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Tuesday, 26 March 1985
Page: 800


Senator MAGUIRE(4.15) —I oppose the motion which has been moved by Senator Chaney. This urgency motion claims that the Government is looking at means testing dependent spouse rebates and family allowances and that, in consequence, those persons with dependants will somehow be hit. I think it is one of the most ill-informed motions I have seen since becoming a member of this chamber. To start with, I can see two gross errors in the motion. Senator Chaney should sack his speech writer for the errors which are contained in this motion. For example, all senators must know already that the dependent spouse rebate is subject to a means test; it has been means tested for many years. Senator Chaney should know that. Also, the motion refers to a supporting spouse allowance. In fact, it is a taxation rebate. It is a rebate against a taxation liability-it is not an allowance. Perhaps there is a little bit of a Freudian content in that slip. Perhaps Senator Chaney supports conversion of the dependent spouse rebate to a cash allowance. He may have recommended that in his previous years as a Minister. I think it is a gross error to come in here and suggest that we are trying to means test the so-called supporting spouse allowance when it has been means tested for many years.


Senator Chaney —Get on to the substance. Stop playing like a Philadelphia lawyer.


Senator MAGUIRE —Having copped that, Senator Chaney might perhaps listen to some of the points that have been made against this motion. This motion stresses, very much indeed, the concept of horizontal equity; that is, the fair treatment of taxpayers with similar incomes but with different family circumstances. Of course there is another aspect of equity; that is, vertical equity, which is the fair treatment of those with different incomes. That particular equity principle is associated with the ability to pay principle, with progressivity in the taxation system. We, in the Labor Party, do not deny that horizontal equity is one equity principle, but we also say some attention should be paid to the concept of vertical equity as well. We believe that persons on higher incomes should pay more. This motion is very much framed in terms of horizontal equity. There is absolutely no reference to concepts of vertical equity. I only wish that members of the Opposition could be somewhat more consistent in referring to horizontal equity concepts. While they choose to use it as the basis for a motion such as the one we have here today, they certainly do not follow it through. They are not consistent when it comes to various types of income. For example, they parade around the country making noises about alleged taxes on capital gains and so forth-capital gains being one form of income, earned income being another form of income-but the horizontal equity principle does not apply universally, for example, to those persons whose income is in the form of capital gains. They are not taxed as are the rest of the community who receive their income as a result of their labours. As I indicated, this motion is very much about horizontal equity. I find it a surprising motion in contrast to the statement made by Mr Peacock on 10 March, when he stated:

The coalition would review the spouse tax rebate to determine whether it should be means tested.

I believe Mr Peacock said that on the Sunday program. I read the report in the Sydney Morning Herald on 11 March. (Quorum formed) Before I was interrupted, I was pointing out that Mr Peacock stated:

The coalition would review the spouse tax rebate to determine whether it should be means tested.

That is a direct quotation from the Leader of the Opposition. We in the Government assumed that that statement was genuine. After all, such a statement by Mr Peacock was consistent with his 1981 resignation statement. When Mr Peacock resigned from the Fraser Ministry, if I recall correctly he indicated in his resignation statement that the income support system should be put more on a needs basis. Essentially, I think he was getting at the concept of vertical equity. Later in the week, on Friday evening, we read in the Adelaide News:

Mr Peacock lashed a proposal to means test the dependent spouse rebate.

Apparently he could not make up his own mind about what he wanted. In the space of 10 days he contradicted a statement of his own. Of course, it is not new for Mr Peacock to contradict his own statements. It is certainly not new for honourable senators opposite to do so. That is one of the major errors Mr Peacock has made in this field in the last month.

The dependent spouse rebate and family allowances, which are the subject of this motion today, are very large Budget items indeed. The dependent spouse rebate costs some $900m to $1,000m annually. That accounts for some 40 per cent of the cost to the Budget of all personal income tax rebates. The dependent spouse rebate is larger where dependent children are concerned; it is $1,030. It is $830 in cases where there are no dependent children. I should point out that, prior to the Whitlam Government, the dependent spouse rebate took the form of a taxation deduction. It had greater value for high income taxpayers than for low income taxpayers because of the effect of high marginal tax rates in combination with tax deductions. The situation which applied under former Liberal governments, whereby the spouses of very rich taxpayers were worth more to them in terms of taxation savings than the spouses of lower income taxpayers, was highly regressive and inequitable. The Whitlam Government changed that situation from 1975. Of course, there were numerous screams and protests from those on the Opposition benches when tax deductions were scrapped and rebates were introduced for personal items. We introduced equal rebates for all taxpayers. I am sure that if the Whitlam Government had not made those changes we still would be facing a situation whereby spouses of wealthy taxpayers were worth far more to them than spouses of low income taxpayers.

Despite the reforms made by the Whitlam Government, the dependent spouse rebate is still a tax item which involves a number of problems. For example, as an equal rebate it still reduces the progressivity of stated income tax rates. Also, there is the problem that persons with very low taxable incomes, whose tax burdens are not particularly high, do not get the full value of the dependent spouse rebate. Many taxpayers, with incomes of less than about $8,700, do not get the full benefit of that rebate There are also some glaring anomalies in the income test in respect of the dependent spouse rebate which I referred to earlier. For example, the income test reduces the value of the rebate by $1 for every extra $4 of income earned by the dependent spouse. I ask honourable senators to contrast that income test with the income test for pensions, where $1 is lost for every $2 of other income, and with the case of unemployment benefit recipients where in some cases $1 of benefit is lost for every $1 of extra income. The income test that applies to the dependent spouse rebate is very much more generous than that which applies to other social welfare payments. It seems unfair that such differences exist.

The Auditor-General in an efficiency audit recently has referred to problems associated with the dependent spouse rebate. The dependent spouse rebate is one of those elements of taxation which have a number of problems associated with them. The Auditor-General rightly has identified the problem. A number of abuses occur each year whereby many taxpayers fraudulently claim fictitious dependent spouses to obtain rebates against their taxation liabilities. Of most concern, I think, is the fact that the taxation statistics made available to Parliament by the Commissioner of Taxation indicate that a high proportion of the dependent spouse rebate is going to very high income taxpayers indeed. I refer to the income year 1981-82. In that year, only 11.8 per cent of taxpayers had taxable incomes above $22,000. Yet some 36.6 per cent of that group, those with the highest incomes, claimed the dependent spouse rebate. But at lower incomes very few taxpayers claimed the rebate. For example, only 8.2 per cent of the 2.7 million taxpayers with taxable incomes under $12,000 received the dependent spouse rebate. Clearly, as the taxable income rises, the proportion of taxpayers claiming the dependent spouse rebate also rises.

I also indicate that the story gets even worse in terms of the dollar value of the dependent spouse rebate which goes to very high income earners. For example, in the 1981-82 income year, the top 11.8 per cent of Australian income earners received 23.5 per cent of the Budget cost of the dependent spouse rebate. The top 11.8 per cent received $192m of the $800m cost to the Budget of the dependent spouse rebate. By contrast with that top 11 per cent, I refer to the bottom 11 per cent. The bottom 11.1 per cent of all Australian taxpayers received a minute 0.4 per cent of the cost to the Budget of the dependent spouse rebate. A paltry $3.4m went to that income group-those Australians most in need. Of all the household categories referred to by the Taxation Commissioner in his 1981-82 taxation statistics, it is very evident that taxpayers receiving the full dependent spouse rebate had the highest average incomes. They had incomes of 30 per cent above the Australian average. That indicates how the dependent spouse rebate is being focused at present on very high income earners.

I turn very briefly to the subject of family allowances. It was correctly pointed out here earlier this afternoon that family allowances were introduced in 1976 as a trade-off for the abolition of child endowment payments and taxation rebates for dependent children. I should say that, thereafter, the record of the Liberals in this area is shoddy indeed. It is certainly not a good record. Family allowances were not increased to take account of inflation for a number of years. They were continually eroded by inflation over that period, despite the claims made by the Fraser Government that the introduction of family allowances was one of the greatest social initiatives ever taken in Australia. There was a 50 per cent rise in the consumer price index before the first increase was made in the value of family allowances under the Fraser Government. So let us not believe that those sitting on the Opposition benches, members of the Liberal Party and the National Party, are somehow champions of the family allowances system. They let the system be eroded by inflation over a number of years. In summary, there are clearly problems with the dependent spouse rebate and family allowances.


The ACTING DEPUTY PRESIDENT (Senator Jessop) —Order! The honourable senator's time has expired.