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Monday, 21 March 2011
Page: 1343


Senator SHERRY (Minister for Small Business, Minister Assisting on Deregulation and Public Sector Superannuation and Minister Assisting the Minister for Tourism) (7:30 PM) —The Tax Laws Amendment (Temporary Flood and Cyclone Reconstruction Levy) Bill 2011 and Income Tax Rates Amendment (Temporary Flood and Cyclone Reconstruction Levy) Bill 2011 are very important pieces of legislation. I would like to thank the senators who have contributed to the debate on the bills.

As we are all aware, the recent disasters around Australia have had a massive impact in human terms and on property and infrastructure. Costs vary but it appears as though the cost to the public purse of repairing the infrastructure damage we have seen, such as roads, bridges, ports and railways, will be approximately $5.6 billion. This would mean that it is one of the most significant disasters, if not the most significant one, in monetary terms that Australia has seen. This does not include the obvious cost to individuals that is also of great significance and will not be finalised until insurance claims are completed.

We are moving into the recovery phase and it is clear that there will be a need to rebuild large amounts of public infrastructure. Many Australians have already generously donated to charitable funds to assist people affected by the floods. Charities will use these funds to help people directly to bounce back from the disasters. This levy on the other hand is contributing funding to rebuild damaged essential infrastructure, such as the roads, bridges, ports and railways that I have mentioned. And, as I mentioned, the cost of rebuilding infrastructure is in the order of $5.6 billion. The government will fund the majority of the cost through spending cuts. The remainder will be provided by this temporary—and I stress, temporary—flood and cyclone reconstruction levy. In an economy that is growing strongly it is important that we pay as we go.

In terms of the spending cuts that I have mentioned, they approximate $2.8 billion. This includes removing industry assistance and cutting back some other programs by abolishing, for example, the Green Car Innovation Fund and the Cleaner Car Rebate Scheme, and making some other cuts. There will be a $1 billion delay in some infrastructure projects. This will free up both funds and skilled workers, which is particularly important at a time of skilled labour shortages around the country.

The Tax Laws Amendment (Temporary Flood and Cyclone Reconstruction Levy) Bill 2011 and the Income Tax Rates Amendment (Temporary Flood and Cyclone Reconstruction Levy) Bill 2011 introduce a modest one-off, temporary levy that will end at midnight on 30 June 2012. There has been a fair amount of criticism from some members of the Liberal and National parties in respect of this legislation. I remind them that this is not the first time over the past decade that this parliament has seen a levy in response to a particular set of unusual and special circumstances. I have been in this place for almost 21 years and I can recall a number of other levies under the previous Liberal and National government. A couple come to mind. I think there were about half a dozen. We had one in respect to the Ansett collapse, which I am sure people would remember. They may not recall that there was a levy on airline tickets to pay for the cost of the collapse of Ansett Airlines. We had a levy in respect to the gun buyback. We had a levy in respect to East Timor. We had a levy in respect to the milk industry. We had a levy in respect to the sugar industry. There was one other that does not quite spring to mind.

In the critique by those opposite of this government’s approach, we have massive hypocrisy. They have condemned and criticised this government for its temporary, one-off levy when they in fact resorted to the same approach on at least six occasions when they were in government from 1996 through to 2007. On six occasions they resorted to levies and some of them went for a damn sight longer than the levy that is proposed in this legislation. The Ansett levy went for a couple of years. The milk and sugar levies went for longer than a year, although I cannot recall the exact time. So in this legislation we are not dealing with anything that is conceptually new.

The levy will end on midnight of 30 June 2012. The levy will be progressive and based on an individual’s ability to pay. The Australian income tax system is based on the individual, which achieves fair treatment between individuals and is simpler to understand for taxpayers. For this reason the levy is based on taxable income earned by individuals which is assessable income less allowable deductions. This is the same income base used for previous levies, levies that I have referred to earlier in this debate such as the East Timor levy and the gun buyback levy. These levies that I have just mentioned involved an increase in the Medicare levy, which is based on taxable income.

Anyone with a taxable income in 2011-12 of $50,000 or less will not pay the levy. Taxpayers with taxable incomes between $50,001 and $100,000 will pay a levy of 0.5 per cent—half a per cent—on that part of their taxable income over $50,000. Taxpayers with a taxable income over $100,000 will pay a levy of 0.5 per cent on that part of their taxable income between $50,000 and $100,000 and a levy of one per cent on that part of their taxable income over $100,000. Let me give an example. A taxpayer with a taxable income of $60,000 a year will pay a levy of 96c a week. A taxpayer with a taxable income of $100,000 a year will pay $4.81 a week. Importantly, taxpayers affected by the recent disasters—not just the floods but also Cyclone Yasi and the Western Australian bushfires and floods—will not have to pay this levy if they meet certain criteria.

The legislative instrument under which these bills provide for the minister to exempt people from the levy will provide an exemption for those who have received an Australian government disaster recovery payment for a disaster that occurred in 2010-11. There will also be an exemption for those who are ineligible for an Australian government disaster recovery payment but have been affected by a disaster declared under the National Disaster Recovery and Relief Arrangements and meet at least one of the Australian government disaster recovery payment criteria. There will be a further exemption for non-protected New Zealand special category visa holders who received an ex gratia payment from the government in relation to a disaster that occurred in 2010-11.

The levy will be paid through the tax withheld from regular wages and salaries like personal income tax and the Medicare levy that is already paid. But if employees are exempt from the levy they can ask their employer not to have the levy withheld from their regular pay. Alternatively, at the end of the year the ATO will assess a taxpayer’s tax liability, taking into account their exemption from the levy.

Once again I would like to thank members of the Senate for their contribution to the debate on these bills, which are of great importance for Australia’s response to the recent devastating disasters. Before I conclude my remarks and sit down, I note the Attorney-General has issued a determination as to the 2011 National Disaster Relief and Recovery Arrangements which amends the NDRRA determination of 2007 to strengthen arrangements ensuring that state and territory governments have adequate capital or insurance to fund restoration and replacement of infrastructure following a disaster. A new guideline is attached to the 2011 determination providing details of how the strengthened arrangements can be fulfilled. I table the determination as to the 2011 National Disaster Relief and Recovery Arrangements.

Question put:

That these bills be now read a second time.