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Thursday, 14 February 2013
Page: 1421


Mr HOCKEY (North Sydney) (11:47): Noting that we were given two minutes notice that this bill was being brought on for debate, I rise to speak on the Tax Laws Amendment (2012 Measures No. 6) Bill 2012, which deals with a range of changes to the taxation system which I will go through in some detail.

Schedule 1 deals with changes to native title benefits and seeks to classify such benefits as non-assessable, non-exempt income so that they are not subject to income tax or capital gains tax. The changes within this schedule also allow impacted taxpayers to amend their tax returns in certain circumstances where the amendment period has expired.

The House of Representatives Standing Committee on Economics inquiry into this schedule of the bill found that opinions shared in the inquiry fell into three broad categories. Indigenous organisations generally supported this amendment, as it provides clarity for relevant income and capital gains tax issues. Indigenous groups also called for the scope of the schedule to be broadened in order to include making investment income generated from native title payments tax exempt. Mining groups supported a tax-exempt vehicle for such payments but felt that this schedule could not proceed in its current form as it may encourage substantial up-front payments to individuals at the expense of longer-term intergenerational goals. The third group comprised the government of Western Australia, which stated that tax exempt status for native title benefits was not warranted outside the normal provisions for charitable trusts.

The coalition have expressed the view, through our dissenting report in the House of Representatives Standing Committee on Economics advisory report into this bill, that there may be unintended consequences of this change. In particular, it may encourage large payments to individuals that would be contrary to the long-term development goals for Indigenous policy. This view was also expressed by the Minerals Council of Australia, which stated:

… we are concerned that the proposed native title payment tax treatment may have a range of unintended consequences. Specifically, we consider that those amendments disincentivise investment in intergenerational wealth creation, as tax will be payable on any transfer of monies to future generations or on income earned. It disincentivises the provision of benefits under agreements to Aboriginal people who are resident in an area but who are unrelated to native title determination and it limits the main tax treatment to the defined beneficiaries.

The coalition also raised concerns in relation to principles which are offended by the operation of schedule 1, making compensatory or any other income exempt from tax and violating the key tax principle of horizontal equity. A dollar earned by one person, regardless of how it is earned or from what activity, should be given the same tax treatment as though it were earned by another person.

As set out in the coalition's report to this inquiry, if this income were to be taxable in the hands of an Indigenous recipient, or recipients, it would likely increase the compensation sought by the amount of tax expected to be paid. As such, the incidence of any tax paid would likely be borne by the compensator. As it stands, the changes contained in schedule 1 make no distinction between native title compensation paid to individuals and that paid to groups or their trust funds. If paid to an individual or a number of individuals with possible inside running, the benefits of native title are unlikely to be shared widely or equitably, which does not seem to be in the spirit of the Native Title Act.

Where such compensation payments are paid to a large group, possibly to a community trust or a fund, then the benefits of native title are likely to be shared more widely and even across generations. That would enhance the justification for allowing these payments to be exempt.

Making this distinction would add some complexity and may appear paternalistic—it could be open to that argument—but it is more the spirit of native title compensation in the act that is worthy of further consideration and debate. The coalition calls on the government to reconsider its approach on this policy matter, and it is for those reasons that the coalition will move an amendment to excise this schedule from the bill.

Schedule 2 of the bill seeks to update the list of deductible gift recipients and extends the listing to another three entities. The coalition is not opposed to this schedule.

Schedule 3 of the bill seeks to extend the immediate deductibility of exploration expenditure provided to mining and petroleum energy explorers. This measure was announced by the government as part of the final design of the mining tax, the MRRT—the minerals resource rent tax—and is therefore expenditure linked to a failure. This measure was raised in discussions between the government and the Policy Transition Group. The Policy Transition Group was established specifically to advise the government on the technical design of the mining tax—gee, that went well! The Policy Transition Group did not include this change as a specific recommendation but, rather, made an observation about the anomaly of the inconsistent treatment for geothermal exploration, noting that the issue was outside the parameters of the terms of reference. The measure was specifically linked to the mining tax in the 2012 budget, on pages 28 and 29. So there is no argument that this is part of the mining tax package. The coalition view this measure as having originated within the mining tax process. We will be moving to excise this schedule from the bill on the grounds that we are opposed to the government's mining tax package and we will not support any expenditure that is linked to this failed tax, apart from the increase in the superannuation contribution rate from nine per cent to 12 per cent.

The Treasurer—what a Treasurer!—has linked over $15 billion worth of expenditure to the mining tax, which has now raised $126 million. Now the Treasurer has no money to pay for the $15 billion of expenditure. The Treasurer has been forced to admit the truth about his handcrafted mining tax—which he, the Minister for Resources and Energy and the Prime Minister personally negotiated, to the exclusion of the Treasury. They personally sat in the cabinet room and negotiated with the heads of BHP, Rio and Xstrata, and what did they come up with? A tax that raises hardly any money and $15 billion of expenditure against that. This will be the government's signature high-water mark. I am reluctant to say that, but I cannot believe that in just a few months the government could come up with any further policy initiative on the scale of the mining tax. The mining tax will be the benchmark for incompetent governments. No-one has encapsulated that better than the member for Griffith, who belled the cat earlier this week by identifying that the people that actually negotiated the mining tax were in fact just the Prime Minister and the Treasurer.

It now looks likely that all the commitments made by the Treasurer in relation to the mining tax will be funded by borrowing money. So the government goes out and borrows money to give it to the Australian people or borrows money to hand it out somewhere. It is clearly unsustainable. We have been constantly saying this, reminding the Australian people. The first version of the mining tax, the superprofits tax, was going to destroy the mining industry. The mining industry said it, and they were right. It is going to have a huge impact. Then they dumped Kev and put in the now Prime Minister. She identified that the mining tax was one of the things she was going to fix—and, boy, she fixed it! Not even the Greeks can develop a tax that raises no money! I apologise to any Greeks in the gallery. It is a great country, it is the home of democracy—

Mr Robert: But it doesn't raise tax.

Mr HOCKEY: but it has not raised much tax over the years. Obviously the government was upset about the fact that Greece won the international award for introducing taxes that raise very little money, so they came up with a new version of the mining tax! Maybe that is how the Treasurer got his bouquet as the world's best treasurer—he should have a post-politics career in tax design!

We are helping the government to improve the budget bottom line by identifying this as another area that is being funded by the failed mining tax—or isn't being funded, as is really the case. Therefore, we will not support this initiative. We will be moving an amendment to excise this part of the bill so that we can separately vote on it, and we hope that the government gives us the opportunity to do just that.

Schedule 4 of the bill seeks to extend the interim streaming rules for managed investment trusts until the commencement of the new tax system for MITs. The interim rules enable the streaming of capital gains and franked dividends to beneficiaries, subject to relevant integrity provisions, until the new MIT regime commences. The commencement of the new MIT regime has been deferred by two years to 1 July 2014, to coincide with the intended commencement of rewritten MIT and other trusts provisions in the income tax acts.

Originally these interim streaming rules for MITs were to apply from 1 July 2012, but that was extended by two years to 1 July 2014, because the provisions for the new regime were not ready in time—what a surprise! This extension of the transition period is a direct consequence of delays in progressing other announced and anticipated changes in the tax law. It reflects a growing backlog of changes to the tax law which have been announced but not enacted. This process has not been helped by the fact that the Assistant Treasurer's portfolio has seen five different assistant treasurers under Labor in five years. That is a pretty good record! How do those members on the back bench feel? They did not get a guernsey. The member for Canberra over there—is it Canberra?

Dr Leigh: Fraser.

Mr HOCKEY: Fraser; I am sorry. How could I forget? He was a Liberal Prime Minister. He delivered the odd surplus.

Dr Leigh interjecting

Mr HOCKEY: Gee, that got a reaction, didn't it?

Dr Leigh: Defamation!

The DEPUTY SPEAKER ( Hon. DGH Adams ): Order! We will come back to the bill, thank you.

Mr HOCKEY: We are on the bill; I am just paying tribute to the member for Fraser and identifying that he has more economic skills in his little finger than the five assistant treasurers Labor has delivered over the last five years. I mean, it has been a conga line of assistant treasurers. What is it with the Labor Party and this turnover? There has been turnover in prime ministers, turnover in assistant treasurers, turnover in workplace relations, turnover in leaders of the Senate, turnover in a range of areas—

Dr Leigh interjecting

Mr HOCKEY: and there is someone like the member for Fraser, who has a very healthy respect for himself, who does not get a guernsey, and I think he should.

The DEPUTY SPEAKER: Order! I ask the honourable member—

Mr HOCKEY: I think the gene pool of the Labor Party—

The DEPUTY SPEAKER: Order!

Mr HOCKEY: is not so shallow that the member for Fraser couldn't get—

The DEPUTY SPEAKER: Order! I ask the honourable member, the shadow Treasurer, to respect the chair, and I ask him to come back to the bill.

Mr HOCKEY: I will, Mr Deputy Speaker Adams, and I, too, respect your contribution to this place over an extended period of time. I would just make the point that one of the reasons there is an enormous backlog in taxation bills before this place—in fact the bills are not even getting to this place—is that there has been enormous turnover in the number of assistant treasurers in the government. There could be no other explanation. How could we have assistant treasurers making announcements about tax changes, creating uncertainty in the business community and yet not being able to deliver the legislation in this place? How does that happen? How could a government be so incompetent?

At any rate, because we are endeavouring, from opposition, to try to repair just a touch of the damage that the government has inflicted in relation to taxation policy, we are going to support the schedule proposed to delay the streaming rules for MITs.

Schedule 5 seeks to apply an income test to the rebate for medical expenses from 1 July 2012. This measure was announced in last year's budget by a government running out of money. The rebate for medical expenses provides taxpayers with a non-refundable tax offset for out-of-pocket medical expenses—which are eligible medical expenses incurred during the year, less available reimbursements from government or private health insurance—above the claim threshold.

The current claim threshold is $2,120 per year for all taxpayers, which is indexed by CPI, with net expenses exceeding this threshold giving rise to a tax offset or rebate worth 20 per cent of the excess above the claim threshold. The parameters of the new income test will generally align with those for the Medicare levy surcharge. For singles with an adjusted taxable income above $84,000, or, for married couples, above $168,000, the claim threshold will instead be $5,000 and the tax offset or rebate will be worth only 10 per cent of the excess above the threshold. The income threshold increases by $1,500 for each dependent child after the first.

This is another tax grab from an imprudent government that cannot seem to deal with its addiction to spending. This means that the Labor Party, since coming to government, has introduced or increased 27 taxes in just five years. Here is another one.

Schedule 6 of the bill makes changes to the 1997 income tax act following the High Court decision in Commissioner of Taxation v BHP Billiton Limited. Contrary to the original intent of the tax law, this decision distinguished between explicit and implicit contractual arrangements in relation to limited recourse debt and the deductibility of capital allowances. To give effect to the original policy intent, this schedule clarifies the definition of 'limited recourse debt'. So we support this initiative.

The changes within schedule 7 of this bill seek to amend the Fringe Benefits Tax Assessment Act in order to remove the concessional fringe benefits tax treatment for in-house fringe benefits accessed through salary packaging. In-house fringe benefits arise when employees receive goods or services from their employer that are identical or similar to those provided to customers by the employer in the ordinary course of business. Quite clearly, the government continues to reduce and eliminate concessions in the FBT system, and it continues to look, rather desperately, for more revenue. This is just another tax grab from a government running out of money. Schedule 8 of the bill makes miscellaneous amendments to tax laws and regulations affecting superannuation and tax legislation generally, and we do not have any issue with those particular points.

So, as I have mentioned, the coalition will be moving an amendment to excise schedule 1 and schedule 3 from the bill. And, as the member for Lyons would know, it is important to give certainty and stability to Australian taxpayers; I think he would know that. He would also know that only the coalition could do that, and only the coalition is prepared to be consistent and predictable when it comes to taxation policy. So we are moving to excise schedule 1 on the basis that we fear unintended consequences will arise from making tax-exempt the payment of large native title benefits to individuals. In the long term—and we do focus on the long term—we believe this will be contrary to the development goals for Indigenous policy. The changes within schedule 1 also violate the key tax principle, as I said, of horizontal equity. The measures contained in schedule 3 are linked to the government's failed mining tax, and we will move to excise this schedule from the bill.

If coalition amendments to remove schedules l and 3 from the bill are not successful, then the coalition will not oppose the bill's passage through the parliament because, ultimately, we aim to be constructive and we want to try to help the government fix its massive self-imposed budget mess. We are feeling incredibly magnanimous when it comes to this, because they have got themselves into a hole. We understand that the easy politics would be to oppose everything, but we are not going to do that, and we do not do that.

Over 86 per cent of the legislation that has passed through this place has been supported by the coalition, and as you, Mr Deputy Speaker Adams—or more particularly, you, as the member for Lyons—would know, the inflated rhetoric from the Labor Party about negativity is just a little unfair given that we have supported 86 per cent of the legislation that has passed through this place. Here is another classic example: we are trying to improve the legislation, we are trying to improve the government's bottom line, but, despite our best attempts, I fear that we will fail at that. Ultimately, the only way we are going to improve the state of the nation's economy and the government's budget is with a change of government, and I am sure the member for Lyons would agree with that.

The DEPUTY SPEAKER: Order! The shadow Treasurer should not verbal the chair.