Tax and Superannuation Laws Amendment No. 7 Bill 2014
25 February 2015
This bill makes seven changes to tax laws. The first schedule puts in place an ongoing fix to the issue of excess non-concessional superannuation contributions. The previous Labor government enacted similar measures on a temporary basis in 2012 and 2013. The Inspector-General of Taxation recommended a change of this nature.
The second schedule is a non-controversial machinery of government change which moves the tax investigative and complaint-handling functions of the Commonwealth Ombudsman to the Inspector-General of Taxation and merges that function with the Inspector-General's existing function of conducting systemic reviews. That ensures that the Inspector-General of Taxation has the power to take up individual cases as well as systemic matters.
Schedule 3 codifies a long-standing administrative practice of exempting certain compensation payments from capital gains tax. Schedule 4 ensures that people affected by superannuation fund mergers are not made worse off, and the previous Labor government announced an intention to enact a similar measure. Schedule 5 provides a more consistent basis for the tax office to share information regarding the proceeds of crime. Schedule 7 is an omnibus schedule of non-controversial mechanical tax measures.
Schedule 6, to which the previous speaker referred, puts in place a capped and caveated program with the aim of boosting minerals exploration. This is a worthy goal as the member for Brand noted in his speech on this bill last night. At the end of the Labor government, there was an estimated $230-billion pipeline of committed capital investment, and direct employment in resource operations across the country was at 250,000 people. Employment in the mining sector has now fallen to under 230,000 people and exploration is beginning to dry up.
The question that the member for Brand raised last night was whether a scheme of this kind will have the desired impact. All of us in the House share the government's goal of boosting minerals explanation but a flow-through share scheme similar to this has been enacted and repealed at certain points in Australian history. It was enacted in the late 1950s and curtailed in 1973. A scheme introduced in the late 1970s by the Fraser government wound up in 1985 because it was being used for tax avoidance and because inquiries found that it contributed little towards mineral exploration.
As the member for Brand noted:
I cannot emphasise enough my personal belief that these explorations activities are not driven by the taxation regime. They are driven by a belief that there are minerals out there to be found and there are customers out there that need has minerals, and they are driven by great belief in our mission that our explorers have to do the jobs as well as they can do them and as safely as they can do them.
Minerals exploration is supported not only by tax arrangements but also by terrific organisations such as Geoscience Australia, which has provided key work which has underpinned minerals and resource exploration in Australia in the past. Those of us on this side of the House will watch with interest how this mechanism works noting that it is an expensive mechanism at a cost of around $100 million and a system which is both capped and caveated. We will watch with interest to see whether it achieves the desired goal of boosting resource exploration.
My second reading amendment went to the issue of inequality. I do want to say something about inequality because, whenever we speak about tax in this place, it is important to recognise the broad context in which we are having these debates. Ours is a nation where over the last generation the top one per cent have doubled their income share and the top 0.1 per cent have tripled their income share. Earnings data from the Bureau of Statistics employee earnings and hours survey showed that for those at the 10th decile, the bottom 10 per cent, their real earnings gained from 1975 to 2014 was $7,000 or 23 per cent. For those in the top tenth of the distribution, their real earnings gain over the same period was $47,000 or 72 per cent. Earnings have risen three times as fast at the top of the distribution as at the bottom of the distribution.
When we speak about superannuation in this place, it is vital to recognise that the Abbott government, upon coming to office, made the decision to raise superannuation taxes for the three million Australians earning less than $37,000 a year—two thirds of them women—while cutting superannuation taxes on the 16,000 Australians with more than $2 million in their superannuation accounts. Those are the priorities of those opposite.
Economic inequality may have risen but egalitarianism remains fundamental to Australian national identity. Ours is a nation where, as the early settlers like to say, 'Jack is as good as his master—or maybe better.' As one 19th-century commentator put it: 'In England, the average man feels he is an inferior; in America that he is a superior; in Australia he feels as an equal. That is indeed delightful.' Mark Twainsaw it; Anthony Trollope saw it; DH Lawrence saw it. It was not a dream and we did not make it up.
Egalitarianism is a regular feature of speeches by my Labor colleagues. Michelle Rowland summed up the appeal to immigrants of Australia as a nation that is 'prosperous, free and instinctively egalitarian'.Bill Shorten noted that ours is a country where the welfare of the weakest and the welfare of the most powerful are 'inseparably bound together'. Andrew Giles warned that we must not 'return Australia to a gilded age of inequality, whereby if you are not born into wealth, the game of life is rigged against you'. Senator Penny Wong noted 'a critical ingredient for a fairer society is equality of opportunity'.Brendan O'Connor pointed out:
The idea that inequality is the price of growth, that prosperity and equality are alternatives, is … not borne out by a calm examination of the evidence.
Others have noted the intergenerational consequences of inequality. Pat Conroy said:
I have a one-year-old daughter, and I want her to grow up in a society that is fair and equitable, where she has the best chance of advancing, based on her hard effort and her intelligence—not on the size of the bank balance supporting her.
Jim Chalmers succinctly pointed out that 'inequality in one generation breeds inequality in the next'. Tanya Plibersek drew attention to the global ramifications of inequality:
There is the simple idea that we should, where possible, work to eliminate some of the most dire forms of inequality that exist in our world. This speaks to something larger than a mere policy difference. We see a role for government in tackling inequality, whether it be at home or abroad.
Inequality need not just be an issue of the Left. I searched in vain for a single comment of this kind from one of my colleagues on the right of politics. It was not always that way. A century ago, Republican President Theodore Roosevelt told an audience in Kansas:
The absence of effective … restraint upon unfair money-getting has tended to create a small class of enormously wealthy and economically powerful men, whose chief object is to hold and increase their power.
In June 2000 The Australian newspaper published a week-long series on inequality. Its lead editor, Paul Kelly, argued that 'inequality in Australia today is a serious social issue'. A decade and a half on, with inequality higher still, there is little evidence that those on the right take inequality seriously. Prime Minister Abbott's view is:
… in the end, we have to be a productive and competitive society and greater inequality might be inevitable.
His hand-picked business adviser, Maurice Newman, believes that we should not talk about inequality because 'words such as equality and egalitarian have become a refuge for bad policy'. Christopher Pynesaid baldly, 'I do not believe there is an equity problem in Australia.' In response to NATSEM modelling showing that his budget made poor single parents 11 per cent worse off and rich singles better off, Treasurer Joe Hockey described his critics as 'engaging in 1970s class warfare' and 'old-style socialism'. Every time I hear someone on the right criticising talk of inequality as class warfare, I think of Warren Buffett's response. He said:
There's class warfare, all right, but it's my class, the rich class, that's making war, and we're winning.
We need a deeper conversation about inequality. I say to my coalition colleagues: if you would like to engage in a serious evidence-based debate about inequality, just name the time and place. With Australian inequality as high as it has been in three-quarters of a century, we cannot afford to have the nation's conservatives shouting slogans. We need them engaged in a discussion about how much inequality our social fabric can bear.
In the time available to me I want to respond to some of the comments made by the Assistant Treasurer in question time. The Assistant Treasurer has shown a new-found concern with the facts and with economic commentators and parliamentarians knowing and depicting the facts accurately. What surprises me is that he has not called his boss on this. The government says that the economy is headed in the right direction but, when the Reserve Bank made its views about economic growth clear, it was clear that growth was continuing at a below trend pace 'with domestic demand growth overall quite weak'. Unemployment is worse than it was at the peak of the global financial crisis. The total number of hours worked per month has scarcely changed since December 2011, despite three years of population growth.
If the Assistant Treasurer is interested in facts, he might question whether this government really is headed in the right direction. With confidence down, unemployment up, growth down and serious problems across the economy now is the time to ask whether we are headed in the right direction. Yet this is a government that withholds facts or misstates them. In the last budget, Treasury prepared the family impact statement as usual, but it was then withheld from the budget so Australians could not see how the budget affected families. The Charter of Budget Honesty brought down by Peter Costellorequires the government bring down an Intergenerational report every five years, but the Treasurer is currently in breach of the Charter of Budget Honesty. He has broken that law. There are no sanctions contained in the law, but the Treasurer is in breach of the Charter of Budget Honesty.
He gets facts wrong across the board. He says that fuel excise is a 'progressive tax' when the evidence shows that it is regressive. He says that the poorest Australians 'do not have cars', but in fact the majority of people in the bottom decile, as his own data shows, have cars. He says his own electorate of North Sydney has 'one of the highest bulk-billing rates in Australia' when in fact the stats show that it has one of the very lowest in all of Sydney.
He said that typical Australians pay nearly half their income in tax. That is a corker. When the Treasurer says that you are working July, August, September, October, November and December just for the government, he is not talking about the typical Australian. The average income tax rate sits at around 19 per cent, so the Treasurer is out by more than a factor of two. If we include all taxes then Australia's tax-to-GDP ratio is about one-third, not a half. Who pays half of their income in income tax? I did some numbers on this. It turns out it is somebody earning $10 million a year. Their average tax rate ticks over 48 per cent. So, yes, maybe for people with eight-figure incomes the Treasurer is right. I suggest he spend a little less time in boardrooms with harbour views and more time with the 98 per cent of Australians who are not in the top tax bracket.
The Treasurer is at war with the facts and is attempting to hide the facts. Australia now has a situation where universities do not know what fees they are allowed to charge, students enrolled do not know what fees they will be asked to pay, doctors do not know what will happen to their incomes, electricity generators do not know what will happen with the renewable energy target and big business do not know whether they will be hit with a 1½ per cent paid parental leave levy for an unfair Paid Parental Leave scheme the government said they will not proceed with. Confidence in Australia is falling and this government is at the heart of that problem.