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Tuesday, 26 May 1987
Page: 3359

Mr WILSON(9.59) —I focus my remarks on the changes that are proposed to the family allowance arrangements. Contrary to the comments made by the last speaker, the honourable member for Melbourne (Mr Hand), I think that the abolition of universal benefits in respect of children is an unfair move. It is unfair because those who support children should be given an effective tax concession--

Mr Hand —All you are prepared to talk about are people with incomes of over $50,000.

Mr DEPUTY SPEAKER —Order! The honourable member for Melbourne will cease interjecting.

Mr WILSON —That is not so. I am talking about a large number of women who have no income of their own but the family allowance which is now to be denied them.

Mr Hand —That is not what you just said.

Mr WILSON —It is. I said that the effect of this legislation is to deny a significant number of women with no income at all any benefit in recognition of the support of their children. Furthermore, it removes the tax concession, the tax adjustment to high income families who are supporting children compared with those high income families who are not supporting children.

This legislation will save $71m. I think the Government has gone about it in the worst possible way. The way in which it should have saved $71m was to give those high income earners a lesser tax cut and to allow families with children to maintain their present level of family allowance. In fact, the present level of family allowance for all families is meagre, absurd--

Mr Hand —You are doing it now. All you are concerned about are wealthy people. You don't care about the poor. I have never heard you speak in defence of the poor.

Mr Tuckey —Gerry, you haven't heard a thing.

Mr DEPUTY SPEAKER —Order! The honourable member for Melbourne and the honourable member for O'Connor will cease interjecting.

Mr Hand —You shut that ratbag up over there.

Mr Connolly —Mr Deputy Speaker, I ask the honourable member to withdraw that most scurrilous observation.

Mr Tuckey —You've picked the wrong bloke.

Mr DEPUTY SPEAKER —Order! I doubt whether the word `ratbag' is unparliamentary.

Mr Hand —I say to the honourable member for O'Connor that I have not picked the wrong bloke. He is a ratbag.

Mr DEPUTY SPEAKER —Order! The honourable member for Melbourne will resume his seat.

Mr Tuckey —Mr Deputy Speaker, apparently the reference was to me and I ask that he withdraw immediately or we will start a proper slanging match.

Mr DEPUTY SPEAKER —Order! The honourable member for O'Connor will resume his seat.

Mr Tuckey —I take a point of order, Mr Deputy Speaker. He has not withdrawn, and I do not want to delay the honourable member for Sturt.

Mr DEPUTY SPEAKER —I am not aware--

Mr Tuckey —I will tell you what the word was. It was `ratbag'. It is wrong, it is untrue, I am offended and I want that ratbag to withdraw it.

Mr DEPUTY SPEAKER —Order! I do not know whether the honourable member for O'Connor is helping himself by identifying himself with an interjection. I agree that the word used by the honourable member for Melbourne was unfortunate. I am not aware that he was addressing it to any particular member.

Mr Downer —He just said he was.

Mr DEPUTY SPEAKER —I do not need any assistance from the honourable member for Mayo. I am not aware that he was addressing it to any particular member. I call the honourable member for Sturt.

Mr WILSON —Even the Government's adviser, Professor Cass, has emphasised that the major objective of the family allowance is `to provide tax equity for families with dependent children, recognising the increased costs incurred in the period of child rearing and the parents' subsequently decreased capacity to pay tax'. This legislation provides that a person can reach a certain level of income and, at that level of income, can treat the expenditure of rearing children in the same way as all other consumption expenditure. That is a retrograde step. As I said a few minutes ago, if the Government had to save $71m, in my view it would have been better to have given a lower tax cut to the families who now are to be deprived of the family allowance and to the other taxpayers who have the same level of taxable income, and to have adjusted the equity of the tax system to ensure that, while taxpayers have dependent children, they continue to receive the family allowance. Indeed, as I was also saying a few minutes ago, I would have gone much further. I would have recognised the real cost of rearing children. I would have given tax cuts in the form of a substantial family allowance rather than tax cuts to single taxpayers and to two-income families with no children. I believe the community would have recognised the fairness and equity of that.

We now face a situation in which under the present tax and social security arrangements we provide to a family that is intact and supporting its children a level of tax relief which is less than one-fifth of the support that we provide to broken families where the non-custodial parent is failing to support either the children or the former spouse. In a debate such as this we should be focusing with concern and compassion on the very low income families to whom the honourable member for Melbourne referred. We should regard it as a national disgrace that so many children are living in poverty. In large measure that poverty is a consequence of the low level of family income support provided through the social security system to all families, the low level of collection of maintenance from non-custodial parents and the low level of the dependent spouse rebate.

Let me remind the House that the Australian Labor Party was elected to office on a commitment to increase the dependent spouse rebate. It has frozen it. It has speculated and toyed with the idea of abolishing it. I suspect that this means testing of the family allowance for families with a joint income of $50,000 or more is the first signal that the next move in the Labor Party's anti-family policy will be to introduce an income test for the dependent spouse rebate. If the marriage certificate is used as the test to determine eligibility for the dependent spouse rebate or the family allowance, the intact families-the families who are doing the right thing by the Australian community-will be penalised by any income testing of either the family allowance or the dependent spouse rebate. In fact, those families supporting a dependent spouse and dependent children relieve the taxpayers of a very substantial burden.

The Labor Party is trying to claim great credit for the substantial tax cuts that will be introduced on 1 July. It is true that they are big tax cuts. But those tax cuts do nothing to introduce family equity into the tax system. In fact, since the Labor Party came to office it has progressively penalised families with children. It has punished single income families by keeping the dependent spouse rebate fixed at its 1983 level. It has punished all families by maintaining the family allowance at its 1983 level. It has done nothing to increase the real purchasing power of families with dependent children. To some extent it has increased the benefit provided to pensioner families with children. But although those increases are sometimes presented in percentage terms as though they are substantial increases, in most instances they do not increase the spending power of those families to a level which has kept up with the rate of inflation. Those families who have not received an increase in the family allowance to maintain its purchasing power and who have not received an increased spouse rebate to maintain its value have had additional costs imposed upon them. Additional costs have come through the increased Medicare levy and through increases in indirect taxation. Most Australians believe that the cost of government should be shared according to the capacity to pay. But everyone knows that inadequate allowance is made for the effect on this capacity of maintaining a dependent spouse, dependent children and other dependants.

The tax rebates and cash allowances to taxpayers who have dependants are substantially less than the pensions and allowances payable to dependants who are the responsibility of the Government and the public sector. The tax relief available to people supporting dependants is much less than it was five years ago. Over this period no adjustment has been made for the effect of inflation. The insensitivity of the tax system to tax paying capacity discriminates against families with children, but most severely against single income families. The tax system is especially harsh on those who live in single income households or those households in which one spouse has a smaller income than the other. Now, if the single breadwinner happens to have an income of $50,000 or more, the spouse with no income, very often the carer of children, is to be denied any payment in the form of family allowance. The tax burden becomes heavier the greater the difference in the proportions in which husband and wife contribute to household income.

At the last election, the Liberal Party undertook to allow families to split their income for tax purposes, allowing those with unequal incomes to be taxed on a partnership basis. This results in all families with similar incomes bearing similar tax burdens. Under the rate scale that is to operate from 1 July, single income families with household incomes as low as $19,500 will be liable for about $10 a week more in tax than two-income families with the same household income. Looked at another way, the tax burden of a single income family will be 24 per cent higher than that imposed on a two-income family. By far the greatest majority of single income families are families with young dependent children where one parent has chosen to stay at home to look after those children.

For those families earning $19,500 we find that, under the scales that are to come into operation on 1 July, for every additional dollar they earn over $19,500 they will pay 16c more in the dollar than a two-income family with the same total household income. For families with household incomes of $35,000 single income families will pay nearly $50 a week more, or nearly 40 per cent additional tax, than a two-income family with the same income. On each additional dollar earned by the family with the single income, the tax liability will be 20c in the dollar more than that payable by a two-income family earning the same additional dollar. Yet it is those families who are to be denied the family allowance. It is those families who will pay far more tax than a single person supporting no dependent spouse and supporting no children. The single income family with a dependent spouse will be paying the same amount of tax as a single person. Yet it is argued that there has been tax reform.

Tax reform is not achieved by tax cuts alone. Tax reform is achieved only if the tax system is made more equitable. What is needed is a more equitable tax system. What is needed is something to protect the incomes of families. There was a time when, under the wages system operating in this country, the Australian Conciliation and Arbitration Commission set wages at a level that took account of the support given by a breadwinner to a dependent spouse and dependent children. However, it is years since the Commission went on the record and said that it would set an adequate living wage related to the wage earner himself or herself. The Commission said that it must be up to governments, using the tax and social security system, to make appropriate adjustments to provide equity, both in a horizontal sense and a vertical sense, for families supporting dependent spouses and dependent children.

In my view, it is vital, as tonight we are talking particularly about families with dependent children, that the family allowances be increased to the real value introduced in 1976 and that the family allowances be indexed and adjusted regularly to maintain their real purchasing power. It is also vital that we take steps to change the relativity between the allowances paid in respect of children under the age of five years, between the ages of five and eight years, eight and 11 years, 11 and teenage, and teenagers. These adjustments should be made to take into account the increased costs of rearing a child the older that child gets. The levels should then be raised to a level of family and child allowances payable in respect of children wholly dependent on the social security system, so that all families, whether they are dependent on the social security system or whether they are supporting their own children, receive, either as cash social security payments or through tax rebates, the same amount so that the tax social security system does not distort social behaviour. Then we should increase the allowances to take account of the--

Debate interrupted.