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Wednesday, 13 November 2013
Page: 86


Mr HOCKEY (North SydneyThe Treasurer) (11:03): I move:

That this bill be now read a second time.

This bill repeals the minerals resource rent tax, and brings to an end the tax commonly known as the mining tax.

For the amount of debate in this chamber about a tax that raised barely a 10th of what was foreshadowed, I cannot believe there are just two members of the Labor Party here, the staunchest defenders of this tax.

This bill ends a sordid history of poor taxation policy. It discontinues or re-phases measures that were intended to be funded from the expected tax, the tax that hardly raised any money.

Given that the mining tax has failed to deliver meaningful revenue and the government has had to borrow to pay for the expenditure associated with the mining tax, the total mining tax package has imposed a significant and massive cost to the budget.

Passage of the bill will not only abolish the flawed mining tax but deliver $13.4 billion in budget savings over the forward estimates. Isn't that amazing? Abolishing a tax actually saves the budget money.

It is extraordinary that only the previous government could introduce a tax that raises no money, but even worse, leaves the budget worse off.

So supporting this bill to repeal the mining tax will help to reduce the burden of debt left by the previous government and it will improve the nation's finances and put the budget on a more sustainable footing.

Schedule 1—Repeal of the Minerals Resource Rent Tax

Schedule 1 of the bill repeals the tax itself with effect from 1 July 2014.

With this tax and all of its predecessors, Australia's mining industry has suffered under the long and tortured journey of the previous government's incompetent attempt to impose a new tax.

Let us have a look at that history. The Henry tax review, commissioned by the first Rudd government, recommended the introduction of a resource super profits tax (RSPT). That came as a surprise not just to the industry but I think to the member for Griffith as well. The government forecast that the original RSPT would raise $49.5 billion in the five years from July 2012.

The RSPT was an unprecedented hit to one of Australia's most successful industries, which understandably reacted rather negatively.

For those of us that were around it became no secret that the mining industry was appalled at the introduction of the original mining tax, and rightly so.

Ultimately the announcement, consultation, and handling of the RSPT was clearly a contributing factor in the downfall of Prime Minister Rudd mark I.

Then new Prime Minister Julia Gillard made a key promise to resolve the impasse with the resource sector over the tax.

Her government negotiated with three of Australia's biggest miners. No-one else was at the table, just the three biggest miners. And out of that came the minerals resource rent tax.

The new version of the mining tax included an extension of the Petroleum Resource Rent Tax to onshore projects.

The forecasts for revenue expected from the new version of the mining tax were significantly revised down from the original tax. Now, remember: the original tax was going to raise nearly $50 billion over a five-year period. This was reduced to $26.5 billion to be collected by the new mining tax over the same period—around half.

Since its creation, forecast revenue from the tax has been repeatedly written down, with hardly a dollar being collected.

In February 2013, the former Treasurer, the member for Lilley, released information that indicated the tax had raised $126 million in its first six months—$126 million was raised in its first six months, for a tax that was expected to raise not billions but tens of billions of dollars. What a genius! Only the member for Lilley! And I know I am drifting from second reading speech protocol here but I cannot help myself on this occasion to pay tribute to the member for Lilley for introducing a tax that not only hardly raises any money and leaves the budget $13½ billion worse off but brings down a Prime Minister. That is quite an achievement. It is a new benchmark from the member for Lilley in the design of a tax that is a catastrophe at all levels.

In total, since 1 July 2012, it has collected a net $400 million.

It is a flawed tax.

It has been opaque in its operation, with key details of how the tax works not clearly articulated by the former government. They did not understand it themselves.

One such example is their failure to explain the up-front tax deduction from the market valuation method used to calculate tax liabilities for the mining tax.

This complex and unnecessary tax has imposed considerable administrative costs on resource operators required to comply with it.

Fewer than 20 taxpayers have contributed to the net $400 million raised by the mining tax to date, but around 145 other miners have been required to submit all the paperwork associated with the tax. One hundred and forty-five miners are submitting millions of dollars of paperwork for a tax that they do not have to pay. I am sorry—I should have paid tribute to the member for Lilley as well for introducing a tax that actually adds to the paperwork burden of someone who actually does not pay the tax.

In other words, it imposes a significant regulatory and compliance burden on the iron ore and coalmining industries at a time when we really did not need it. It has undermined business confidence in these industries that are critical for investment and jobs.

Repealing the tax will restore confidence—I have no doubt about that. It will promote mining activity, it will help to create jobs, it will help to deliver prosperity to the broader community and it will send a clear signal that Australia is back open for business, that it wants to be a premier destination for mining investment and that it wants to be leading the world when it comes to the delivery of resources.

While mining companies in Australia will no longer be required to pay the mining tax, they will continue to pay their fair share of tax through state royalties and, of course, company tax.

Schedule 2—Loss carry- back

Schedule 2 of the bill seeks to repeal the mining tax related company loss carry-back.

The bill provides that, from the 2013-14 income year, companies can carry their tax losses forward to use as a deduction for a future year.

This is one of the initiatives that is funded by borrowed money. It is unsustainable because it represents $950 million of cost to the budget over the forward estimates.

Schedule 3 Small business instant asset write-off threshold

There are expenditures that the government announced against the mining tax that the coalition wishes it could keep, but we cannot keep spending initiatives that are funded by borrowed money. It is unsustainable.

So schedule 3 of the bill amends the instant asset write-off threshold provisions for small business entities.

The threshold value of a depreciating asset for the purposes of instant asset write-off provisions was increased from $1,000 to $6,500 as part of the introduction of both the mining tax and the carbon tax package.

We seek to reduce this back to $1,000 from 1 January 2014. I know it is hard. I want to say it is hard. The Minister for Small Business knows it is hard. We know it is hard, but these are the hard decisions that have to be made because the people of Australia cannot afford to have initiatives that involve a cost to the budget that is being funded by borrowing money.

From 1 January 2014, small business entities will be able to immediately deduct the value of depreciating assets that cost less than $1,000 in the income year the asset is first used or installed ready for use.

This initiative alone will save $2.6 billion over the forward estimates.

Schedule 4 Deductions for motor vehicles

Schedule 4 of the bill deals with the motor vehicle industry.

It provides that, from 1 January 2014, motor vehicle purchases made by small business entities will no longer be eligible for an accelerated deduction of $5,000.

These purchases will instead be treated as normal business assets under the concessional capital arrangements available under subdivision 328-D of the Income Tax Assessment Act 1997 and depreciated at a rate of 15 per cent in the year in which the asset is first used or installed and then 30 per cent for subsequent years.

The removal of this measure will save the budget $450 million over the forward estimates.

However it is hugely important to note that in an unrelated initiative the coalition will assist the automotive industry by not imposing Labor's $1.8 billion fringe benefits tax hit to salary sacrificed vehicles.

Schedule 5 Geothermal energy

Schedule 5 of the bill seeks to repeal the geothermal exploration deduction.

As a consequence, geothermal energy exploration and prospecting expenditure will not be immediately deductible.

Amendments are included in the schedule to provide a capital gains tax rollover in cases where a geothermal exploration right is merely exchanged for a geothermal extraction right relating to the same area.

Geothermal exploration will then be consistent with the treatment of other mining rights.

This will save the budget $10 million.

Schedule 6—Superannuation Guarantee Charge percentage

Schedule 6 of the bill seeks to further delay increases in the superannuation guarantee rate for a two-year period.

The superannuation guarantee rate will remain at 9.25 per cent until 30 June 2016 and then rise to 9.5 per cent on 1 July 2016 and then in increments of half a per cent a year until it reaches 12 per cent on 1 July 2021.

I know this is hard for some—delaying the increase in superannuation. It is a big benefit to small business, I might add, having that delay in place. But it will save the budget $1.6 billion, and therefore, again, we cannot continue to borrow money to fund these sorts of initiatives.

Schedule 7—Low - income superannuation contribution

Schedule 7 of the bill seeks to abolish the low-income superannuation contribution (LISC). The contribution will not be payable on or after 1 July 2013.

When we are responsibly able to and once the budget has been returned to a strong surplus the coalition will revisit the concessional contribution caps and incentives for lower income earners.

The removal of this measure, which is going to be funded by borrowed money and is unsustainable in its form, will save the budget $2.7 billion over the forward estimates. The opposition has been trying to argue that there is some policy equivalency in abolishing the low-income superannuation contribution of $2.7 billion with the previous government's failure to introduce a tax on income and superannuation over $100,000, which was roughly $300 million. So they keep comparing a $2.7 billion cost to the budget with a $300 million cost to the budget, and the $300 million cost to the budget that they were choosing to impose on people who had earned over $100,000 on their superannuation was never going to raise that money because the industry itself did not know how to implement it, and the Treasury advised me that the complexity of the legislation was almost prohibitive. There is no policy equivalency here. The bottom line is that there were lots of announcements but there was very little action from the previous government in relation to these matters and the complexity of their announcements was little understood, not only by the people in the community and not only by the businesses that were meant to implement them but more particularly by the people that were meant to draft the legislation.

Schedule 8—Repeal of income support bonus

Schedule 8 of the bill seeks to repeal the income support bonus, which was intended to be funded from the anticipated revenue from the mining tax. This indexed, non-means-tested payment was paid twice annually to social security recipients.

This bill will abolish future payments from the date of royal assent of the legislation. It will save $1.1 billion over the forward estimates.

Schedule 9—Repeal of schoolkids bonus

Schedule 9 of the bill seeks to repeal the schoolkids bonus.

The schoolkids bonus is a payment that is not linked to education or education expenses. It was paid for by borrowing money. It was paid for by borrowing the money from our children to give to the parents today. It is not out of the revenue that is raised today by the parents. It is out of the revenue that will need to be raised by our children sometime down the track, and that is unsustainable and we do not accept it. That is the classic example of the Labor Party at its worst—when it was handing out money, claiming that it was for education related expenses when it was not, and handing out the money by borrowing from other generations of Australians simply to give it to the parents of today. It was unsustainable. It is unsustainable. Abolishing this will save the budget $4½ billion. So, in the last few days, the opposition has been so outraged about the need for the government to increase the debt limit which is going to be hit in mid-December that they are opposing everything we are trying to do to reduce the debt. They do not understand the implications of their decisions.

Conclusion

Full details of all of these measures are contained in the explanatory memorandum to the bill.

The government has consulted with key industry stakeholders since the repeal of the mining tax was announced as a priority election commitment, including a recent round of public consultation on the exposure draft legislation.

Whilst some of the related expenditure initiatives are worthy in nature, they have been carelessly linked to a complicated and burdensome tax that will, at the end of the day, never pay its way.

The Australian people have voted to get rid of the mining tax. It is now time that the Australian parliament did the same.

Debate adjourned.