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Wednesday, 8 December 2004
Page: 99


Senator SHERRY (4:09 PM) —The Tax Laws Amendment (Retirement Villages) Bill 2004, which the Senate is now considering, will finally bring to a conclusion a very trying ordeal that the Liberal government has forced on some of Australia's most vulnerable and needy persons—the elderly. This ordeal has been caused by one thing, and one thing only: the harsh, brutal, at times arrogant and uncompassionate attitude of this Liberal government to elderly Australians in seeking to impose the GST on basic living services. Here we are, four years after the introduction of the GST, still dealing with its consequences.

I will briefly outline the history of this debacle, because I think it is important that those elderly Australians who are listening receive an appreciation and an outline of the absolute travesty and the very poor way the Liberal government has handled this issue. I say Liberal government as I do not call it a Liberal-National Party government, because the Nationals just follow the Liberal Party in everything they do—they are the doormats—so when I refer to the Liberal government you will know what I mean.

Let us go back to the introduction of the GST. At that time there was great concern in the community about how it would affect the residents of retirement villages, so the Liberal government promised to exempt all those in nursing homes and retirement villages from the GST. This was given effect in a determination by the former aged care minister in 2000, Mrs Bishop, the member for Mackellar. In that determination she stated the list of services that would be GST free and specified that to be eligible for the GST-free supply the resident of a retirement village must need and be in receipt of certain services. Frankly, the determination would make an episode of Yes, Minister or Yes, Prime Minister with Sir Humphrey Appleby bureaucratic-speak look good. This was the government's first failure. It failed to make the original determination clear. The sector was left in a state of confusion as to how the actual law would be applied and what it meant. So, over the intervening period—and this went on for four years—some retirement villages collected the GST and some did not. It was an absolutely absurd situation to allow this uncertainty about GST collections to run for four years.

The Australian Taxation Office began a review of the taxation treatment of retirement villages in February 2003. As part of this review process, the ATO came to the view that those living in serviced apartments in retirement villages were effectively living in their own homes. As services provided to persons in their own homes are generally not GST free, this would imply that the GST-free treatment of these services would cease, and this was made clear to the sector in the ATO's consultation process. So we had the former minister, Mrs Bishop, assuring people about the introduction of the GST. I notice Senator Murray is in the chamber, representing the party in part responsible for delivering the GST and in part responsible for creating this mess by not being thorough enough to make sure this issue was cleared up at the time in those now infamous negotiations that they engaged in. That is my flick of the day to the Democrats. I just want to remind you of your part in this debacle, Senator Murray. So we had the former minister, Mrs Bishop, saying, `Oh, no, they won't be hit by the GST.' Then we had the ATO and their officers—and I am not being critical of the ATO, who were only doing their job and who have to apply the law, which was apparently not well written by this parliament—going around in the consultation process making it clear that the GST would apply. The ATO prepared a draft ruling but did not release it.

So what happened next was an absolute farce in public policy terms, and here the blame shifts squarely to the feet of the Treasurer, Mr Costello. When they heard of the ATO's hardline position, many in the aged care sector were, quite rightly, very worried indeed and they began to panic. They feared that they would be charged significant back taxes and penalties. So retirement village operators started to increase levies imposed on these aged persons—and we are not generally talking about the most affluent of retirees in society—to provide for back payment of the GST. Some operators seriously questioned their financial viability. They were in an uncertain position. If they did not try to recover the back GST and then had to pay it in one lump sum that would obviously significantly affect their cash flows in the year that they had to pay the back GST. That potentially could have sent some retirement villages broke. Others held out in the hope that the tax might never be levied. That is a very unsatisfactory situation.

On 10 August this year the Labor shadow Treasurer, Mr Crean, the member for Hotham, asked the Treasurer, Mr Costello, a question without notice. He asked:

Is the Treasurer aware of reports that Mr Charles MacDonald of the Retirement Villages Association has stated that, as a result of uncertainty arising from the Australian tax office's deliberations on a draft ruling on this matter, some retirement villages are already being advised to start making provision for this GST impost? Is the Treasurer aware that, in December 2003 and June 2004, the Parliamentary Secretary to the Treasurer wrote to the member for Petrie confirming that the Australian tax office was preparing a draft ruling on this matter which contravened government policy and implied support for this change?

The response by the Treasurer, Mr Costello, was quite extraordinary. He stated in Hansard:

Retirement village residents in serviced apartments and independent living units are not GST free. That is the legislation and that is the policy which the government announced.

It was not, but that was what Mr Costello claimed at the time. It was a very arrogant and inconsiderate claim and declaration. All of a sudden the Treasurer, Mr Costello, had created a new tax, a new GST application, where it was not supposed to have applied. This was in direct contradiction of yet another core election promise. Mr Costello indicated that persons in serviced apartments in a retirement village were to be charged GST on their basic living services. Effectively by this announcement he extended the GST into aged care. The Treasurer did not even wait for the draft ATO ruling.

Thanks to the inquiry by our former shadow Treasurer, Mr Crean, the issue had finally been brought to light in public and had to be dealt with. The Treasurer, Mr Costello, realised he had a significant problem. When Mr Crean pressed the Prime Minister on the same issue the next day, Mr Costello denied in the House that he had said that residents of serviced apartments in retirement villages were GST free. On reflection I think that he misled the House—and the Hansard proves it. It was not a great comfort that this debacle was rolling on for the residents in retirement villages who were affected. They were still left with doubt and uncertainty.

So what happened? Later that night, after Mr Crean had asked the Prime Minister about the issue—I am not sure what time it was but it was certainly done in the dark of night to avoid press scrutiny—we had a backflip. The Minister for Revenue and Assistant Treasurer, Mr Brough, put out a press release indicating that these basic living and accommodation services would be GST free and that the Liberal government would legislate to ensure it. It is very clear what happened. On one day the Treasurer effectively made an announcement that the GST would apply. The Prime Minister, Mr Howard, was asked about it the next day and he contradicted the Treasurer. Then the Prime Minister obviously called in the Treasurer and said, `The GST doesn't apply. You'd better get it right; you'd better back down.'

The Treasurer is too arrogant to back down on anything. He is too arrogant to put out his own press release acknowledging that he got it wrong so he rang up Minister Brough to get him to put the press release out late at night so that it would not get any press coverage. So we finally got the right outcome but it was four years too late. Since the year 2000, many residents in these facilities have had to suffer uncertainty or pay an unnecessary tax. This government owes an apology to those residents and to the operators of the aged residential care homes who were left in this position. Four years is a long time to allow something as fundamental as the application of GST to some retired Australians to remain in doubt. It is a very long time.

The explanatory memorandum to this bill indicates that the cost of this backflip is some $63 million over the forward estimates, and $47 million in the first year. This is money that the Liberal government ought not to have received. This amounts to 63 million reasons why the Treasurer, Mr Costello, should apologise to the residents of aged care facilities and the operators of these homes. Will he? I am sure he will not. Even then, when we analysed this bill, we found that the government still had not got it quite right.

I point out, as I pointed out earlier, Labor have led the way on this issue in exposing the gross incompetence of the government in their mishandling of the issue and the insensitivity in the application of the GST to certain residents in aged care facilities. Labor have consulted with the sector to ensure they are happy with the bill that we are considering. There are still some issues which need to be resolved. In particular, my colleague Senator Jan McLucas, who is the Labor Party's shadow minister and spokesperson on aged care issues, will be outlining in detail those particular aspects in her contribution and in the committee stage.

In closing my contribution in this place on this piece of legislation, yes, this is technically a tax bill. It is certainly dealing with the application of the GST to certain residents of aged care facilities. But we should look beyond the travesty of justice, the incompetence of the government and the arrogance of the Treasurer on this important issue to those who have been affected by these four years of uncertainty: the residents of the aged care facilities. You could not pick a better example of the application of a new tax creating uncertainty for retired Australians. When Australians retire I think they do want a degree of certainty. Certainly when they move into aged care facilities they do want to know what price they have to pay. It is a massive indictment of this government that four years on we are finally fixing up this tax problem.

Senator Murray might remember that two years ago tomorrow we were in this chamber at about six o'clock in the morning correcting the GST application to the Royal Life Saving Society Australia. It is certainly written in my memory. It is not often we are here until six o'clock in the morning. We were dealing with fixing up the GST as it applied to the Royal Life Saving Society Australia, and at last count I think that was the 1,200th amendment to the GST. We were dealing with that one two years after the introduction of the GST, at six o'clock in the morning, prior to breaking for Christmas. So much for this simple tax! Here we are, another two years on, still trying to fix it up.

The Labor Party will be supporting this legislation. There are a couple of amendments that will be dealt with in committee. We have consulted with organisations from the charitable sector, including Catholic Health Australia, and they are very keen that this bill pass before the parliament adjourns for the summer break so that the uncertainty that the aged care residents, the aged care sector and the operators have had to endure as a result of the incompetence of the government in the application of the GST in this sector—this sad chapter—will hopefully be brought to a close.