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Tuesday, 4 April 2000
Page: 15166


Mrs MAY (6:19 PM) —It is with great pride that I rise to support A New Tax System (Family Assistance and Related Measures) Bill 2000 tonight. It is part of a historic and long overdue overhaul of Australia's tax system; it is a new tax system for the 21st century. That is exactly what this government promised at the last election, and that is exactly what we are delivering. This bill deals with a number of outstanding family assistance issues to ensure that the full measure of our increases in family benefits, contrary to what the member for Lilley says, is delivered as efficiently and as fairly as possible. I will outline these changes a little later.

It is all too easy to get caught up in the details of the new tax system and overlook the bigger picture—the significance and the enormity of the changes that will come into effect on 1 July this year. The new tax system will deliver over $12 billion a year in income tax cuts for Australians; that is $12 billion back in the pockets of Australian workers. It is the biggest income tax cut in Australia's history. It will mean that around 80 per cent of Australians will pay an income tax rate of no more than 30 cents in the dollar. This will undoubtedly restore incentive in the Australian work force. If people choose to work longer hours, they will get to keep more of their hard earned wage, rather than being penalised by slipping into a higher tax bracket. For over 13 years, Labor were content to slug Australian workers more and more each year by virtue of bracket creep. That was, of course, on top of the billions of dollars extra they collected in indirect tax increases.

Although Labor are trying desperately to rewrite history, they will never be able to erase their record on tax. The Australian public will never forget the massive deficit of Labor at the 1993 election when they ran the most untrue and vicious scare campaign on GST and promised not to put up taxes. What did they do when they won that election? They turned around and increased indirect taxes by a whopping $10 billion—a $10 billion extra slug on Australian families. And what for? Not to pay back debt, not to fund decent employment programs, not for any purpose in the national interest; they could not bring unemployment down, they did not reduce debt. In fact, at exactly the same time during their last five years in office, Labor ran up more than $70 billion in government debt.

It just amazes me that Labor have the gall to stand in this place and be critical of our efforts to fix the mess they left behind. They never had the backbone to tackle reform of Australia's tax system and they do not even have the backbone to support our efforts to do so. All they can do is whinge and complain and talk down Australia. But Labor's true thoughts on the new tax system are revealed by their own admission that if they were re-elected they would keep it. That is right: they hate the GST so much that if they were elected they would keep it. And, if history is any indication, they would probably add a range of other indirect taxes to the mix to raise more revenue or increase income taxes.

It should also be remembered that on top of the income tax cuts that the Howard government's new tax system delivers we are abolishing Labor's complicated and unfair wholesale sales tax system. We are simplifying 11 existing tax payments to create the pay-as-you-go system. Perhaps most importantly of all, we are delivering a massive $2.4 billion extra each year to Australian families in the form of increased family assistance. Few people would disagree that families are the cornerstone of our society. They are the places where children are raised, values are learnt and upon which communities are built. I am very proud to be part of a government that is unashamedly pro-family. We have put families at the forefront of Australian political life again, which is where they should be. I think it is a great pity that under the former government families were regarded almost as passe, not trendy enough for many Labor parliamentarians and especially the special interest groups that Labor are beholden to. We recognise that families come in all shapes and all sizes and that each of them has special needs. We need a system of support that encourages family cohesion and helps those who need it most. That is exactly what we have developed under the new tax system and what we are finetuning with this bill.

I would like to outline some of the major benefits to Australian families under the new tax system. First and foremost is the tax cuts. Someone on an average wage will receive a tax cut of around $30 a week. On top of this, families will be provided with an extra $140 per year per child in family assistance. Additional assistance of $350 a year will be provided for single income families with a child under five years of age. This includes sole parents. This recognises in just a small way the contribution of families where one parent chooses to stay home and care for young children full time. These mums and dads are often the backbone of schools and community groups and are in most cases also saving the government in terms of child-care assistance.

I am hopeful that in the future once we have repaid Labor's debt in full and the economy is growing there may be scope to further support and recognise the value of full-time parenting. Families should have the freedom to choose the type of care arrangement that most suits their needs and their aspirations and that includes the legitimate and worthy option of one parent providing full-time care. Again, under Labor, this was a notion seen as passe. While I acknowledge that it does not suit absolutely everyone, there are many families where that is the ideal option, but they feel pressured, some for financial and others for social reasons, to pursue full-time work and relegate care of their young children to others. The Howard government wants to allow families to pursue whatever option they prefer, and by easing the financial pressure on families, as we have through lower interest rates, tax cuts and improved family allowance, we can provide real choice for Australian families.

As part of our range of new measures we have already extended assistance to families with older dependent children not receiving youth allowance. We are also increasing the maximum assistance for child care for lower income families. Importantly, we are increasing the level of income at which family assistance begins to be income tested to $28,200. We are letting families keep 70 cents in every dollar of income they earn above the free area, instead of the current 50 cents. This will address the poverty trap where people have found that the option of taking up work meant they were actually worse off than they were remaining on government assistance. This measure will allow families on low incomes to earn a little extra and not risk being worse off because their family assistance is reduced. Again, it is about restoring incentive, giving people more control over their own lives. As I have said before in this place, governments should not be something that just happen to people; they should be working with communities and individuals to give them more say.

It is little wonder that people felt isolated and alienated from their government and community during the decade of the Labor government. Labor's view was always that the government ought to have more say in people's lives and tell people what is right for them. We here on this opposite side take the opposite approach. Put simply, we believe that governments ought to, wherever possible, butt out of people's lives and instead of telling people what is good for them we should listen to and help fulfil their aspirations for the future. It is just another fundamental area where we take a different view from Labor.

This bill makes amendments to several new policy issues that have been identified such as ensuring that a person who only has shared care of a child or children is assessed for rent assistance at both the `with child' and `without child' rates and is paid at the higher rate, ensuring that the child-care benefit rate per child will not decrease for children above the third child, enabling special benefit recipients who would not otherwise be eligible for the family tax benefit or child-care benefit because of residence rules to access those payments, preventing entitlement to a family tax benefit advance where a person has an existing tax debt, and tapering of the 10 per cent part-time loading in long day care centres to provide greater fairness and equity. This bill also amends the Social Security Act 1991 to increase the rates of CDEP participant supplement, pensioner education supplement and carer allowance by four per cent to compensate for the effects of the GST.

We are being very thorough to ensure that we have a smooth changeover on 1 July and that Australians will be better off under the new tax system. The four per cent increase in all government benefits and pensions is a crucial part in ensuring that no Australians are worse off because of the change to the way we collect tax. We recognise that the GST will add slightly to the cost of living but, because of the nature of the changes to the tax system, including removal of the existing indirect taxes, the increase in the cost of living will be nothing near 10 per cent. In fact, it is expected to be more in the vicinity overall of around one to two per cent, which is why we are increasing all pensions and benefits by four per cent to ensure at least a two per cent buffer. We also have a special mechanism in place to ensure that, if prices rise more than we expect, pensions will rise accordingly to preserve that two per cent buffer.

Sitting suspended from 6.30 p.m. to 8.00 p.m.


Mrs MAY —Can I just make a point about the new tax system. You will not hear Labor talking about this. They run around declaring that the sky is going to fall in on 1 July, but they will never acknowledge the obvious benefits of the package. The truth is that grocery prices will actually fall under the new tax system. The respected independent consumer magazine Choice recently conducted an analysis of how the average weekly shopping bill would be affected under the new tax system. I suggest to those opposite that they get hold of this article and have a good read and let their constituents know about it, rather than trying to scare them senseless, because Choice actually found that prices would fall under the GST. Choice found savings of $3.12 on the average shopping bill.

Along with the substantial personal income tax cuts and increases in pensions and family allowance, this means that Australians will find that the extra money in their pockets more than compensates for slight increases in the cost of services, entertainment and things like takeaway food. Of course the Choice survey was a direct comparison of the wholesale sales tax with the GST, and it did not take into account the savings in the cost of transport and other business inputs which could make some food even cheaper. Basic foods like meat, fish, bread, fruit and vegetables, rice, pasta, eggs, butter, tea, coffee, breakfast cereals, soup, canned food and sauces are all GST free. Because there will be savings for many businesses and farmers, these foods may even go down in price.

Then of course there are some foods that will be subject to GST, but the wholesale sales tax is coming off, so they will also be cheaper. They will include things like chocolate, ice-cream, soft drinks, biscuits, chips and pet food.


Mr Tanner —We will all get fat!


Mrs MAY —We will! It is clear that grocery prices, a major cost for Australian families, will actually be cheaper under the new tax system. Pensioners and those on fixed incomes will be compensated as well for slight increases in other costs. Again, you will not hear Labor explaining that the following things will all be GST free: basic food; most medical services, including all services covered by Medicare; private health insurance premiums; a wide range of commonly used health services like physio, chiropractic, podiatry and dental services; medical aids and appliances; most education services; most child-care services; exports; religious services; local government rates and charges; and non-commercial activities of charitable institutions. This, and the fact we are abolishing a range of other taxes and simplifying things for business, is a large part of the reason why prices are expected to rise by only around one to two per cent and, as I said, we have provided more than adequate compensation.

The new tax system is not going to make all Australians wealthy overnight. Some people have been coming up to me and saying, `I am only going to be $6 to $10 better off a week. What is the point?' The point is that you will be better off and no worse off. No-one will be worse off. Even before the GST was removed on basic food, the Senate inquiry could not find any sector of the Australian community that was going to be worse off. The point is that we will have a tax system that will serve us well into the next century. We will not have to keep tinkering at the edges; we will not have to keep increasing taxes here and there; we will not have a tax act thousands of pages long that no-one can understand. Businesses will be better off, which will mean more jobs for young Australians. Our exporters will be better off, which again means more jobs. Ultimately, Australia will be much better off.

That is the only reason we have made this historic change to Australia's tax system—it is in our national interest. That is the yardstick against which we measure all our policies. It should also be remembered that this historic tax change also heralds a new era in Com-monwealth-state relationships. The states are the full beneficiaries of the GST. The federal government does not get the GST—it goes to the states. It will be used to ensure funding for our police services, roads, hospitals and schools. Again, it will clearly benefit our families and our nation, contrary to what the member for Lilley said earlier this evening. I am pleased to support this bill. It helps facilitate the smooth transition to the new tax system and to ensure that families receive the full measure of increases in assistance.

I would just like to end tonight by challenging the Labor Party to act in the national interest and to get behind the new tax system—the very same system they have said they will keep if they get elected. If Kim Beazley really wants to bring a new honesty to politics, he ought to call off the scare campaign and stop his ministers and backbenchers from running around declaring that the sky will fall in on 1 July and scaring some people in the process. He ought to come right out and admit that this is the way forward. He ought to help unite the community in working to create a more prosperous future for all Australians, instead of constantly talking it down. He ought to help sell the benefits of the new tax system and help make it work well in the national interest. But sadly the national interest does not get a look in when Labor is drawing up its political strategy, and the Australian public know it. Australian families will not forget the sharp contrast between the many benefits the Howard government has delivered and the legacy Labor left them after 13 years of mismanagement. I commend this bill to the House.