Tax Laws Amendment (Norfolk Island CGT Exemption) Bill 2016
2 March 2016
In rising to speak on the Tax Laws Amendment (Norfolk Island CGT Exemption) Bill 2016, I move:
That all the words after 'That' be omitted with a view to substituting the following words:
'while not declining to give the bill a second reading, the House calls on the Government to make Australia’s capital gains tax regime fairer and more sustainable.'
Labor supports the measures in this bill, in the same spirit with which we supported the initial suite of legislative changes in the Norfolk Island Legislation Amendment Bill 2015, passed by this parliament with bipartisan support last May.
This bill goes to the particular issue of capital gains taxation, providing the same protection against retrospectivity as for assets held by Norfolk Islanders, as was put in place when the capital gains tax was introduced in Australia in 1985. This is, indeed, an exciting time to be talking about capital gains tax. It is interesting, however, to note that the government has not shown the same passion and interest in economic reform for the mainland of Australia that it has shown for Norfolk Island. The Prime Minister, this week, ruled out changes to the capital gains tax discount, choosing the sort of scare campaign that he promised he would not engage in over a sensible economic conversation with the Australian people.
The government's own financial systems inquiry describes the combination of negative gearing and capital gains tax discount as a major tax distortion. We saw, in his last speech to the parliament, the former Treasurer, Joe Hockey, saying that negative gearing should be restricted to new-built homes. We have had former Liberal Premier of Victoria Jeff Kennett saying that Labor's reforms in this space were sensible policy and urging his own side of politics not to engage in the sort of fearmongering that Australians were promised had been removed when Tony Abbott was deposed from the prime ministership.
These unfair and unsustainable tax concessions are among the fastest-growing tax concessions in the budget, and they are contributing to house prices massively outstripping wages growth. On the latest figures, wage growth is running at around two per cent—an 18-year low. It has been nearly two decades since wages grew this slowly, and yet, in recent years, we have house prices growing at around 10 per cent a year, so you can understand why young Australians are frustrated when they see house prices growing five times as fast as pay packets. Young couples in my electorate come to me and say, 'The deposit always seems to be slipping out of our grasp. We just can't get a foothold in the housing market.'
Over the last generation, the chances of young Australians owning their own home has halved. The home ownership rate for 25- to 34-year-olds was around six in 10 in the early 1980s. Today, it is around three in 10. But you do not hear the Prime Minister and the Treasurer talking about how tough it is for young Australians to buy their first home; instead, you hear them busy defending the rights of those who are tax deducting their 10th home. They will have you believe that it is teachers, nurses, police and cleaners who are the principal beneficiaries of negative gearing but, in fact, the average tax benefits to surgeons and anaesthetists are multiples of what they are for teachers and cleaners. It might be true that there are more teachers than anaesthetists in Australia. If you add up anything that teachers have—
Mr Simpkins: This is a free-ranging debate, isn't it!
Dr LEIGH: It is the value of a second reading amendment, remember! If you total anything going to teachers, it probably outweighs what goes to the few thousand surgeons in Australia. But these are benefits which go, disproportionately, to the top of the distribution—70 per cent of capital gains tax subsidies go to the top 10 per cent of income earners. Our plan improves the budget bottom line by around $32 billion over the decade. It gives investors certainty by guaranteeing that existing investors will not be affected and provides the scope for us to begin to restore some of the savage cuts to schools and hospitals that have occurred under this government.
By stating that investments made before 1 July 2017 will be treated under the existing rules, we ensure that there is no retrospectivity. That is what this bill does, in the case of capital gains tax arrangements for Norfolk Island residents, and it is, in general, a good tax principle.
The DEPUTY SPEAKER ( Mr Broadbent ): Member for Fraser, can I just explain to the House and to the people listening to your presentation that this bill is an act to amend the law relating to taxation and for related purposes, so the member for Fraser is quite within his rights to range fairly widely on taxation matters.
Mr Simpkins: I was not doing a point of order. I was just saying that it was wide.
Dr LEIGH: Thank you for your wise guidance, Deputy Speaker. Labor's policy ensures that, for investments other than in new housing stock, the capital gains tax discount is reduced. Deductions will still apply for investment streams so that investment deductions can be made against investment income.
We are still failing to get from this government the sorts of assurances that they are providing to the people of Norfolk Island. They are saying to the people of Norfolk Island that capital gains tax will not be applied retrospectively, but they are failing to say to the Australian people that their mooted changes on negative gearing will not be applied retrospectively. Having dealt properly with the issue of capital gains tax for Norfolk Island residents, it is important that other Australians be given that assurance from this government—that any changes to negative gearing will not be retrospective. We waited in question time, yesterday, for such an assurance from the Prime Minister and it never came. The Prime Minister has been unwilling to rule out retrospective changes to negative gearing.
Bringing Norfolk Islanders into the mainland tax system is an important reform and a progressive reform at that. I acknowledge the work of the bipartisan committee which recommended this change. But it is important that, as Norfolk Islanders are brought into Medicare, the Medicare system remains strong. It is important that, as public servants work on the island in order to expand access to Medicare, we have a government that respects the hard work of public servants.
Norfolk Islanders will have access to the age pension as a result of the package that passed this parliament last year and it is vital that that the pension is protected against cuts from this ideological government. It is absolutely vital that Norfolk Islanders are protected against the cuts to the social safety net that are still on the table—that $80 billion ripped from health and education now looks to be increased by further cuts. My colleague the member for Jagajaga has been a fierce defender of Australia's social safety net, not just for mainlanders but now for Norfolk Islanders as well. Norfolk Island is, for the purpose of service provision, a part of New South Wales so that means that cuts to schools funding in New South Wales will affect Norfolk Island as well. Needs based school funding is vital for Australians and vital for Norfolk Islanders.
The changes in this bill are welcome changes. They are absolutely sensible ones. But we on this side of the House cannot help noting the irony of proposing capital gains tax changes that ensure that Norfolk Islanders are not given retrospective treatment while failing to give other Australians the assurance that they will not suffer retrospective changes under this government.