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Monday, 18 June 2018
Page: 3134

Senator FIFIELD (VictoriaMinister for Communications, Minister for the Arts and Deputy Leader of the Government in the Senate) (17:44): I move:

That these bills be now read a second time.

I seek leave to have the second reading speeches incorporated in Hansard.

Leave granted.

The speeches read as follows—

Treasury Laws Amendment (Personal Income Tax Plan) Bill 2018

This Bill implements the Government's Personal Income Tax Plan to make personal income taxes lower, fairer and simpler.

By sticking to our plan for a stronger economy, the Government is returning the Budget to surplus and guaranteeing the essentials.

And because a stronger economy delivers more revenue to the Budget we are able to afford our Personal Income Tax Plan. It is affordable and fiscally responsible. More so it is necessary and will help people to manage household budget pressures.

The Government is committed to a tax system that rewards effort and aspiration and promotes opportunity. A tax system that is internationally competitive, capable of driving stronger investment and growth, and a stronger economy. A tax system where all individuals and businesses pay their fair share so the Government can deliver essential services.

Without action, the personal income tax system will increasingly penalise Australians for earning more as they move into higher tax brackets. The tax burden borne by workers will rise, reducing the rewards for effort.

As outlined in the ATO taxation statistics, the personal income tax burden is carried by the few, not the many. In 2015-16, the top one per cent of taxpayers paid around 17 per cent of the $186 billion of personal income tax. The top 10 per cent paid around 45 per cent of this total, compared with around 36 per cent 20 years earlier.

The Government has set a tax to GDP speed limit of 23.9 per cent. This prudent fiscal strategy, ensures that taxes do not chase spending and overwhelm the economy, like a snake eating its tail.

Over the seven years of the plan, the Government will provide tax relief to encourage and reward hard working Australians and to reduce household budget pressures.

The plan will mean that individuals will be able to take on additional work and seek advancement, knowing their extra income will not be taxed more harshly. Our plan will deliver a personal income tax system that is lower, fairer and simpler.

The plan will be delivered in three steps.

One. It will provide tax relief to low and middle income earners first.

Two. It will protect what Australians earn from bracket creep.

Three it will ensure Australians pay less tax by making personal taxes simpler and flatter.

Under our personal income tax plan, 94 per cent of Australian taxpayers will pay no more than 32.5 cents in the dollar. This compares with 63 per cent if we leave the system unchanged.

Step one of our plan will start permanent tax relief to low and middle income earners first, helping to ease household budget pressures. A new non-refundable low and middle income tax offset will provide tax relief of up to $530 to middle and lower income earners for the 2018-19, 2019-20, 2020-21 and 2021-22 income years. This is what can be responsibly afforded, while keeping the Budget on track.

The tax offset will assist over 10 million Australians. The maximum benefit of $530 will go to around 4.4 million taxpayers for 2018-19. For a working family with both parents on average full time wages, this will boost their 'kitchen table' budget by more than $1000 every year.

The new tax offset is in addition to the benefit lower income earners receive from the low income tax offset, and will be paid in the same way - on assessment after tax returns have been lodged.

This tax relief will not be clawed back by other tax increases, including the Medicare levy, which will remain unchanged.

Step two of the plan will help ensure that incomes earned by Australians are protected from bracket creep. From 1 July 2018, the Government will increase the top threshold of the 32.5 per cent bracket from $87,000 to $90,000, providing a tax cut of up to $135 per year to around 3 million taxpayers. This builds on the 2016-17 Budget increase to the top threshold of the 32.5 per cent bracket from $80,000 to $87,000, and shows the Government's long-term commitment to reforming the personal income tax system.

From 1 July 2022, the Government will provide tax relief of up to $1,350 per year by further increasing the top threshold of the 32.5 per cent bracket from $90,000 to $120,000. This is projected to benefit around 3.9 million taxpayers and prevent around 1.8 million taxpayers from facing the second top marginal tax rate of 37 per cent in 2022-23.

In addition, the top threshold of the 19 per cent tax bracket will be increased from $37,000 to $41,000 providing a tax cut of up to $540 a year. The low income tax offset will also be increased from $445 to $645. The extension to the 19 per cent tax bracket together with the increase to the low income tax offset will guarantee the benefits of Step 1 are maintained.

By protecting against bracket creep under Step 2 of our plan it ensures that a pay rise, extra over time or working more hours do not get eaten up by higher tax rates.

Step three of the plan will make the personal tax system simpler and flatter. From 1 July 2024, the top threshold of the 32.5 per cent tax bracket will be further increased from $120,000 to $200,000, abolishing the 37 per cent bracket and reducing the number of tax brackets from five to four. This is projected to prevent around 1.8 million taxpayers from facing a tax rate higher than 32.5 per cent.

The plan provides certainty to most taxpayers, most of whom will face the same marginal tax rate through their working life. It is projected that with the plan, around 94 per cent of taxpayers will face a marginal tax rate of 32.5 per cent or less in 2024-25. Without change, a projected 63 per cent of taxpayers will face a marginal tax rate of 32.5 per cent or less in 2024-25.

This Personal Income Tax Plan rewards effort, fosters aspiration and improves incentives to strive for success. Permanent tax relief will put more of Australians' hard earned income back into their pockets.

Higher income earners will contribute to income taxes about the same as they now do.

The Personal Income Tax Plan is a package. We are legislating it as a package, now.

We are legislating the whole package now to provide certainty that low and middle income earners will get ongoing tax relief to manage household budget pressures.

We are legislating the whole package now to provide certainty to taxpayers they will be protected from bracket creep.

We are legislating the whole package now to provide certainty that personal taxes will be simpler and flatter.

Schedule 1 of this Bill implements the low and middle income tax offset and increases the value of the low income tax offset. Schedule 2 of this Bill increases the personal income tax thresholds in 2018-19, 2022-23 and 2024-25 delivering significant tax cuts to Australian taxpayers.

We are the party of responsible Budgets and lower taxes. This plan is affordable and fully funded in the Budget. This plan enables Australians to keep more of what they have earned.

Full details of the measures are contained in the explanatory memorandum.

Water Amendment Bill 2018

One of the key objects of the Water Act 2007 is to promote the use and management of the Murray-Darling Basin's water resources in a way that balances environmental, economic and social outcomes.

In 2007 the Water Act established the Murray-Darling Basin Authority as an independent expertise based statutory agency responsible for preparing an integrated plan for the sustainable use of the Basin's water resources: the Murray-Darling Basin Plan.

The Basin Plan involves the commitment of no less than four state, one territory and the Commonwealth governments, all working together to achieve the sustainable use of water across environmental, economic and social needs. Australia is envied the world over for its cross-jurisdictional water management arrangements.

The Australian government remains committed to implementing the Murray-Darling Basin Plan in full and on time. The Basin Plan is visionary - it is a long term strategy that was never intended to make a difference overnight. Now, time is of the essence. Basin States must have in place Basin Plan compliant water resource plans by 30 June 2019.

However Basin States currently face serious uncertainty in achieving this milestone following the disallowance of the Basin Plan Amendment Instrument 2017 (No.1) by the Senate in February of this year. This has also widely been referred to as the disallowance of the Northern Basin Review amendment or the NBR instrument.

Turning now to this Bill - the Water Amendment Bill 2018. The Bill seeks to rectify the uncertainties that remain following the disallowance of the NBR instrument.

The Bill will amend the Water Act to enable the NBR instrument to be remade and tabled again before Parliament as soon as possible.

The Bill will introduce a new directions power to the Act. This power will enable the Minister to direct the Murray-Darling Basin Authority to prepare an instrument that has the same effect as a previously disallowed Basin Plan amendment. The Murray-Darling Basin Authority may not propose amendments to the previously disallowed instrument if they have not gone through the extensive consultation process under the Water Act.

The Water Act already gives the Minister the power to direct the Authority in certain circumstances. The amendments to the Water Act contained in the Bill do not grant the Minister any extra powers in this sense.

The directions power will be subject to strict limitations, for instance the Minister can only exercise the power within twelve months of disallowance.

The directions power will only be available for disallowed instruments that were prepared under Subdivision F of Division 1 of Part 2 of the Water Act. This means, for example, that if an amendment to adjust the SDLs (prepared, then adopted under sections 23A and 23B) is disallowed, it could not be remade using this new power.

Further, an instrument prepared by the Authority under this new power must be the same in effect as a previously disallowed instrument. This also means that power is only available if the disallowed instrument has been through consultation requirements set out in the Water Act.

These limitations mean that the integrity of the consultation process that a disallowed instrument has been through is preserved.

Any amendment to the Basin Plan inevitably impacts a range of stakeholders. These limitations will ensure that the integrity of the public consultation process is maintained to best balance environmental, economic and social objectives.

The Murray-Darling Basin Plan is a critical reform which will help ensure the future of Basin communities, farmers and the environment.

The disallowance of the NBR amendments in February of this year has caused significant levels of uncertainty for communities within and outside of the Basin. It is essential that we find a path forward.

This Bill will amend the Water Act to enable the outcomes of the crucial NBR amendments to the Basin Plan, disallowed by the Senate in February, to be given effect in a prompt manner. The February disallowance of the NBR Instrument means we are facing increased time pressure to move forward with implementation of the Plan. An instrument that gives effect to the outcomes of the NBR instrument could be prepared by the Authority and adopted by the Minister by mid-2018. This will provide certainty to Basin States and communities, as they prepare sustainable diversion limit (SDL) compliant water resource plans by 30 June 2019.

The amendments contained in the disallowed NBR instrument were based on the best available science and data. They were recommended by the independent Murray-Darling Basin Authority following a series of reviews (the Northern Basin Review, reviews of sustainable diversion limits in three groundwater areas, and the 2014 independent review into the Water Act), each of which involved significant consultation with relevant community members, businesses and community organisations.

Throughout the process of preparing the disallowed NBR instrument, the Authority consulted at length with the Basin Officials Committee, the Basin Community Committee, Basin States, members of the public, including Indigenous groups, individuals, businesses and community groups.

The Authority was required to consider any of their views during the consultation process.

Giving effect to the disallowed NBR instrument will enable a 70-gigalitre reduction to the amount of water to be recovered for the environment in the northern Basin each year and mean less water will need to be taken from farmers, saving almost 200 jobs. It will also enable the Government to invest in environmental works and measures so that similar environmental outcomes can be achieved with less water in the north.

Paving the pathway to full implementation of the Basin Plan, the Bill contributes to achieving a key part of the Government's six point implementation agenda for the Plan - to deliver on the Northern Basin Review, including to reduce impacts on communities and support states to deliver environmental works and measures.

The Bill provides an efficient way forward for the outcomes of the NBR instrument to be given effect. This will provide certainty for Basin States and communities as they work towards preparing SDL compliant water resource plans by 30 June 2019. It is critical that the Bill is passed urgently to enable the Authority to prepare a new Basin Plan amendment instrument in time for these plans to be made and in place by 30 June 2019.

The Bill contributes to the pursuit of delivering important outcomes for Basin communities, ensuring a sustainable future for the Basin.

Debate adjourned.

Ordered that the resumption of the debate be made an order of the day for a later hour.

Ordered that the bills be listed on the Notice Paper as separate orders of the day.