because we take seriously the battle against inflation—unlike those opposite, who are still deluding themselves that it is a fairytale, who are deluding themselves that they have not left the country with the highest level of inflation in 16 years.

They have no policy whatsoever to deal with these challenges. They had spending running at four per cent—so much for the finance minister and the Treasurer and their tough economic measures. That was a government that had spending out of control, that was involved in nothing other than pork-barrelling, that ignored all the warnings from the Reserve Bank, that ignored the opportunity to spend on infrastructure that this country so desperately needs, infrastructure like a broadband network—

Senator Chapman —Mr President, I raise a point of order. I asked the Minister representing the Treasurer quite a specific question. All he has done thus far is restate the government’s position and then go on to talk about issues that are quite irrelevant to the questions I asked. Would you direct him to answer the specific questions which I asked.

The PRESIDENT —On the point of order, Senator Joyce?

Senator Joyce —Mr President, it is a separate point of order.

Senator Conroy —You can’t be serious!

The PRESIDENT —Order! Senator Conroy, if someone stands in their place I am quite entitled to ask them whether they are taking a point of order. Senator Joyce.

Senator Joyce —The minister referred to an action that will take place in the 2007-08 year. Does he mean that it has taken place in the 2007-08 year or does he intend for it to take place in the next four days?

The PRESIDENT —Senator Joyce, that is not a point of order. There will be an opportunity to take note of answers at a later time. In relation to Senator Chapman’s question, Senator Conroy, I would remind you of the content of the question.

Senator CONROY —Thank you, Mr President. As I was saying, the government’s decision to go down this path was based on the need to address this country’s difficulties created and left behind by the former government and their wanton ignoring of the Reserve Bank, which stated on many, many occasions that infrastructure was in critical need of being addressed. That is what this question is about—it is about a measure taken in the context of the overall budget. In the context of the overall budget, the former government were grossly irresponsible. Their spending was out of control, inflation has suffered because of it and interest rates have risen again and again, because the former government did not have the capacity to manage the economy. That is why the judgement was made by the Australian public in November last year.

Let’s be clear about this: there were a number of measures taken by this government in the budget, of which this was one. We stand by them and we welcome the opportunity to debate them, because the economy and the mess that has been left by those opposite is too serious for the fairytale approach being taken by those opposite. They cannot even work out whether or not inflation is a problem. They cannot even accept that they have left this country with the highest inflation rate in 16 years. It is very simple: this government have been forced to address a gallop in spending and we have had to cut back, and this is one of those measures that we have, after careful consideration, proceeded with.

Senator CHAPMAN —Mr President, I ask a supplementary question. Can I say it is very sad that, for the sake of $8 million in a several hundred billion dollar budget and a $20-odd billion dollar surplus, the government seems to be ignoring the long-term, devastating consequences of this policy. The minister has failed to say in answer to my question why the intergenerational transfer of assets held in a family trust should be subject to capital taxation. He has also failed to acknowledge the unfairness of Labor’s changes. Given that assets held in other forms of ownership are not subject to this same form of harsh taxation and that some farmers may have to sell their farms to pay the tax, as they did with death duties, will Labor reverse these changes and stop punishing farmers and small business operators in Australia with what amounts to a de facto death duty?

Senator CONROY (Minister for Broadband, Communications and the Digital Economy) —Could I also wish Senator Chapman well in his retirement. The answer to the question is no.