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Transcript of doorstop interview: Sydney: 17 July 2013: emissions trading, fringe benefit tax changes, Mr Hockey's press conference errors

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Transcript Doorstop, Sydney 17 July 2013

SUBJECTS: Emissions trading, fringe benefit tax changes, Mr Hockey’s press conference errors.

CHRIS BOWEN: Firstly, today is the anniversary of then Prime Minister John Howard’s speech in which he announced his support for an Emissions Trading Scheme in Australia. He said at the time that it’s important that we use the market to bring down emissions. He said at the time that this provided great economic opportunities for Australia. Of course he was right. He was right then. It shows that the decision announced yesterday by the Prime Minister, Mr Butler and myself is the right one for Australia at this time. An Emissions Trading Scheme to reduce our carbon emissions and to properly link Australia’s carbon price to the rest of the world through a floating price is the right one and the one that John Howard supported in 2007.

Now of course yesterday I also announced some spending and tax changes in a fiscally responsible way to make up for the short fall in government revenue, with going to a floating price a year early. I said at the time yesterday that this would be controversial and would not be universally welcomed. And that has not been proved to be incorrect. But I do want to correct some of the assertions that I have seen made in the media over the last 24 hours or so. Let me be very clear, very very clear about this, the government has not abolished an FBT concession for motor vehicles. It has not been abolished.

What the Government has done is said that people who claim business usage to receive tax relief will need to justify that claim and back that claim up with some evidence. That is not a change to the entitlement, it is a change to the way the entitlement is administered. Now what we require people to do is to fill in a log book or use a mobile phone app to track their percentage of business use. Now we require this for three months. Not three months a year, not three months every two years, not three months every three years, not three months every four years, but three months every five years.

Now it’s well understood and accepted in the Australian tax system that if you claim a benefit, if you seek relief, then you have to justify that. Tradespeople, small business people, people across the country, hardworking people every day, keep their receipts, track their expenses in order to justify their claims. Now in 1986 the statutory method was introduced to mean that you could claim just a flat percentage. I understand why that was done at the time. But the world has moved on since then. With mobile technology, with the recent developments, it is not an onerous request to justify tax relief, to say that we ask people to keep records for three months every five year period.

Now I just watched before a press conference from Mr Hockey and I have read Mr Hockey’s press statement. I have a couple of things to say about that. In a typically shrill performance this morning and alarmist and fear-mongering performance, Mr Hockey sort of, sort of outlined the Opposition’s position. Although he did not, despite his bluster and his rhetoric rule out voting for this proposition. I want to make a few points. Mr Hockey claimed this morning that 240,000 people who claim salary sacrifice reductions earn below $100,000 a year. He is wrong.

The Government’s advice, Treasury advice based on ABS work, is that two-thirds of people who salary sacrifice their cars earn more than $100,000 a year. Now $100,000 a year as an income is not a particularly high amount but I am simply correcting the mistake made by the alternative Treasurer shortly before today. Mr Hockey is often not on top of his facts; he is not on top of his facts on this particular issue. And I also want to ask this - is Mr Hockey on behalf of the Liberal Party, the alternative government of Australia, really saying that their policy position is that if you have a car and do not use it for business use you should be able to claim business use, without having to justify it at all? Is that the position of the Liberal Party?

Now we don’t really have clarity around that. Mr Hockey huffed and puffed and engaged in his typical bluster this morning but then could not rule out actually supporting this. Now this is a test for the Opposition. You get a lot of rhetoric from the Opposition about surpluses about the need for responsible economic management, about the need for tough decisions. Well here’s a tough decision the government is taking. If the Liberal Party wants to be taken seriously when it comes to economic responsibility they would simply accept this change and support it. If they don’t, it shows that they are not really economically credible. Happy to take some questions.

JOURNALIST: Treasurer, can you rule out making any changes to FBT policy after consultation with industry?

BOWEN: Our policy position is clear and we’ll be implementing that policy position. Of course, will always enter into conversations with anybody who wants to enter into a conversation with us. But as I said before this is about ensuring that people who make a claim can justify it, not through an onerous task, not through masses of red tape as I have seen some people claim, but by keeping some records for three months over a five year period.

JOURNALIST: Why wasn’t industry consulted before you made the change?

BOWEN: Well because this is about the integrity of the tax system. Now the Prime Minister and I have been talking a lot to business and industry since we took office a few weeks ago as is appropriate, as is the right thing to do. But it is the responsibility of the Government to make sure the tax system’s integrity is protected, adjust to changing circumstances, here we have a situation where the Government could see that we could properly administer the tax system by requiring people to keep some records for a short period of time and that is the right thing to do.

JOURNALIST: How do you think this is going to affect the car sales in the country? What is your prediction on that?

BOWEN: Well, I don’t think that people buy cars because they can, you know, make a particular claim through the tax system. People buy cars because they need to or because they want to buy a particular car. Now of course we took advice from relevant agencies in making this decision. Now Minister Carr in particular and myself are always happy to talk to the automotive industry but this is an appropriate decision and we are the government and the party which supports the motor industry of course. The other point I’d make, which I should have made before perhaps, is that Mr Hockey again with his bluster and his bluff, is the Shadow Treasurer, the alternative Treasurer, who would cut funding in support for automotive manufacturing in Australia. So we’re not going to take any lectures from him.

JOURNALIST: Was Mr Carr in agreement with this policy during Cabinet discussions?

BOWEN: The Cabinet supported this decision in its entirety, including Mr Carr of course.

JOURNALIST: Can you confirm that Parliament has to be brought back in order to bring in the ETS?

BOWEN: Well the move to an emissions trading scheme would require legislation that is correct, as we have said consistently since making this announcement.

JOURNALIST: What sort of cars are we talking about?

BOWEN: It will vary of course from person to person. You can salary sacrifice any sort of car in doesn’t need to be Australian made and this change of course doesn’t discriminate between Australian made cars and foreign cars. Obviously people will make their own decisions. People on particularly high incomes may choose a particularly expensive car which may well not be Australian made, which may well be imported, we don’t discriminate between the types of cars in relation to FBT treatment and nor should we.

JOURNALIST: Did the Government have a view that the FBT, the existing FBT was a veiled subsidy for the car industry?

BOWEN: Ah no we had a view that the FBT concession is an appropriate one if justified. It’s appropriate to get tax relief if you are using your motor vehicle for legitimate business purposes, work purposes, going from work site to work site. This change doesn’t impact one iota, not one iota, on the more than three million people, I think it’s 3.6 million people who claim tax relief either as an individual or a business through tax returns, small business through tax returns, doesn’t impact on them one iota. If you listen to Mr Hockey you might have a different view understandably, if you took his word for it.

JOURNALIST: At a time when the Government is trying to support the auto industry why are you doing something that could hurt the car {inaudible}

BOWEN: Well because this is the fiscally responsible thing to do. If you’re going to return to surplus, if you’re going to have responsible measures in place that means sometimes making tough decisions. Now this is a decision which as I stress, means that people who are claiming a tax deduction are simply required to keep some record of their business use. If you’re using you motor vehicle you deserve the deduction, you’ll get the deduction, you’ll keep the deduction. If you are not using your car for business use then you don’t need a business use deduction. Okay?

JOURNALIST: Can I just clarify quickly - with the implementation, will that apply to cars that are already on order or is it only contracts signed?

BOWEN: This applies to new contracts from the date of announcement, although we have of course, as is appropriate and responsible allowed a transition period until April next year. Of course the fringe benefits tax year is April to April and that’s the appropriate thing to do, we’re allowing some transition so that people can adjust to this change. Alright, thanks very much.