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Wednesday, 3 October 1984
Page: 1089


Senator MAGUIRE(11.20) -I wish to speak today on the Income Tax (Rates) Amendment Bill and the Medicare Levy Bill which are being debated cognately. In doing so, I first welcome the major initiative of the 1984-85 Budget to introduce the five-step income tax scale. This scale replaces the former three-step scale which prevailed from 1978 until this year as a result of changes made by the former Fraser Government. One of the really major features of the new income tax scale is that we will now have a 25c in the dollar marginal tax rate. According to my research, this is the first time since 1977- 78 that we will have a marginal tax rate of income tax below 30c in the dollar. It was only after February 1978 when the Fraser Government introduced the three- step tax system that tax rates went to 30c in the dollar and above. Prior to that time 27c in the dollar was the prevailing tax rate.

In four weeks time, from 1 November, Australian taxpayers will benefit from reductions in income tax brought about largely as a result of the initiative in this Budget to restructure the scale, to introduce five steps in the tax system and particularly to introduce the all new 25c in the dollar tax rate. That rate will apply on all taxable incomes up to $12,500. Of course, it will mean significant tax cuts for lower and middle income earners. The new rate on the first $12,500 of income will also apply to much higher incomes as well-to the first $12,500 of higher incomes. From 1 November Australian taxpayers with taxable incomes of up to $28,000 will receive, as a result of this legislation that is now before us, tax cuts of $7.60 a week. Of course, $7.60 a week in income tax cuts will benefit, as I said earlier, lower and middle income earners . This seems to be the reverse of the policies of the Fraser Government which tended to structure its tax changes so that the only advantages really went to the high income earners who tended to get much larger absolute tax cuts than did lower and middle income earners.

As a result of this Budget the 25c in the dollar tax rate will prove to be a great advantage to lower income earners in particular. I am surprised that members of the Opposition have not highlighted the 25c in the dollar tax rate because for years I have listened to them both in this place and outside talking about the need for incentive in the community. Here is a tangible move in the 1984-85 Budget to reduce the tax rate to a low figure. Yet, members of the Opposition are silent on this matter of a new tax rate which, for the first time since 1977-78, is below 30c in the dollar.

The Income Tax (Rates) Amendment Bill seeks to structure the reductions in income tax so that the largest benefits proportionately go to those on the lowest incomes. It is possible to calculate that as a result of the changes in the 1984-85 Budget brought down by the Hawke Government people on the lowest taxable incomes will receive a 17 per cent reduction in their taxation liability this financial year compared with last financial year. I think that all honourable senators will agree that a 17 per cent reduction in income tax liability is a very large reduction indeed.

When we look at the aggregate global figures for Australia, it can be calculated that in this financial year the tax changes as a result of this legislation will cost the Budget revenue $1,300m, a very large sum indeed, and in a full financial year-because the tax cuts operate only from 1 November this year-the cost to revenue of the taxation changes will be over $2 billion; in fact, $2,100m. So it can be seen that the taxation changes as a result of the legislation bring about very real tax cuts. It is possible to calculate that the $7.60 a week reduction in taxation for most taxpayers is equivalent to about a four per cent nominal wage rise for wage earners. In one Budget, by reducing taxation and increasing disposable incomes, we have in effect granted a 4 per cent nominal wage rise. That is quite a significant increase in one move.

The tax cuts, of course, provided for by this legislation are part of the overall prices and incomes policy, known as the accord, which was agreed between the Government and the Australian Council of Trade Unions. These taxation reductions are designed to give further life to and a further strengthening of the prices and incomes policy which has proved so successful in this country. In effect the taxation reductions to some extent are in place of the money wage rise which would have otherwise resulted from the consumer price index, had there been a rise in the index in the last six months. The important thing about the accord is that it is enabling the Australian economy to expand, but with lower inflation than applied under previous governments. That is the essential difference between this Government and the Fraser Government which had contractionary economic policies, rising unemployment and very high levels of inflation. The taxation reductions of $7.60 a week, equivalent to a 4 per cent money wage rise, should be seen in the context of the prices and incomes policy.

One of the really important effects of the new 25c in the dollar tax rate is that it means that existing taxation rebates go further in freeing taxpayers from tax liabilities. I simply instance the dependent spouse rebate which has been the subject of some discussion this morning. That rebate of $830 for a married couple and $1,030 where children are involved will now free more taxpayers from a taxation liability as a result of the introduction of the 25c in the dollar tax rate. According to my calculations, under the previous Government the dependent spouse rebate cancelled out taxation liabilities for those with taxable incomes in the vicinity of $8,000. But as a result of this new tax rate of 25c in the dollar which has been introduced in this Budget, people with taxable incomes of up to $8,700 per annum will no longer pay tax. That is a very large reduction. I think most honourable senators would agree that there would be many hundreds of thousands of Australians whose taxable incomes would be in the range of between $8,000 and $8,700. That, of course, is a very big step forward in freeing many Australians from taxation liabilities.

In relation to the $250 pensioner tax rebate which is in existence, the 25c in the dollar tax rate will also mean that more pensioners will no longer be liable to pay income tax. It is very easy to calculate that the 25c in the dollar tax rate, in concert with the $250 pensioner tax rebate, will mean that pensioners with incomes of up to $106 a week will now no longer pay tax.


Senator Messner —Have you done the sums on that and found out how many pensioners will be paying more tax?


Senator MAGUIRE —We have certainly done our sums and I wish Senator Messner would do his on occasions. I will repeat the figures.


Senator Messner —Madam Acting Deputy President, I raise a point of order. Senator Maguire has referred to documents which he has in his possession which set out these sums on taxation. I call upon him to table those at this stage.


The ACTING DEPUTY PRESIDENT (Senator Coleman) —There is no point of order.


Senator MAGUIRE —I repeat that the $250 pensioner tax rebate and the 25c in the dollar income tax rate mean that pensioners with incomes of up to $106 a week will no longer pay tax under this Government. I think it is possible to calculate that together those two factors will mean that about 85,000 Australians will cease to be liable to pay income tax. That is a big step forward and obviously a step which is of great advantage to those Australians.

The taxation reductions to which I have referred this morning, costing over $2, 000m in a full financial year, have been made possible, of course, by our rapidly growing economy. I simply refer again to the fact that in the period from June 1983 to June 1984 Australia experienced real economic growth of 10 per cent-the highest among all of the developed countries in the world and the best record in this country for 25 years. That is one of the key reasons why we have been able to finance these major tax cuts. There are now 60,000 fewer unemployed Australians than there were 12 months ago. That is one of the results of the rapid economic growth we have had in Australia. The end of the recession, with more Australians at work, fewer unemployed, the end of the drought and also importantly the introduction of the prescribed payments system for taxation have meant that revenues have been very strong and also importantly that a number of Australians who were not paying tax before and who should have been paying tax are now paying tax.

This morning I heard Senator Peter Baume claim that this Government was a high tax government. I simply put on the record the figures for net pay as you earn tax collections in relation to Australia's gross domestic product. In 1982-83, the last financial year of the Fraser Government, Australian net pay as you earn tax collections were 11.5 per cent of Australia's gross domestic product. In this current financial year, 1984-85, net pay as you earn tax collections will be less than 11 per cent, in fact 10.9 per cent, of Australia's gross domestic product. So it is absolute nonsense for Senator Baume and others to claim that this Government is a high tax government. Clearly, if there has been a high tax government in Australia in recent times it was the Fraser Government, under which net pay as you earn tax collections amounted to 11.5 per cent of gross domestic product. I simply refer to a recent opinion survey published in the Melbourne Age which clearly shows that the Australians people know that the Hawke Government is not a high tax government.


Senator Boswell —That is rubbish.


Senator MAGUIRE —Senator Boswell should read that survey. Perhaps it has not been circulated north of the Queensland border. But let us look at some of the figures which show that the Australian people clearly believe that this Government is not a high tax government. Twenty two per cent of the population polled in that survey said that they felt they would be better off as a result of the Hawke Government's 1984 Budget. That figure should be contrasted with the 13 per cent of Australians who felt they would be better off following the Fraser Government's Budget in 1982 and a mere 2 per cent who felt they would be better off as a result of the Fraser Government's 1981 Budget. Let us look at the people who felt that they would be worse off as a result of recent Budgets. Nineteen per cent thought that they would be worse off as a result of the Budget this year compared with 60 per cent who thought that they would be worse off as a result of the 1982 Budget under the Fraser Government, and a staggering 73 per cent who believed that they would be worse off as a result of the Fraser Government's 1981 Budget. The Australian people believe they will benefit from this Budget. From those figures it is possible to draw a very strong inference that they can see that this is not a high tax Government.

I turn briefly to the Medicare Levy Bill 1984 and refer to the changes which are proposed in this legislation. Under this legislation the exemption level for payment of the Medicare levy will be increased quite significantly. For instance a married couple will be exempt from the one per cent Medicare levy if their income is $11,803 or below. For every dependent child there will be a further exemption of $1,330. Therefore a two-child family whose income is below $14,463 will no longer be liable for the Medicare levy. This morning we have heard an absolute diatribe from Opposition speakers claiming that the Medicare levy will have to rise beyond one per cent to pay for the system. Here is proof that it will not. This legislation will free many Australians from paying the levy. With a one per cent levy we can afford to free many thousands of Australians from paying the Medicare levy.

On 11 September I asked a question in this place of the Minister for Social Security (Senator Grimes) as Minister representing the Minister for Health (Dr Blewett). I asked him how many Australian families would no longer be liable for the one per cent Medicare levy as a result of this legislation. He said that on the best available calculations 120,000 Australians without dependants would no longer pay the levy and a further 35,000 Australians with dependants would no longer pay the levy. It is estimated that 155,000 Australians will not be liable for the one per cent Medicare levy as a result of this legislation. That represents a tremendous increase in disposable income for those Australians. It is possible to calculate that as a result of the various measures introduced by this Government-the tax cuts and the lower cost of medical care as a result of Medicare-the average Australian family is now about $21 a week better off in terms of real disposable income. That is as a result of the cost of health cover being reduced by Medicare, the $7.60 a week reduction in income tax and also, importantly, the 2 per cent reduction in housing interest rates from the 13 1/2 per cent level which applied under the Fraser Government in early 1983 to the 11 1/2 per cent level now applying in Australia. Those factors together have resulted in the average Australian family being $21 a week better off in terms of real disposable income.

We would like to be able to make bigger reductions in income tax than are provided in this legislation. As I have said, $7.60 a week is a significant cut in income tax. We would certainly like to be able to do better but one of the problems that we face, of which I am sure you, Madam Acting Deputy President, are as well aware as other honourable senators, is the fact that on four occasions we have found it impossible to get through this place legislation to collect taxation from those who have participated in bottom of the harbour taxation avoidance schemes. On four occasions this Government has tried to extract that revenue by trying to pass legislation to crack down on those involved in tax avoidance or tax evasion through bottom of the harbour activities.

On four occasions this Government has been defeated in this place in trying to get that legislation passed. Not only did senators from the National Party of Australia and the Liberal Party of Australia oppose that legislation but also Senator Harradine from Tasmania and three of the Australian Democrats senators. Senator Haines from my State of South Australia, Senator Chipp and Senator Macklin are the three Democrats who have not supported this Government in trying to extract more revenue from tax cheats. The gross amount of revenue that was lost as a result of the defeat of the first of those four Bills was $570m. That $570m in revenue was not extracted from tax cheats as a result of the defeat of the legislation proposed by the Labor Government. That represents $570m which cannot go into the Budget, which cannot provide for various expenditure schemes or for larger reductions in income tax. I call on Senator Haines in particular, who is from South Australia, to come clean on tax avoidance and help us get important legislation through the Parliament to crack down on tax cheats in Australia. If we could get that extra revenue we could certainly provide much larger taxation reductions for Australian taxpayers. With those remarks I commend the legislation to the Senate.