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Tuesday, 13 September 2011
Page: 9854


Mr SWAN (LilleyDeputy Prime Minister and Treasurer) (12:37): I move:

That this bill be now read a second time.

The Clean Energy (Income Tax Rates Amendments) Bill 2011 is part of a package implementing the carbon pricing mechanism and related reforms to build Australia's clean energy economy for the future.

This bill, and the related Clean Energy (Tax Laws Amendments) Bill 2011 that I am also introducing today, deliver on the government's determination to assist households with the cost of living impacts of a carbon price.

But these bills do much more than that.

These bills deliver major personal tax reform, by tripling the tax free threshold from $6,000 to $18,200.

This builds on the $47 billion in personal tax cuts already delivered by the government, and our broader tax reform agenda that includes:

cutting business tax,

boosting superannuation savings,

making tax time simpler for small businesses and individuals,

and addressing unintended incentives in the tax system.

So the first point I make is that the reforms in this bill significantly advance the government's ambition for a stronger, fairer, simpler personal tax system.

This $8 billion package delivers new tax cuts for millions of Australians, allows more people to keep all of their wages in their regular pay packets, and means fewer people will need to file a tax return at the end of the year.

We can cut pollution and h ave Strong Economic Growth

Australia is a nation that has not been afraid to face up to tough economic reforms.

Under the previous Labor government, we took significant steps to secure our economic future by floating the dollar and bringing down the tariff wall.

Not to mention steps to secure the retirements for millions of workers, by introducing compulsory superannuation.

These reforms were undertaken in the face of a fierce scare campaign from those opposite not too dissimilar from what we see in relation to these bills today.

In implementing these overdue reforms we are embarking on a great day in the history of national economic reform.

Today we take a vital step—a long awaited step—to secure our environment for the next generation of Australians, by acting on carbon pollution.

The government's package is underpinned by a determination to leave a better Australia for coming generations.

This reform is all about creating new jobs for Australians and attracting investment in the clean energy technology industries of the future.

It is all about securing our international competitiveness as the world moves to cut its emissions.

The truth is that if we want to prosper in a first rate economy into the 21st century, then it cannot be anything other than a clean energy economy.

That is why the best thing we can do for Australian businesses and families is to put in place the fundamentals of a modern competitive economy, powered by clean energy.

All the credible analysis—all the way back to the Stern report—shows that we can make big cuts in carbon pollution and have strong economic growth.

If we delay, if we shirk from this key reform, we will undermine our future competitiveness and leave a much larger challenge for future generations.

Under a carbon price, we will see 1.6 million new jobs created by 2020.

By 2020, around 460,000 new jobs are expected to be added in Queensland. Just under 400,000 new jobs will be created in both New South Wales and Victoria. There will be about 230,000 new jobs in Western Australia, while 70,000 jobs will be created in South Australia and 10,000 in Tasmania.

These new jobs that are created as the carbon price drives innovation and investment in renewable energy and new technology are absolutely critical to the future.

A carbon price is essential if we are to take advantage of the great economic opportunities that are already emerging.

The low-carbon goods and services sector is already estimated to be worth about $5 trillion globally, and to employ 28 million people.

We want to secure our share of this growing economic opportunity.

This is a Labor package right down to its bootstraps—strong economic growth, more jobs and rising incomes.

Under a carbon price we will see average incomes growing strongly, rising by about $9,000 per person by 2020 in real terms.

It is a plan that responds to the climate science, and it is a plan that grows incomes and strengthens our future economy.

It is a plan that empowers the market, not the government, to drive economic and behavioural change.

This ensures the transition towards cleaner energy technology is achieved in the least cost and in the most effective way.

That is why we hear support for a carbon price from respected economic institutions both here and overseas—the Treasury, the Productivity Commission, the OECD and the IMF, just to name a few.

It avoids unnecessary costs that those opposite would foist on businesses and households—$1,300 for every household with no compensation whatsoever.

Assistance to h ouseholds

We have dedicated more than half of the revenue raised from pricing carbon pollution for assistance to households—targeted to low- and middle-income households that need it most.

What enables the government to do this, to provide this assistance to nine out of 10 Australian households, is that we are committed to assisting people whilst we deal with carbon pollution.

The assistance package has been carefully and methodically designed so that it accounts for the entire estimated average impact of the carbon price for all low-income households.

In numerical terms, this means that almost six million Australian households will receive assistance that meets or exceeds their expected average additional costs.

And over four million households—almost half of all households—get assistance that is at least 20 per cent more than their average expected price impact.

This assistance will be delivered through a combination of permanent tax cuts, increased payments and increased pensions across the board. The Clean Energy (Income Tax Rates Amendments) Bill 2011 contains the amendments to the personal income tax rates and thresholds that will enact these tax cuts.

The related Clean Energy (Tax Laws Amendments) Bill 2011, which I will also be introducing today, contains amendments to offsets and levies in the personal tax system to ensure nobody pays more tax as a result of these changes.

These bills will mean that all taxpayers with taxable income up to $80,000 will get a tax cut from 1 July 2012. Most will get at least $300.

And from 1 July 2015, all taxpayers with taxable income up to $80,000 will get another tax cut that brings the total tax cut to at least $380 for most.

Tax cuts through tax reform

Let me be very clear: these changes are not just tax cuts, they are genuine and enduring tax reform.

The personal tax cuts will be delivered in a way that has at its core the principle of rewarding hard work.

They are a major step towards the vision for a simpler, more transparent personal tax system, as identified in the Australia's future tax system review.

The changes reward hard work by more than tripling the tax-free threshold from $6,000 to $18,200 on 1 July 2012, and to $19,400 from 1 July 2015.

When the remaining low-income tax offset is taken into account, this means that from 1 July 2012 workers will not start paying personal tax until their income exceeds $20,542.

This important change will especially benefit part-time secondary earners. For example, the Mum or Dad who is taking the kids to school each day.

By delivering tax assistance through the statutory scales, we will deliver more timely tax relief.

Regular wage and salary earners with income below the new tax-free thresholds will be able to keep every cent of their pay from their regular pay packets.

This means more immediate and tangible rewards for hard work.

These reforms will free over one million Australians from having to lodge a tax return.

Less time doing tax returns means more time to spend on things that Australians like to do, like spending time with their families.

The tax reforms in these bills will make the tax system more transparent.

Currently, a large amount of tax assistance is delivered through the low-income tax offset. And, of course, assistance through the LITO is not transparent.

Many people would not realise how much benefit they receive from the low-income tax offset.

Many also do not understand that the withdrawal of the low-income tax offset at 4c in every dollar of income between $30,000 and $67,500 means the effective tax rate they face is four percentage points higher than their statutory tax rate.

These reforms will roll most of the low-income tax offset into the statutory rates and thresholds.

While some statutory rates will be higher, the combined changes mean this will better match the effective rates and thresholds that many low- and middle-income people currently face.

Under these changes all taxpayers under $80,000 will pay less tax.

A taxpayer on $65,000 will face the same effective tax rate of 34 per cent, plus Medicare levy, as they do today, and the higher tax-free threshold means they will pay $303 less in tax.

Major economic reform

So pricing carbon is part of a long and proud tradition of market based economic reform in Australia over the past 25 years.

Australia has always undertaken the critical reforms that have set up our economy and our country for generations to come.

The reforms of the 1980s and the 1990s transformed Australia into a vibrant, outward-looking economy.

Just imagine, if we had refused to make those tough decisions back in the eighties and nineties, where would our nation be today?

The world would be entering into the Asian century while Australia would be subsidising uncompetitive domestic industries.

We could have missed all of the opportunities of mining boom mark II.

Instead, to our nation's great fortune, the tough decisions were taken that have allowed Australia to advance substantially in the way which we see today.

These reforms laid the fundamentals which enabled Australia to come through the global financial crisis in a better position than just about any other advanced economy.

So today the government introduces bills that deliver the next crucial step in this history of reform.

We will reform our economy with the changes Australia demands to secure a clean energy future for our children, and for their children.

We will do it because the national interest demands it.

And, in doing so, we do it in a way which helps households, with nine out of 10 receiving assistance.

And we do it in a way which rewards secondary income earners and will mean that one million Australians will no longer have to lodge a tax return.

These are the fundamental reforms required to build the Australia of the future.

Full details of the measures in this bill are contained in the documents I have circulated. I commend the bill to the House.

Debate adjourned.