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Wednesday, 2 March 2011
Page: 2037

Mr HOCKEY (9:41 AM) —I rise to support these minor changes to the tax laws as proposed in the Tax Laws Amendment (2010 Measures No. 5) Bill 2010. However, schedule 2 of this bill, relating to changes to capital protected borrowings, has been referred to a Senate committee for further scrutiny. As the bill says, schedule 1 of the bill makes two changes to the eligibility criteria for accessing film tax offsets. The coalition acknowledges the reduction in compliance costs that these changes will have for this industry.

The overall bill has our support but, as I said, schedule 2 of the bill will obviously be subject to review following the Senate Economics Committee assessment, which will report on 24 March, regarding amendments to capital protected borrowing provisions. This reflects coalition concerns around the proposed benchmark rate that has been chosen to be used within this bill. When capital protected borrowings entered the Australian market in the early 1990s, all interest on these products was tax deductible. Treasury and the Australian Taxation Office in the late 1990s then moved to limit the fraction of interest which could be claimed as a tax deduction, with part of the interest allocated as an investment expense and therefore obviously deductible and part allocated as a capital expense and, therefore, as capital, obviously not deductible.

In 2002 the Full Bench of the Federal Court ruled that the component of interest applicable was in fact deductible, and the High Court later refused an appeal from the tax commissioner. After this, legislative action was required and the Howard government moved to introduce an interim methodology apportioning deductibility for capital protected borrowings and opened the consultation process to determine a longer-term methodology. The new methodology was introduced from 1 July 2007. Until this, any interest paid in excess of the Reserve Bank’s indicator rate for personal unsecured loans would not be deductible. Government and industry were content with this; however, Treasury, being Treasury, wanted a lower rate.

In the May 2008 budget the Rudd government lowered the benchmark interest rate to the indicator lending rate for standard variable housing loans—a move that would net the government an additional $70 million in revenue. This is where the coalition’s concerns began to emerge. As everyone on this side of the House understands—and I say to the new member for Canberra: watch and learn—housing lending rates are significantly lower than personal unsecured lending rates. Industry lobbied the government for change and the Rudd government delayed proposing legislation to implement their proposal.

This brings us to where we currently are with the legislation. In the May 2010 budget the Rudd government undertook changes to the benchmark interest rate so that it was 100 basis points above the indicator lending rate for standard variable home loans—that is their version of a compromise—with revenue forecast to be $28 million less. However, the proposed benchmark interest rate at current interest rate levels is about six percentage points below the personal unsecured lending rate. That is why the coalition wishes to defer the final decision on schedule 2 of this bill until the Senate committee has reported, in order to determine whether the government has actually got this right.

Schedule 3 extends the main residence capital gains tax exemption to a compulsory acquisition or other involuntary realisation. We will be supporting this change as this allows the taxpayer who has had part of their asset compulsorily acquired to reduce or disregard a capital gain made as a result of the compulsory acquisition. I think that is very reasonable. Schedule 4—deductions in relation to benefits for terminal medical conditions: obviously we support this part of the bill, which allows complying superannuation funds and retirement savings account providers to claim deductions for terminal medical condition benefits. Schedule 5 deals with changes to the 1999 GST act to allow non-profit subentities access to GST concessions of their parent entity.

How fitting it is to have the minister, Minister Crean, at the table—my old foe and friend from GST days. And how the roles are reversed. How the worm turns—and hopefully it will turn again.

Mr Crean interjecting

Mr HOCKEY —I well remember! And he is a good man, this one. Standing right here—

Mr Crean —There were the Hockey Bear pyjamas.

Mr HOCKEY —The Hockey Bear pyjamas were brought to the table during question time. That is when the Speaker used to allow all those sorts of props. And my friend here, the now minister for—education?

Mr Crean —No, regional development.

Mr HOCKEY —I am sorry—regional development. He came to this place every day and asked question after question on the GST. He asked, ‘How much is a bag of salad going to cost?’ and brought in a bag of salad; he asked ‘How much are Hockey Bear pyjamas going to cost?’ and brought in the Hockey Bear pyjamas; ‘How much is this can of food going to cost?’ and ‘How much is a bottle of Coke going to cost?’ I well remember those days, and the lessons have been learnt.

Mr Crean —It was actually the radio interviewer who asked about the can of Coke.

Mr HOCKEY —No, it was actually on the 7.30 Report that they asked me about the can of Coke.

Mr Crean interjecting

Mr HOCKEY —That is quite right. So I would say to the government that there are lots of long memories in this place from previous debates about tax, and we will not disappoint. So here we are with changes to the 1999 GST act—proposed by this government. And they were going to roll back the GST.

Mr Crean —But that is what you are going to do on—

Mr HOCKEY —No, we are going to abolish, not roll back, because you were selective in rolling it back. But that was not your idea. I am sure that was the Leader of the Opposition at the time, Kim Beazley.

Mr Crean —We’ll wait and see whether you get rolled on this one.

Mr HOCKEY —Well, from our perspective, we are abolishing—totally abolishing. It is all gone. And I would say to the minister for regional development, ‘Watch this space,’ because I am sure this will be a very interesting debate on the carbon tax. I thought that, when the former Prime Minister, the member for Griffith, said in 1999 in relation to the GST that 1 July would be—was it ‘a day of infamy’? Maybe I am misquoting him there. It was something along those lines. I thought, ‘Well, what about the day he was dumped as Prime Minister? That was a pretty significant day.’

Mr Crean interjecting

Mr HOCKEY —I would say to the minister for regional development: how ironic it is that he is now sitting at the table proposing extensions to the GST act when he so vigorously opposed it at the time. How the worm turns. But, of course, as the minister knows, his friend and colleague, the representative of the AWU in Canberra, the Deputy Prime Minister and Treasurer, has introduced or increased—

Mr Crean interjecting

Mr HOCKEY —13 different taxes.

Mr Crean —It pays to have a memory in this place.

Mr HOCKEY —It does pay to have a memory in this place. It is like Groundhog Day, in one sense. Thirteen different taxes Labor has introduced or increased since 2007, since they were elected. That is quite a record. They have not abolished any taxes, but they have increased or introduced 13 taxes in just three years. And now the Treasurer does not bother to turn up at the announcement of a tax. He cannot even be bothered turning up because it has just become so commonplace. We could go through them: the alcopops tax, $3.1 billion; a new tax on Australians working overseas, $675 million; cutting Australians’ tax-free superannuation contributions, $2.8 billion; restrictions on business losses, $700 million; changes to employee share schemes, $200 million; the cigarette tax hike, $5 billion; and the mining tax—well, God! How much is that? We do not know. And you know what? They do not know either. How is that, the mining tax? Ethanol taxation increases—I will be interested to see what the minister for regional development thinks about that. He is quite silent.

Mr Crean —The mining tax?

Mr HOCKEY —The ethanol tax increases—do you support those?

Mr Crean —The mining tax?

Mr HOCKEY —The ethanol tax increases?

Mr Crean —Going into infrastructure in the region.

The DEPUTY SPEAKER (Hon. BC Scott)—Order! The member for North Sydney has the call.

Mr HOCKEY —What about the LPG tax increase? Tightening restrictions on medical expenses before you can claim them on tax—that was $350 million. Increasing the luxury car tax, $555 million; the flood levy, $1.8 billion; and then, No. 13, lucky 13—the carbon tax. How much is it going to raise? We do not know. The government does not know. How much is it going to apply to various industries? The government does not know, so we do not know. Who is going to be exempt? Well, the government does not know, so we do not know. All the government knows is that it is imposing a new carbon tax right across the Australian economy, and the Treasurer, as deputy chair of the committee responsible for the recommendation, did not have the guts to turn up to the announcement. So much change! So many tax increases! The Treasurer cannot even be bothered turning up.

We are a party of accountability. We are a party of responsibility. We are a party of transparency. Even though we did not win government, we are quite properly seeking to implement our policies as if we were elected to government. After all, half the Australian people voted for us. After all, we hold more seats in this place than the Labor Party. After all, we have policies that we believe will grow the Australian economy, reduce the burden of taxation and make it easier for people to meet their bills head on. In committee, we are going to introduce a similar but not exactly the same amendment to this bill which will give Australians a receipt for their taxation contribution and explain to them in detail where their hard earned tax goes. This receipt, a core part of our election commitment, is about transparency and accountability.

Of course, as I shall say again and again during the committee stages of this bill, we are asking this parliament to let the sun shine in to give Australians full transparency about where their hard earned bucks are going. It was the Prime Minister who said, ‘I will open the curtains and let the sun shine in.’ It was the Independents who said, ‘This is a new paradigm. This is a new environment where there will be total transparency.’ Let them vote our way this time. Let them vote for transparency and accountability. This government are scurrying away from their tax summit commitment, which of course the Independents identified as one of the reasons they were going to back the Labor Party. They said that. That is one of the reasons they were backing the Labor Party: the Labor Party are going to have a tax summit by 30 June 2011.

You know what—in the first few weeks of 2011 the government announced two new taxes: a flood tax and now a carbon tax. Let me say to you: the whole year is turning out to be a tax summit—not just one or two days in June but the whole year—but the problem is they are not abolishing any taxes and they are not reducing any taxes. All they are doing is announcing new taxes and higher taxes. So, from our perspective, we say, ‘Let the sun shine in. Open the doors of the parliament. Let the people see exactly how wasteful the Labor Party are in government.’ That is their form. As my leader said, the Labor Party have never seen a tax they did not like and have never seen a tax they did not want to hike. That is their form.

I see the member for Canberra watching intently. As a new member, I would say to her, ‘Run away. Run away. Do not be associated with this mob because, ultimately, even the good folk of Canberra—as the highest average net earning people in the country—will come to understand that sooner or later you cannot trust Labor with money and sooner or later you just cannot trust them with tax.