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Thursday, 24 February 2011
Page: 1382


Mr BILLSON (11:14 AM) —I too rise today to oppose the Tax Laws Amendment (Temporary Flood Reconstruction Levy) Bill 2011 and the cognate bill, which seek to enforce a tax that is applied indiscriminately, without justification and without a compelling case that the government has actually done the hard work expected of a government in living within its means. The tragedies that we have seen over this summer—disasters that have seen households, livelihoods and peace of mind destroyed, crops and communities flattened and terror that will last long for the people affected—emphasise just what a challenge many communities and individuals face. But I can assure them of the coalition’s support and, wherever I am able, my support in the recovery operation.

I think it would be unfair to suggest, as some on the government side have done, that the coalition’s opposition to this flood tax somehow reflects a diminished commitment to the recovery effort. That is patently wrong and completely untrue. Our issue is with the way in which the resources have been brought to this task. Natural disasters are challenges that nations as vast as our continent will face each and every year. The La Nina weather system has certainly contributed to a greater frequency of the tragic events that have really had an enormous impact on some communities, in some cases more than once. But this will not be the last time we have a La Nina event. We may have grown more familiar with El Nino weather patterns and the droughts that tend to accompany them, but La Nina weather cycles will be a part of our future and we will again see challenges like those that La Nina has produced for our continent this year.

My thoughts are very much with those who are now in that difficult phase of recovering from the disasters. My role in the Howard government had me as an integral part of the Indian Ocean tsunami relief and other disaster response exercises. The key learning that came out of that was the importance of people being able to constructively engage in their recovery, the re-establishment of their circumstances and the recommencement of their livelihoods as best as they are able and the importance of that as a tonic for their emotional and mental wellbeing. It is a constructive thing that people can do after these extraordinarily destructive natural events. Our thoughts are very much with those communities as they embark on that reconstruction and recovery exercise.

This flood levy is not needed to help that work. This flood levy is an opportunistic grab for more cash by a government that just cannot manage a budget. This flood levy has, to use the term, a transaction cost—the cost of collecting it—of 25 per cent from the deals that have already been done. Of the $1.8 billion said to be due to be collected by this natural disaster tax, 25 per cent has already been given away in wheeling and dealing to gain the support of the minor parties and the crossbenchers. There is a 25 per cent collection cost to a tax where the exemptions are broad and yet to be tested. It is hard to know quite how much money it will raise.

On the expenditure side, the government have conceded their estimates of the cost may well be out and that dealing with additional costs would represent quite a challenge but that they would find that extra money in additional savings in the budget. The coalition’s position is that they should make that effort to find those savings now and live within their means. That is a challenge the government have failed to respond to.

It is interesting as well that many Australians who may have been able to access some of the flood relief payments have reflected on their circumstances and thought that others were needier of that support. A perverse incentive is created by this bill where those who obtain benefits will get some exemption from the flood tax, while people who felt that they did not need to access that government support and that there were more deserving and worthy recipients did not take full advantage of the available assistance. They perhaps felt they were somewhat inconvenienced but were not facing the enormous challenges of others. If they are in the upper income brackets, they will now be penalised for not taking up that opportunity to access those benefits, because they will have to pay this tax. That is a perverse incentive that is a very interesting characteristic of the legislation before us.

After being somewhat disappointed and underwhelmed by a lack of support from the crossbenchers for a bill that this parliament recently considered, I ask why they are not focusing on the package that this flood levy is supposed to be supporting. Instead we have seen wheeling and dealing around certain expenditure items that were going to part-fund the government’s disaster response and putting those expenditure items back in the books of the government, putting further pressure on the budget. We have seen that discussion; what we have not seen and what is desperately needed is a discussion about whether the government’s response is adequate. The coalition has clearly articulated that the flood levy is not needed to finance a government response and the support required for reconstruction and recovery of flood and cyclone affected communities. The discussion needs to move to the question of whether that tool kit of support is adequate.

I want to share with the chamber my personal and direct experiences in discussing that very matter with small businesses in areas that were affected by the natural disasters over summer. After the first of the floods following the storm event in western Victoria, I journeyed to Skipton. Skipton is a small community that is very dependent on a handful of businesses for livelihoods and to support the local community. The operators of Food Works are lovely people with a deep passion for their community and they receive much support from within the community. They were concerned that one of the eligibility criteria was that, if you were a business seeking recovery assistance, the business needed to be your predominant source of income and where you predominantly spent your time. Russell and Beryl Adams operate a number of Food Works businesses across that broader district and, without some kind of support, they are genuinely concerned about their ability to fully recover and get engaged in providing their supermarket services for the immediate township and those further beyond. They are concerned that the strict application of those support rules might see that vital business supporting the Skipton community not able to recover.

Surely there should be some allowance made for people such as Russell and Beryl Adams, whose enterprise, importantly, operates not only in supporting the community of Skipton but also in supporting livelihoods and the need of people not to have to travel great distances to Ballarat just to go grocery shopping. Surely examples like that should factor into the considerations of the support package. Other examples relate to tragedies that I saw in businesses in Queensland. Impulse Entertainment operates a CD music and movie distribution business, and they work very closely with retailers right across Australia. They suffered losses of about $500,000 in stock and plant, but because they have more than the maximum number of employees they are deemed ineligible for concessional loans. I would have thought the objective of those loans was to help people recover their livelihoods. About 60 to 65 people are part of that business. Most them are at the head office and warehouse facility that was inundated by two metres of water, but others are sprinkled right across Australia to support the distribution business that Impulse Entertainment operates. That business has grown very successfully through the work of a family with a very deep commitment to their workforce, yet they were told, ‘Too bad, you employ too many people.’ However, under the eligibility criteria for business recovery from Cyclone Larry, for instance, under the Howard government, they would have been able to access recovery assistance.

They are a viable business, and a concessional loan is all that would be needed for them to get back on their feet and make sure that they are not facing the risk of closure. Yet, under the funding criteria in the support package that this government has introduced, they are not eligible for a concessional loan. Had they been affected by Cyclone Larry, they would have been eligible, and these are the kinds of issues that I hope the crossbenchers who have not formed or settled on a view might take up with the government when there is wheeling and dealing about putting back into the government’s budget other expenditure not specifically related to the disaster response. In fact, flood mitigation works and the like on the Bruce Highway—which are directly related to these disaster events—have been cut, and we have not seen those things put back in either. Maybe some of the discussion between the government and the crossbenchers could go to whether the package itself is adequate to ensure that small and medium-sized enterprises, which are crucial to the wellbeing and livelihood of affected communities and crucial to giving people a capacity to support their own recovery, get going again.

I believe the package is inadequate. It is inadequate in a number of ways, and the coalition has provided a number of very constructive, very practical suggestions about what the government can do around the GST and PAYG holidays. These very constructive proposals include waiving the penalties for PAYG variations where a business might not precisely forecast the impact on their business of natural disasters and also extending the assistance to those businesses affected but not directly impacted physically by the storm events. I urge the government to take up these proposals, and I urge the crossbenchers, as they wheel and deal and negotiate with the government, to consider putting the package itself into the mix in addition to whatever expenditure they might want to pluck out of other areas to be part of the discussion about how they will vote.

Finally, I draw attention to concerns around insurance. The Assistant Treasurer has talked a lot about the work he is doing on the definition of flood insurance. I have something else for him that he has been less forthright in talking about—that is, where businesses take out business interruption insurance. Time and time again businesses have paid handsomely to have that protection. They recognise that the loss of their opportunity to trade would significantly undermine the viability of their businesses and, therefore, they take out interruption insurance.

I was in New Farm talking to a small retailer who was told by Ergon, the Queensland energy provider, ‘We are really not sure whether we can help you.’ His interaction with Ergon occurred when the business contacted their insurer, who said: ‘You talk about floods and water inundation and the fact that you’ve got ankle deep water running through your business premise, but what really stopped the electricity was an Ergon worker. It wasn’t a natural event; it was turned off by an electricity worker.’ What kind of moronic explanation is that of a reason for not paying out on business interruption insurance? With all that went on—the protection of substations in the New Farm area and the concern about the electrification of the water and the impact on human life—the energy authority rightly shuts down the risks, and then someone says: ‘Business interruption? It was not the natural disaster or the floods or the water inundation; it was some human that turned off the electricity.’ The insurance industry needs to get serious about that. I have raised these concerns with the insurance industry, and I have been underwhelmed by their response.

Another example is CGU, a Melbourne based company. I have rung them and canvassed these issues with them, but I have yet to receive a reply, from a business that has business interruption insurance where the eligibility criteria relates to the period of time and the inability of customers to access their work sites—all those things that would reasonably go towards determining whether a business was indeed interrupted. But no, they want to go down some other pathway and say, ‘You might have been interrupted, but we are going to muck around with this flood definition again and somehow link the two together.’

The government needs to engage the insurance industry on this question of business interruption and recognise the other quite serious concerns about the impact of these natural disasters on small businesses—the engine room of the economy, the lifeblood of the livelihoods of so many people—and make sure small businesses get the support they need by a proper examination of the support package, a proper engagement on whether business interruption insurance is being fairly administered and also by not imposing a new tax that will further undermine consumer confidence at a time when these businesses need as much confidence in the economy as they can get. They do not need consumers being concerned and saying, ‘If this is an extra tax today, what might be next?’ because that has a direct impact on discretionary spending.