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Thursday, 19 June 2003
Page: 16991


Mr COX (10:12 AM) —I will be very brief in speaking on the Taxation Laws Amendment Bill (No. 6) 2003 because the opposition has had very little time to scrutinise it. In fact, it was introduced on the Thursday of the last parliamentary sitting. Most of the measures in it are fairly routine, except for a couple of them. The first set of measures relates to the Medicare levy and Medicare levy surcharge thresholds. The bill amends the Medicare Levy Act 1986 to increase the Medicare levy low-income thresholds for individuals, married couples and sole parents. The dependent child-student component of the family threshold will also be increased. The Medicare levy low-income threshold for pensioners below age pension age will also be increased so that they do not have a Medicare levy liability where they do not have an income tax liability, which is of course very important, and so that they do not have to lodge a tax return.

The bill also amends the A New Tax System (Medicare Levy Surcharge Fringe Benefits) Act 1999 to increase the Medicare levy surcharge low-income threshold in line with movements in the CPI. All of the increases in these thresholds are in line with the CPI and will apply from 2002-03 as the year of income. These thresholds are periodically updated in line with the CPI but are not automatically indexed. Labor will support these measures. I move the following second reading amendment:

That all words after “That” be omitted with a view to substituting the following words:

“whilst not declining to give the Bill a second reading, the House notes that, while this Bill restores the value of the Medicare levy and the Medicare levy surcharge low income thresholds, the Howard Government has failed to provide an appropriate system of Medicare rebates to support the continuation of bulk billing”.

The second set of measures relates to value shifting and the transitional exclusion for certain indirect value shifts relating mainly to services. The bill provides a transitional arrangement under the consolidation regime for value shifting between companies. The purpose of the provision is to reduce compliance costs for companies going into consolidation. Most value shifting in this area is in the area of services—a risk area for avoidance and evasion. The transitional arrangement relies on the part 4A general anti-avoidance provisions. Because this bill has been brought on for debate at short notice without the opportunity for adequate scrutiny of this complex position, Labor will not oppose these provisions but subject them to further scrutiny prior to the bill being dealt with in the Senate.

The next set of provisions relates to refinements to the consolidation regime. Under consolidation the costs of assets and liabilities are set separately. Some of these assets and liabilities are linked. The bill allows that link to be recognised. The bill provides cost setting for partnerships where a single partnership wants to operate as a member of a consolidated group, and the bill also provides rules for cost setting where two corporates come into a consolidated group to operate as a partnership. Labor will support these measures.

The next set of provisions relate to hardship. The bill transfers the authority to grant release from tax obligations from tax relief boards—which are currently chaired by the ATO, with Customs and Finance as members—to the Commissioner of Taxation. The bill will provide for a new right of review of tax relief decisions, including to the AAT. The opportunity for relief will also be provided for PAYG and FBT obligations, which has not been available under A New Tax System.

I think that it is a useful opportunity to point out that the way in which tax relief generally operates will not change. If somebody has a tax obligation that they cannot meet, they can apply to the tax board. The tax board presently looks at it and decides whether that person has basically a modest consumption pattern and whether, in fact, it would be possible for them to extricate themselves from that tax debt over the course of about three years. If they have a grand lifestyle or live in grand accommodation, they are expected to down-shift their lifestyle as a way of meeting their tax obligation. If they have other debts and they are, in fact, going into bankruptcy, the tax relief board does not allow people to extricate themselves from their tax obligations and, thus, hand on to other creditors the benefit of that tax relief.

These provisions are quite useful for people who are living in modest circumstances and perhaps have incurred a tax liability because of some error in or misunderstanding of the tax law. For example, pensioners living in a modest situation who find themselves caught with a $400 or $500 tax bill are the sorts of people to whom tax relief is really targeted. Labor will be supporting the new administrative arrangements because they are superior to the tax relief board giving people the opportunity to go to the AAT if they think that the decisions that have been made are unreasonable.

The next set of measures relates to trans-Tasman triangular imputation. This bill provides Australian shareholders with access to franking credits for New Zealand companies' Australian profits. New Zealand is providing similar access to New Zealand shareholders in Australian companies for profits on their New Zealand operations, so this is an important aspect of closer economic relations. These changes will make it easier for Australian companies to expand their operations and shareholder bases in New Zealand, and vice versa with the New Zealand measure. The provision of franking credits is on a pro rata basis, based on ownership.

One complexity is the need to deal with New Zealand's foreign investor tax credit system, which transforms underlying company tax in New Zealand into a creditable withholding tax. Under that arrangement the company pays the foreign shareholder an amount equal to the New Zealand withholding tax and New Zealand reimburses the company for that payment. The bill reduces the franking rebate by the amount of the supplementary dividend paid so that there is no advantage in investing via a New Zealand company. Labor, as it has previously announced, will be supporting these measures.

The sixth set of provisions relates to GST amendments for compulsory third party schemes. There are transitional arrangements for GST on compulsory third party insurance which operate until 30 June this year. The general arrangements for insurance provide that GST is applied to the premium. The GST is applied to the margin. There is a decreasing deduction on the margin when a payment is made. The transitional arrangements mean that there is no input tax credit on the premium. CTP is unlike general insurance because, in relation to claims, it deals with the victim rather than the insured. The bill recognises that there are significant variations between the CTP schemes operating in each state and territory, and it sets rules to determine the amount of a decrease in deduction in the average input tax entitlement for the insurer. Labor will support these measures.

The seventh set of measures is the establishment of a register of harm prevention charities for the purposes of providing tax deductibility for gifts. The register will be operated jointly by the Minister for Family and Community Services and the Treasurer, with the concurrence of the Commissioner of Taxation. Similar registers already operate for deductibility in respect of environmental and cultural organisations. Organisations to prevent harm are not public benevolent institutions, because they need not be engaged directly in the provision of relief. Examples of the types of organisations which might qualify include anti-smoking and anti-gambling foundations or organisations to promote the protection of children. This is part of an ongoing program to put deductibility for gifts into a better system of administration. The Labor Party will be supporting those measures.

I now turn to my second reading amendment, and I would like to point out that the government does periodically lift the Medicare levy low-income thresholds and maintain their real value. It is worth pointing out that the Medicare system is a world-class system of health insurance. It is funded by a levy on an income basis. It is important that people on very low incomes are not forced to pay that levy, both because they cannot necessarily afford to and also because of the potential administrative costs of collecting that levy from people who would not otherwise be taxpayers. The Medicare system has been one of the most popular reforms of previous Labor governments: first, in its guise as Medibank; and, latterly, in its form as Medicare. The Howard government, however, does not have the same commitment to universal health insurance that the Labor Party does, and this is one of the most significant differences between the parties in our parliament.

The Howard government would like to create a two-tiered health insurance system where people on low incomes are provided with health insurance through Medicare and where people on higher incomes basically provide for their own health insurance through private health insurance funds. The reality is that the government knows that that would be extremely unpopular, and it wishes to maintain the pretence that it will keep Medicare as a universal health system. Its recent budget reforms, which cost $917 million over four years, were a political bandaid to pretend that it was taking some action in that area because there has been quite a precipitous drop in bulk-billing over the last couple of years.

In my outer metropolitan electorate of Kingston, in the southern suburbs of Adelaide, the proportion of medical services bulk-billed has dropped by well over 15 per cent in the last two years. There is very definitely a crisis. The government has recognised that people in the community are becoming alarmed about it. Because the government has such poor budget priorities, it has decided that it will bring in a bandaid measure for doctors providing consulting services. That would provide them with about $1 extra per consultation. The reality in my electorate is that, to maintain bulk-billing in reasonably large, well-organised bulk-billing practices, you need an increase in the rebate of effectively $5. We are going to continue, under the government's measure, to see a rapid decline in bulk-billing. In fact, it has become so difficult to run a family practice or a reasonably sized and efficient bulk-billing practice in a low-income area that I have had three practices close in my electorate in the last few months. In a situation where you have a shortage of 30 doctors in the outer southern suburbs of Adelaide, the loss of three medical practices is going to escalate the crisis quite dramatically.

The Labor Party have a policy which would be partly funded by reprioritising some government budget measures in the tax area. We would not proceed with some concessions that are being given to the business community, and we will, in fact, vote against those measures when they come up in the House. We would also use a small proportion of the surplus to fund our measures. It is instructive to note how the government has funded its $917 million Medicare package. When you look at the budget papers, you find that there is another measure for Commonwealth funding of public hospitals that has a net reduction in outlays over the next four years of $918 million.

I do not think that those two figures—the $917 million expenditure on the Medicare package and the $918 million reduction in Commonwealth contributions to public hospitals—are a coincidence. I think that is precisely how the government is funding this measure. It is a demonstration of what we are going to see a lot of over the next few years while this government remains in office. As a means of dealing with its rapidly escalating budget problems, this government will be withdrawing support to the states. We are going to see all sorts of specific purpose payments cut. The government will be out there with its normal rhetoric that the states have plenty of money and that they have the GST revenue.


Mr Slipper —They have.


Mr COX —The minister interjects, but we have a situation where the GST revenue does not yet make up for the loss of financial assistance grants. In fact, there is still a schedule of make-up payments to equalise them. Some states are not going to see GST revenue of more than the financial assistance grants for a further two or three years, but the government continues to put out this propaganda. The Minister for Finance and Administration was on Adelaide radio only last week putting it out in Adelaide that the states were already better off and that anything that the states are paying for is being funded by the GST. That is simply not the case. As we are going to see with this tight budget, the government cannot give back to ordinary taxpayers all of the bracket creep that has accumulated since the GST was introduced. If the government did that, it would have to have given $900 million more in tax cuts this year than it has. If, in the following financial year, it gave back all of the bracket creep that has been built up, we would have a budget deficit of $550 million; and if, in the year after that, it gave back all of the bracket creep, we would have a budget deficit of $1.55 billion.

This government is using bracket creep to keep its budget in surplus. That means that it does not have sufficient money, because of its very poor priorities, to fund the things that need to be funded such as a proper Medicare rebate system that will support bulk-billing. We are going to see the Commonwealth withdraw, as it has done with its grants to public hospitals, its support for a whole range of social programs through specific purpose payments over the next couple of years. That is going to be one of the ways that the Commonwealth is going to keep the budget in balance. It is very important for the Australian people to understand that, after 13 years of almost continuous economic growth—we have had only one negative quarter, and that was induced by the government introducing the GST—we have a situation where tax as a proportion of gross domestic product has been increased from 23 per cent of GDP to 25 per cent of GDP, yet we are still living at the margin. With all of that extra tax revenue being spent, a large part of it not particularly wisely, the government is unable to fund some very important basic programs such as Medicare.

People in my electorate have great difficulty finding a bulk-billing doctor. A lot of people have a great deal of difficulty finding any doctor at all. The reason fewer doctors are operating in my electorate is that it is becoming increasingly difficult in an outer metropolitan, low-income area to provide the normal services of a family practice or a bulk-billing clinic on the Medicare rebates that this government is providing. There is simply no way around that for this government. As its term of office goes on, we are going to see that the $917 million program that the government has offered is inadequate.

The Prime Minister keeps saying, `There's no reason under our scheme for the copayments to go up.' In six months time the figures will show that the copayments have gone up, and the Prime Minister will be saying, `It wasn't our scheme that made them go up. We put in another $917 million.' But it will be the government's arrangements that make them go up. It will be the capacity of doctors to simply swipe the Medicare card and charge just the copayment to patients that will allow the doctors to put up their fees in higher income areas. We will see a situation where doctors in those high-income areas will have much higher incomes. If you happen to be a poor person living in one of those areas or, more particularly, a person with a modest standard of living—for example, somebody earning roughly $32,000, a family with two children and no access to a health care card—you will not be able to go to your local family practice and get bulk-billed. No, you will be paying a copayment that has been set by a doctor with a very comfortable lifestyle who is charging fees that it is very comfortable for people on much higher incomes to pay—professional people whose incomes will be in the six figures who do not mind handing over their Medicare card and who do not mind handing over their credit card to get it swiped for a $30 copayment. Try doing that if you are a person who happens to live in an inner-city area and who is on a low income.

Once those huge incomes are available, again in inner-city medical practices, it is going to be even more difficult to get people to go out to the outer suburbs to practise medicine. It is very difficult now, because it is very difficult to make ends meet either with a family practice or with a well-organised bulk-billing practice in outer metro areas. It is very difficult to attract doctors to them because, unfortunately, they would all rather live in the leafy suburbs. But once the income disparity between practising medicine in the outer suburbs and practising medicine in the inner suburbs grows substantially, there will be fewer and fewer doctors willing to go out to the outer suburbs and there will be a greater and greater crisis. That is something that this government cannot avoid. It is something that we are going to see demonstrated dramatically over the next two or three years. I said to my electorate before the last election, `If the Howard government is returned, bulk-billing will effectively be a thing of the past before the end of the parliament we are now in.' Unfortunately, that has proven to be the case, and it is something that depresses me totally.

The Prime Minister has never supported Medicare. His pollsters have bought into the conclusion that he cannot publicly oppose it. He finally came to that conclusion when he became Leader of the Opposition before the 1996 election. He told people that he supported Medicare. He got into government and he set about systematically, and by stealth, undermining Medicare and bulk-billing by holding down the rebates. Those rebates are now well below the cost of running either a small family practice or a well-organised quality medicine bulk-billing practice, so we are seeing the demise of bulk-billing. Despite the government's $917 million package, the pace of that demise will increase over the next two years and we will see that policy totally fail. I commend the second reading amendment to the House.


The DEPUTY SPEAKER (Hon. B.C. Scott)—Is the amendment seconded?


Ms Livermore —I second the amendment.