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Wednesday, 31 May 2000
Page: 16662


Mr IAN MACFARLANE (12:50 PM) —Unfortunately—or perhaps fortunately, going by some of the comments made by the member for Makin about earlier speakers from the other side—I was unable to hear the first part of this debate on the business taxation bills. I had the fortunate and very rare occurrence of being granted a leave pass by the Chief Government Whip to attend a function last night hosted by the board of Telstra.


Mr Slipper —How did it go?


Mr IAN MACFARLANE —It went extraordinarily well. The attendance of the board of Telstra in my electorate not only signifies the importance of Toowoomba and the Darling Downs in a national context but also gave an excellent opportunity for local people to meet and to hear the views of the board and, at the same time, to give the board some of their own views. It is important that local communities be given access to the nation's industry leaders, and I took the opportunity while the Telstra board were visiting to ensure that the local mayors and local industry leaders had the opportunity to put their concerns across.

We as a government acknowledge that there are still concerns to be resolved with regard to Telstra, but it is very safe to say that there is a growing degree of support in regional Australia for the sale of Telstra. Anyone who doubts that needed only to spend some time at my table and listen to the chairman and CEO of Telstra as they discussed the hampering effect that continued government involvement in Telstra was having in the company's ability to expand, to raise capital, to be competitive, to grow its market share and of course ultimately to secure the positions of its employees, which are so important. I did not get the opportunity last night to talk to John Ralph, who was there, to perhaps discuss a little further some of the business tax reforms that he was involved in and obviously that this government has taken up. As I have said, it was an extremely successful function. If the papers can be believed, perhaps we have missed out on the siting of the new regional headquarters in Groom, but I am sure it will go to a worthy region somewhere else.


Mr Slipper —Like the Sunshine Coast?


Mr IAN MACFARLANE —No, unfortunately, it was not the Sunshine Coast, member for Fisher. I think it is going to be somewhere down on the New South Wales-Victorian border; but, as I say, we make a bad mistake if we believe everything we read in the papers. I did in fact emphasise to the chairman of the Telstra board that I would be bitterly disappointed were it to be put on the coast. I thought the head of regional Telstra should be somewhere inland in regional Australia.

I go back to some comments that I have heard since coming into the House at about 11 o'clock this morning. I was particularly disappointed to hear the comments of the member for Griffith. I have known the member for Griffith for some time. In his former life, he played an important role in the Queensland state government. I have a great deal of respect for his intellect. But I guess the thing that stood out in his speech was that he really had nothing to say about this legislation. He probably had nothing to say for two reasons. I will not humiliate or taunt the opposition by holding up their tax policy as our Treasurer has done from time to time, but the simple fact is that Labor do not have a tax policy that has any meaning or respect out in the wider community. I am not sure why that is, but they have embarked continually on a process of tearing down all the positive alternatives that the current government has put forward. That is probably the first reason that the member for Griffith misspent most of his time for the small part of his speech that I could bear listening to. I have to confess that I turned it off in the end and concentrated on other much more important issues. The other reason that he was unable to say much on the specific topic is that this is exceptionally good legislation. It is legislation which brings equity, fairness and, most importantly, stability to this very important area. Contractors and subcontractors are a growing breed in Australia. They are small business men and women who have taken up the challenges of going out there and doing it for themselves, enjoying the freedom that self-employment offers and aspiring to deliver excellent services, to ensure quality workmanship and to be able to grow their businesses free of the shackles of trade union impositions. Of course, employers have been keen to accept this format as well, and I think this legislation will make it clearer and easier to understand for all those involved.

I note the member for Makin's comments about the HIA and the general support from the industry, which uses subcontractors and contractors. Having had a couple of meetings with the HIA, can I congratulate them on their strong advocacy of the subcontractors that their industry involves and the fact that they were prepared to sit down around the table with the government and in a constructive but forceful way ensure that this legislation was able to work well with their industry. I guess that is typical of the legislation we have seen across the board with tax reform. It is a simplification. It is about making the tax system practical. It is about ensuring that we do have the support of the people who are affected by tax reform as we go about reforming the tax system in what is undoubtedly the greatest tax reform that this country has ever seen. It is tax reform that is well overdue.

I will go back to the subject of the dinner last night. Guests spoke quite freely about the difficulties that they thought they were going to have with the new tax system and how they were coming to terms with them and complying. Those who did suffer some difficulty and perhaps some financial cost were unanimous in their view that, regardless of those, tax reform in Australia is well overdue, and they welcome the reforms that this government is bringing in. Of course, out in the street the talk of $12 billion of personal income tax cuts far outweighs and drowns out the cries and scare tactics that are being mounted by those who sit opposite here. People are starting to understand that the introduction of tax reform and the GST will actually be good for them, that it underpins their families, that it provides added assistance and that it actually ends the tyranny of bracket creep and rewards the battlers and middle income earners who were almost taxed into oblivion by the Labor Party when they were in government.

Industry is accepting of good tax legislation, and this is a great example of it. The amendments will limit and clarify the reductions available to interposed entities and individual contractors against personal income. As well, they will ensure that, after allowing deductions to interposed entities, any income remaining is attributed to the individual. This means that people who are genuine contractors, people who are not interested in rorting the tax system, people who the member for Mitchell described as salt of the earth battlers—the people who get out there and have a go, who pick up their hammers or these days their laptops and set about earning an honest living and paying an honest rate of tax—will not be affected by this legislation. In fact, they can take a great deal of heart from this legislation because it is there to ensure that they will be able to continue to claim the tax deductions that they are rightfully entitled to.

There has been a great deal of misinformation, one might call it, about this legislation. Again I have no understanding of why that would be. I would imagine that we come to this House as both government and opposition to ensure that good legislation is carried. So it has been a bit of a job and a bit of a disappointment for the government to have to go out there and re-explain the criteria for this legislation. The criteria include the following. The test for personal services businesses is that they must perform work for more than one client to the value of 20 per cent; that is to say, they must have more than one client and that second client must be receiving at least 20 per cent of their work by value. They should have, as I say, two or more unrelated clients and their business premises must be separate from their residence. They must be producing a result; they must satisfy the commissioner that they can produce a result. They must be liable for the costs of rectifying any defective work that they have performed. They must supply plant and equipment or tools of trade.

In outlining just those few criteria, obviously you would understand, Madam Deputy Speaker, as do the many contractors in my electorate of Groom, that this legislation will not affect them and that what they have read in the newspaper, again a little inaccurate, and what they have heard from the opposition, again entirely inaccurate, is not the case. In fact, this legislation merely cements their position as contractors. It cements their competitiveness and of course for those businesses who run as partnerships the personal income tax cuts that will be coming on 1 July will make them only even more competitive. If you are a subcontractor and you are supplying tools of trade, your tools of trade are going to be cheaper. Your tools of trade are not always covered by the sales tax legislation—that incredibly complex sales tax legislation that we have at the moment. They are not always an aid to manufacture and, therefore, tradesmen find themselves paying 22 per cent to 32 per cent sales tax on day to day tools of trade.

An incredible thing I found when I was a farmer—and I have mentioned it before in this House—is: if I bought a spanner to fix a bolt on a header, a harvester or combine harvester, whatever you like to call it, it was tax deductible. But, if I bought exactly the same spanner and used it in exactly the same farm workshop to fix a tractor, it was not tax deductible. So complex is the current sales tax legislation. Of course, as I have said, tradesmen and subcontractors will be freed of that. They will simply go in, pay their GST and claim their GST. The burden of indirect taxes, whether on their utility, their tyres, their spare parts or their bits and pieces is immediately lifted off them.

The personal income tax cuts and drops in company rates of tax are all good news, but this is even better news. This legislation is going to ensure fairness and equity in the marketplace to ensure that those people who should be paying tax will be paying it at the right rate. For those people who have been trying to claim they are subcontractors and of course are not, this is bad news, but those people are the people who have been avoiding tax. Those people, because they are avoiding tax, because they are not meeting their obligations, are the ones who push the rate of tax up for the honest taxpayers The alienation of personal services income will also end the overclaiming of income tax deductions by people who are not entitled to those deductions. Again the response that I have had to this is, `If I am a genuine subcontractor and I am out there competing for a job and I know that I have got to build into my job a rate of income tax to ensure that I end up at the end of the day with a profit to live on, I don't want to find that some unscrupulous person who is not making the commitment in plant or who is not set up in the proper way is able to undercut my price out there simply by avoiding income tax.'

This legislation is merely part of the many tax reforms that our government is introducing. It is, as I have said repeatedly, part of the tax reform system which is the greatest reform of the taxation system that you and I have ever seen. It is part of the reform of a tax system which is antiquated. It is the tax reform that, given time, clarity and experience, I have absolute confidence the businessmen and businesswomen of Australia and every man and woman in Australia will greet, enjoy and profit from. I commend the legislation to the House.