Andrew Leigh (Fraser, Australian Labor Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

I move:

That all the words after "That" be omitted with a view to substituting the following words:

"While not declining the Bill a second reading, the House notes that the Government's economic policies are having an adverse effect on jobs and growth and condemns the Government for failure to deliver assistance to drought affected farmers in a timely manner"

Ross Vasta (Bonner, Liberal Party) Share this | Link to this | Hansard source

Is the amendment seconded?

David Feeney (Batman, Australian Labor Party, Shadow Minister for Justice) Share this | Link to this | Hansard source

I second the amendment.

Andrew Leigh (Fraser, Australian Labor Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

Labor will not be opposing the measures in this bill, which go to farm management deposit accounts and the repayment of overpaid GST. But it is vital that we see this bill in the context of the broader picture of taxation reform, or lack thereof, and last night's budget. I want to do this by commencing with a few stories.

Patrick Cerato is a young man who lives in a supported residential home after suffering the effects of a brain tumour discovered at the age of 21. His parents have said:

There is no guarantee there's going to be a disability pension when our guys grow up. It was a constant worry about how we were going to finance their future.

Paul Midson is a 48-year-old builder's labourer. He has worked for 20 years as a builder's labourer, at least 60 hours a week and often longer. He has developed crook knees and shoulders from the manual labour and he has had numerous operations on his knees. Paul says:

I reckon I will be lucky to last [in work] to 60.

Imagine how Paul feels being told that he might not get the pension until age 70.

Alan Blevin, a 47-year-old crane operator, says:

My left knee is already giving in because I'm bending down, loading gear from trucks and guiding cranes all day. But I can't afford to just stop. I have to keep paying the rent and bills.

Asked about working till age 70, he says:

It's unthinkable … There is no chance I will be able to work till I am 70.

Dr Soo Koan, who has a three-year-old daughter and a 19-month-old daughter, says, 'I think that everyone should be entitled to health care, and not have to worry about choosing between a doctor's visit and dinner for the kids.' Asked about a GP co-payment, Dr Koan says, 'I would stop and think about it'—that is, going to a doctor—'a lot more.'

I should mention that when I was at university, GP co-payments were something I thought were worth considering. But I have changed my view on this since university—in fact, I would be surprised if there is a member of the House who has not changed their mind on a matter since university—and I have done so by looking at the evidence: by speaking to GPs, to people with chronic disease and to bodies like the Australian Medical Association and the Royal Australian College of General Practitioners, who have today come out opposing GP co-payments because of the concern that we will end up with more people in emergency rooms, and add to total health spending rather than reduce it.

I mentioned yesterday the broad context in which this budget is being delivered: that of a rise in inequality unprecedented in Australia for over 75 years. We have seen an increase in the top one per cent share, which has doubled; and the top 0.1 per cent share, which has tripled. CEOs' salaries have gone up twice as fast as average wages, and three times as fast as the minimum wage—and yet the CEO-dominated Commission of Audit thinks the wages problem in Australia is with the minimum wage. That, after a generation when the wages of the top 10 per cent have grown three times as fast as the wages of the bottom 10 per cent; a situation where the combined wealth of the richest three people in Australia is now more than that of the bottom one million people. Deputy Speaker, this is a budget which hits the unemployed—which takes away supports from unemployed people, including those with disabilities. It takes away support from students—

Scott Buchholz (Wright, Liberal Party) Share this | Link to this | Hansard source

I rise on a point of order on relevance. I was under the understanding that the tax laws amendment bill was to speak of farm management deposits, and an amendment to the GST. If I could just bring the speaker back to relevance to the bill that is currently before the House. There are provisions in the House, under appropriations, for him to elaborate.

Ross Vasta (Bonner, Liberal Party) Share this | Link to this | Hansard source

I thank the member for Wright. The member for Fraser has the call.

Andrew Leigh (Fraser, Australian Labor Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

Thank you, Deputy Speaker. I would hate to say that the member for Wright was wrong! But it does appear that on the issue of second reading amendments, he and I have some talking to do.

The budget will hit people in developing countries—some of the world's poorest people, and it will benefit mining billionaires—some of the world's richest people. When this government came to office, it doubled the deficit. The four-year deficit between PEFO and MYEFO literally doubled—it increased by $68 billion. And so you would expect that, having doubled the deficit, the Treasurer might at least have come in here last night and halved it—taken it back to where it was when he took over, as judged by the Charter of Budget Honesty. But he did not do that. Last night's budget failed to halve the four-year deficit, and left it higher than it was when the coalition took over. If last night's budget had been honest, it would have shown the return-to-surplus trajectory under PEFO and compared that under this budget. That would have shown that—according to the secretaries of Treasury and Finance—we were going to be back in surplus in 2016-17 when the government took over, but now that is projected for 2017-18.

This is a budget where Australians are not saying, 'Which promise has been broken?' but, ;Which promise has been kept?' What is it that this Prime Minister thinks that he needs to keep faith with the Australian people on? 'No changes to pensions'—that pledge from 6 September last year does not seem to have been kept. The pledge by the Prime Minister that 'we are about reducing taxes, not increasing taxes,' from a doorstop on 20 November 2012—well, that has not been kept. What about, 'no cuts to health,' from an interview with the Prime Minister on 6 September last year? No, that promise has not been kept. 'No cuts to education,' from an interview with the Prime Minister on 6 September last year—no, that promise clearly has not been kept. And we can see the results from the budget papers last night, which show a distinct flattening of the education spending line outside the four-year period: the end of the Gonski reforms and the end of the National Plan for School Improvement that was put in place. The pledge, 'no cuts to the ABC or SBS'—well, that has been broken. That was a pledge again made by the Prime Minister on 6 September 2013. Again the pledge made by the Prime Minister on 4 May 2011, 'A dumb way to cut spending would be to threaten family benefits or to means test them further,' has been broken. The pledge by the Minister for Education on 26 August 2012, 'The coalition has no plans to increase university fees,' has been broken. That promise has been broken.

We see a litany of cuts across the board: the destruction of cultural programs—the Creative Australia programs; cuts to legal aid, which will see many vulnerable Australians unable to access legal assistance; and cuts to foreign aid, which will see some of the most vulnerable people in the world unable to access sanitation programs and vaccinations. Australian foreign aid saves lives and it will save fewer lives as a result of the decision made in this budget.

The fact is that when this government took over it inherited an economy where unemployment was among the lowest in the developed world. That was thanks to the stimulus that Labor put in place during the global financial crisis that saved 200,000 jobs and tens of thousands of small businesses. No-one at that stage thought we should have adhered to a two per cent spending cap. No country in the world did that. Of course, we did not either, but following the global financial crisis we put on a two per cent spending cap and, better than stick to it, we kept spending growth to 1.35 per cent. So when the coalition talk about reckless spending they are talking about the fiscal stimulus that they in part voted for and, let us face it, when we had the debate over the global financial crisis response those opposite were in many cases saying that what we needed was permanent tax cuts rather than temporary stimulus. Just imagine what state the books would be in if we had listened to that advice.

I spoke earlier about the decisions made by this government in the MYEFO statement, which included scrapping the $700 million measure on multinational profit shifting, a measure that would have seen a crackdown on companies using offshore banking units and debt shifting as a way of avoiding taxation. Australians are pleased to have the investment and the opportunities that come from multinationals in Australia. All we ask is that those multinationals pay a fair share of tax, but the government scrapped that $700 million measure and is instead pursuing cuts to some of the most vulnerable Australians. Yet last night there were still further decisions that will benefit those multinationals: not proceeding with changes to multiple entry consolidated groups, costing $140 million; deferral of offshore banking unit changes, costing the budget $180 million; deferral of the start date of legislative elements of the measure to improve tax compliance through third-party reporting and data matching, costing the budget $113 million—

Andrew Robb (Goldstein, Liberal Party, Minister for Trade and Investment) Share this | Link to this | Hansard source

Mr Deputy Speaker, I have a point of order again on relevance. The speaker is not even addressing his own second reading amendment, which is about jobs and growth. It is a litany of gripes about a budget that is trying to fix the mess left by those on the other side. Mr Deputy Speaker, I think you should pull the speaker into line and bring him back to the subject matter.

Ross Vasta (Bonner, Liberal Party) Share this | Link to this | Hansard source

I thank the honourable minister. The honourable member for Fraser will be relevant.

Andrew Leigh (Fraser, Australian Labor Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

The total effect of these decisions on last night's budget, an effect that will resonate through the economy and impact on jobs and growth, is to lose $430 million over the forward estimates. That is a cost that has to be paid by some of the most vulnerable. The impact on jobs and growth is going to be manifest because when you ask multinational firms to pay their fair share of tax that does not have an adverse effect on Australia's economic growth, but when you cut back on supports for pensioners and when you cut the pension that does because those who are at the bottom of the income distribution spend everything they have got and that goes back into boosting demand and boosting jobs. If you cut back on supports, then you are going to be hurting the most vulnerable Australians.

The Prime Minister said before the election: 'We will be a no surprises, no excuses government.' He said:

We are about reducing taxes, not increasing taxes. We are about getting rid of taxes, not imposing new taxes.

Yet the budget last night did precisely the opposite: it is cutting back on supports for vulnerable Australians today and cutting back on investment for tomorrow. We on this side of the House are all for infrastructure investments. We are proud that we took Australia from 20th in the OECD to first in the OECD for infrastructure investment.

But good infrastructure investment requires cost-benefit analyses and requires investment in urban rail, if it passed a cost-benefit analysis, not simply investing in the favourite boondoggle project of the National Party. We are going back to the days of the Roads to Recovery rorts and the like with the government clearly picking favourite projects, rather than allowing expert cost-benefit analyses to guide it.

We are seeing a lack of investment in another critical form of infrastructure, the National Broadband Network. Fibre-to-the home is fundamental to productivity of businesses and individuals, and to jobs and growth in the future. If we cut back on that form of infrastructure, future Australians will be the poorer for it.

Future Australians will be the poorer too for the budget's inability to tackle climate change. The Treasurer talked a lot last night about the importance of intergenerational equity and thinking about the future. Yet the budget is going to be a risk to the future growth prospects of Australians, because it utterly fails to deal with the single challenge of climate change—trashing an effective, efficient, cheap means of dealing with carbon pollution, an emissions trading scheme, in favour instead of command and control direct action, which no serious economist believes can do the job.

The cost to jobs and growth of not dealing with climate change down the track will be significantly higher as a result of this government's decision to not address climate change. As the developed country with the highest carbon emissions per head, we cannot simply put our heads in the sand on this one.

This really is a budget for the cigar-chomping plutocrats, rather than for the battlers. If you are a mining billionaire, you have done well out of the budget. If you are a millionaire family expecting a child, congratulations to you: your new age of entitlement is just beginning.

If you are a person like 42-year-old Genise, who has tunnel vision and learning problems, including dyslexia, and receives a part-disability support pension and rent assistance, this is a budget that is not doing much for you. Genise works sorting mail and used to work in a childcare job. She is a great Australian. She won three gold medals for swimming in the 2007 Special Olympics, but cuts to pensions will affect Genise directly.

Meanwhile somebody with a name close to Genise, Gina, will do very well out of this budget, thanks to the cut to the mining tax which is projected, according to the Treasurer, to raise $1.8 billion in just 2016-17 alone—a larger amount than the special levy on high-income earners is expected to raise in that year.

I am deeply concerned that, after a generation of rising inequality where the billionaires have done much better than the battlers, this budget will only serve to widen the gap. Australians need serious tax reform, not the piecemeal reforms being put forward by this government. They expect fair tax reform in which everyone will play their part, rather than slugging the poorest and the most vulnerable in order to not even manage to get the budget into the situation it was in when this government took over.

Christian Porter (Pearce, Liberal Party) Share this | Link to this | Hansard source

I rise to speak on the Tax Laws Amendment (2014 Measures No. 1) Bill 2014 and the member for Fraser has put an amendment to the motion before the House. The bill does two things: in schedule 1, there are three components that improve the operation of the Farm Management Deposits Scheme; and in schedule 2, there are provisions which will allow taxpayers to self-assess entitlements for refunds for overpaid GST either by virtue of mischaracterisation of the nature of the transaction or indeed a miscalculation of the transaction itself.

In this contribution, I want to focus on the first part of the bill before the House and those components that improve the Farm Management Deposits Scheme. We have had from the member for Fraser an attempt to draw into the debate on this bill a whole range of other budgetary matters; I might allow myself the indulgence of addressing some of those very briefly after I have made a comment about the Farm Management Deposits Scheme component of the present bill. Because the Farm Management Deposits Scheme is a very important scheme to my electorate of Pearce, and notwithstanding the member for Fraser's attempts to draw in other matters to this debate, the purpose of this bill warrants some time and some analysis and some statement about the importance of this bill because of the importance of the Farm Management Deposits Scheme.

I represent the electorate of Pearce, which is a 14,000 square kilometre electorate that has not only outer urban areas but also a very large part of Western Australia's Central Wheatbelt. It has a large farming community in broadacre agriculture as well as other agricultural pursuits, and the Farm Management Deposits Scheme has been a very, very important scheme for the people of my electorate. The improvements to that scheme that are contained within this bill are also going to be, likewise, very, very important to the people of my electorate. It has been said in some of the briefing papers that exist on this bill that the Farm Management Deposits Scheme is important because, and it is described in this way, 'an income from agricultural production is inherently subject to fluctuations due to variability of supply and demand', which is a fairly nice bureaucratic way of saying that farming is dependent on two things: firstly, the price of commodities, as is evidenced from month to month and day to day on the Chicago exchange, and, secondly, the weather. Farming depends on the weather, which in itself is quite undependable. An economist might describe the reason for the Farm Management Deposits Scheme as the fact that income from farming is lumpy. It surges and it hits troughs in various years depending on a range of things, but predominantly prices and weather as that affects your ability to actually produce the goods that you are selling at any given price.

There is probably no better illustration of those phenomena that create the lumpy cycle for income for farmers than exist in my electorate of Pearce. The WA Central Wheatbelt is a very significant part of agriculture in Western Australia, and indeed in Australia; it is some of the most productive arable land that exists in the country. In WA the grain industry is a major contributor to the agrifoods sector and to the entire Australian economy. The grains industry in WA is the largest agricultural sector in WA. Wheat is the dominant crop throughout the south-west. There are about 4,700 grain farms—primarily family owned and operated businesses—that produce on average 12 million tonnes of grain per year. Farm sizes range from 1,000 to 15,000 hectares. The value of WA grain exports in 2012-13 was over $3.1 billion with 70 per cent of that coming from wheat crops. So the value of grain exports from WA is $3.1 billion. It is a very, very large industry.

What is most intriguing about that industry is that, even in times where there have been droughts and adverse weather conditions, the ability of the industry to grow its productivity, even in short-term periods that have been inclusive of periods of drought and adverse weather events, has been very strong. Some of the data that suggests that is the case comes from the Australian Bureau of Statistics. Looking at Western Australia, and particularly the areas in my electorate of Pearce, from 2000-01 to 2004-05 there were two severe droughts in those five years. Notwithstanding that, the value of agricultural production in WA increased from $4,387 million to $5,149 million, which was a rise of 17.4 per cent and $762 million. There was considerable fluctuation in agricultural production from year to year over the period, but there was, as I noted, a 17.4 per cent overall increase. And that is in a five-year period where there were two droughts. What it does go to show is that even when there are very significant adverse weather events in a relatively short period of time, those weather events seem not to, in good arable land in Australia, affect the overall productivity of the industry. That is a phenomenon that is repeated throughout Australia and throughout Australian agriculture.

There is a very good Productivity Commission research paper called Trends in Australian agriculture. It notes that agriculture's share of the Australian economy has declined significantly from the turn of the century when it was around the 30 per cent mark. It is far lower than that now. But that is not a measure of the failure of the industry; it is a measure of its success. The dramatic increase in the productivity of the agricultural sector has facilitated the release of resources to other sectors of the economy. Like many modern economies, as the Australian economy has become more sophisticated over 100 years, the proportion of people engaged in agriculture has decreased but there has been a rapid increase in agricultural productivity. So, in that sense, the declining share of agriculture is a reflection of success rather than any systemic weakness. There has been a very strong inverse relationship between per capita income, GDP and employment share as accounted for by agriculture. That having been said, Australia's agricultural sector's share of output remains one of the highest in the OECD.

The decline in agricultural output is always a relative phenomenon. Real output in agriculture has increased around 2½ times over the four decades to 2003-04. Over the four decades to 2003, we have had a 2½-fold increase in agricultural production in Australia. That in itself is remarkable when you consider the very rapid decline in agriculture's share of the economy and the number of people engaged in agriculture. But what is absolutely remarkable about that 2½-fold increase in agricultural production is that it has occurred at a time when there have been dramatic shifts in the Australian climate for arable land, particularly in the south and the south-west.

Using the example again of my seat of Pearce, there has been a phenomenon in the central wheat belt which we dealt with at great length at the state government level where since the 1960s rainfall has decreased by 20 per cent. The south-west of Western Australia is prime arable land. This rainfall decrease since the 1960s is well documented. Yet, as some of these statistics have demonstrated, we have had radical increases in the productivity of that land while it has been subject to a 20 per cent decrease in rainfall. That has to do with many things—agricultural techniques, farming management, technology, hard infrastructure technology and technology applied to fertilisers, and the types of crops we are using.

Throughout this incredibly productive region of the central wheat belt, a region that has been productive since the earliest times of the colony, we have had very radical decreases in rainfall since the 1960s accompanied by radical increases in productivity. Inside that, there have been these short-term periods of five to seven years where there have been some very good years, some not so good years and sometimes some quite poor years. When that is smoothed out there has been quite significant growth in agriculture.

All that means that there is a particularly lumpy system of revenue for farmers. The Farm Management Deposits Scheme must be one of the better examples of successful policy—and it has bipartisan support in the House. To illustrate its success, you can look at the figures for the Farm Management Deposits Scheme's holdings at 30 June each year from 1999 to 2012. For my own state, in 1999 there were $32 million in such schemes and $463 million in 2012. For Australia, in 1999 there were $279 million in these interest-bearing accounts and $3,532 million in 2012.

The reason the schemes are so helpful for farmers is that the economic income derived from farming is of a lumpy nature. In addition, whilst the prices of commodities might change and weather variations will affect the nature of crop productivity year to year, the time that is available for a farmer to expend their labour on other income-gaining activities—non-farm income-gaining activities—remains relatively constant from year to year. If you are a farmer that has the ability to go out and derive an income of $80,000, $60,000 or $30,000 in any given year, the time that you have available to do that does not vary with commodity prices on the Chicago futures exchange or with whether or not it has been a good or bad year for agriculture. That is because often the same sort of effort is required in a drought for a minimal crop as is required in a very good year for a very good crop.

This piece of legislation, which had a large amount of bipartisan support—indeed its first drafting was under the previous government—is incredibly important for farmers. Being able to move money in and out of these accounts and being able to consolidate them without any taxation penalty is a massive benefit to farmers. Increasing the threshold from $65,000 to $100,000 is of incredible benefit to farmers. The take-up figures that I just cited from the National Rural Advisory Council report show that this scheme has become an integral part of the productivity of farming and making farming successful. The ability of farmers to go out and earn an income from other sources and effectively delay the tax payable on that income in bad years when they need to draw on that income means that we have been able to smooth out revenue sources for farmers in a very elegant, clever program that is now being substantially improved by virtue of these provisions—provisions which appear to have bipartisan support and which the farmers in my electorate will be very pleased about.

Matters which did not generate as much bipartisan support were mentioned by the member for Fraser. I just wanted to touch on three of those very briefly before closing out this contribution. Whenever it is the case that you have a budget, the first thing that most people do to try to suggest either the worthwhile nature of the provisions in your budget or their calamitous nature is to look at individual examples. The member for Fraser raised three or four at the beginning of his contribution and I wanted to just look very briefly at three of those—because if these are the best examples that you can provide to discredit a budget, they need some analysis.

The first was the notion of the assessment criteria changes that the government is proposing to the disability support pension. The member for Fraser mentioned a constituent who had a brain tumour and left us with the inference that that person is in jeopardy from the government's changes. That is patently ridiculous. The difficulty that we all understand with the DSP is this: at present, there are well in excess of 800,000 Australians on the disability support pension—that is, one in 15 Australians of relevant working age is on the DSP. The difficulty is not the people who have brain tumours and genuine difficulties. The difficulties are at the margins. Having some reasonable system of greater scrutiny and assessment for those margins is absolutely and fundamentally appropriate. In fact, I think it is beneath someone of the intellectual calibre of the member for Fraser to suggest that people with brain tumours are in jeopardy from this system.

The second example was a gentleman with crook knees who said that he would be lucky to manage to 60. What view did he take about Labor's change in the pension age to 67? He is still seven years short of that. What this goes to show is not that the problem cannot or should not be tackled—it must be—but that we have to change the attitude of employers to people in their 60s and leading up to 70. That is one of the reasons we have the $10,000 payment.

The third example—I believe her name was Sue—said that the co-payment might make her stop and think about her next visit to the doctor. Well, of course! When you have clear evidence that there is a level of overservicing, that is what you must do. The member for Fraser said that in his university years he agreed with a co-payment. There was another measure in this budget that he agreed with, but we will hear about that later. (Time expired)

Joel Fitzgibbon (Hunter, Australian Labor Party, Shadow Minister for Agriculture) Share this | Link to this | Hansard source

It is a pleasure to follow the member for Pearce, who largely made a very thoughtful contribution on agriculture. It is obviously an area in which he has a great degree of knowledge and a strong interest, as you would expect from someone representing a Western Australian seat. It is true that, despite drought challenges, WA did enjoy a bumper wheat harvest. That has done wonderful things for the majority of farmers, at least in his state.

I have often said that if I can do one thing in this portfolio, it will be to nurture and encourage a bipartisan approach to agriculture. Agriculture is a sector that is all-important to the Australian economy and our export opportunities. That is something that the Minister for Trade and Investment will agree with. Really, in ideological terms, there should not be all that much between the major political parties in this place as we strive together, I hope, to make the most of the opportunities presented to us by global food demand and, in particular, the food demand out of Asia.

There will be limits to my bipartisan spirit, because the member the Pearce then wandered more widely onto the budget more generally, as did the member for Fraser, I understand. While I will return to specific agricultural matters in the budget—which in many ways was a business-as-usual budget for agriculture, but I will qualify that later—the broader budget will affect farming communities in the same way as it will affect communities right around this country. I think it was my 19th budget in this place and I must say it was the harshest budget I have seen. It was a double whammy for Australian families and elderly Australians because it hit them both on the income side of the equation and on the cost-of-living side of the equation. In other words, it hit the purchasing power of pensions and family budgets, while at the same time driving up the cost of living through things like the increase in the fuel tax and the affordability of health care.

Those things tend to fall disproportionately on people living in rural and regional communities. For example, fuel taxes are embedded in the transport of goods, including food. In regional and rural Australia, we have greater challenges in attracting GPs, although we have made some improvements in that area in recent years. The co-payment for GPs will hit disproportionately in rural Australia, where people are already challenged in securing bulk-billing services because of the shortage of doctors.

This is a bad budget for rural and regional Australia. In terms of agriculture, as I said, it is largely a business-as-usual case for agriculture, although the four per cent reduction in departmental staff will have impacts in policy development, in service delivery and, most importantly, in areas like quarantine which safeguard our clean, green, safe image as a food exporter to the rest of the world. There will be consequences from those cuts—make no mistake about that. On the other side of the ledger, I note the government has fulfilled its commitment to increase R&D expenditure by $100 million, although I think few in the agriculture sector expected that to be over a four-year period at $25 million a year. It is not smoothly spread over the four years; and it is a very modest increase, particularly when it is aggregated with those cuts made to other areas of agricultural R&D, including cuts to RIDC—one of the more important research and development corporations in the sector. It was a bit of a double whammy.

I should say very quickly that this bill broadly does two things: it tidies up some GST arrangements—I will let the member for Fraser articulate those matters—and it amends the farm management deposit scheme, as the member for Pearce said. The member for Pearce is right in saying that these changes were initiated by the former Labor government—good and welcome charges. For the uninitiated, the farm deposit scheme is probably the most effective drought preparation initiative we have seen in this parliament. It allows farmers to put money away in good times to spend in bad times, particularly those driven by the effects of dry weather conditions. We use the tax system to give them incentives to do so: for example, they do not pay tax on income until that income is drawn; it is put away in good years, when the tax rate tends to be higher, and withdrawn in tougher years, when the tax rate for the farmer tends to be lower. These are tidying up of those arrangements, allowing farmers to consolidate accounts, for example. These are good things, and I am very pleased to see we have a bipartisan approach to the measures before the House today.

This leads us to drought, one of the biggest challenges facing the farming sector. I am disappointed that the government pins so much of its promise to agriculture on its coming agricultural white paper. There is nothing on climate change or, indeed, natural resources sustainability in the terms of reference for the white paper. I do not say that to make a political point; I just say that to express disappointment, because I do not understand how you can ignore the greatest challenge facing agriculture and hope to have a strong and credible policy document at the end of that process. Going back to the budget last night, there are further cuts to Landcare, which is a retrograde step that will not help us meet the challenges of soil fertility, land degradation, salinity, et cetera. Drought is a huge challenge for us and FMDs are an important part of that approach to drought.

What do we do about drought more generally? We saw the Prime Minister and the agricultural minister announce a new drought policy in February in great fanfare and some of it was around income support for farmers in need. Of course, we support that with its more relaxed assets test. There are other initiatives, but the centrepiece was really the extension of Labor's farm financing package to drought affected farmers. The government said it would spend $280 million over a four-year period, yet here we are three months on and not one cent of that assistance has been delivered to struggling farm families, I understand. That is disappointment to the opposition and it is why we felt compelled to move the second reading amendment today. I would prefer not to use the word 'condemn', although that it is the usual form of words used in this place for such an amendment. We are very concerned that three months after the Prime Minister's well-covered drought tour and his significant press conference—where he announced that he had learnt so much from the tour and, as a result, would allocate all that money—we have not seen that money flow to farmers, which says something about the government's capacity to administer this scheme.

Perhaps of greater importance, we are on track to having a bipartisan view of drought policy in this parliament. It is obvious that we all agree on the need for some form of social safety net—or a welfare payment, for want of a more appropriate word—to farmers in real need; a welfare payment that is temporary, is appropriately means tested and has a component of restructuring incentives for people to broaden their skills in drought. We agree on all of that. At the moment we are focused on a bipartisan view of farm financing—a Labor initiative—which I expect everyone would see as a temporary measure to deal with the temporary crisis at hand. What do we do beyond that? Is there more we should do as a parliament for farmers facing drought? Let us make no mistake about it: these dry events will, sadly, become more regular and more protracted. I think we do need to do more because our farmers are subjected to Mother Nature more than any of the sector in the economy. It is not possible for farmers in every instance to sufficiently ready themselves for drought. When you get one-in-50 or one-in-100 events, it is just not possible to do so. These are the people who give us our food security, put our food on the table and earn very significant export income. I think they are a special case and there are more things that we need to do. The challenge is avoiding the mistakes of past policies, which in effect—to put it not too subtly—rewarded farmers who were not doing enough on the drought preparation front at the expense of those who were doing significant work on that front. We have to be careful not to have perverse incentives in the public policy approach. I think it is fair to say that things like interest rate subsidies of yesteryear contributed some of those perverse outcomes. On a bipartisan basis we need to think harder about where we go beyond what we are doing for drought.

We are spending a lot less money now than we were before under the exceptional circumstances arrangements, so I think there is scope for both of the major political parties and, indeed, the crossbenchers in this place to think about reinvesting some of that money at some point in more long-term and well-considered drought responses. I said in something I recently wrote for one of the Fairfax blogs that I am a little surprised that the market has not responded to drought as it has to so many other areas where there are going to be challenges in not just the local economy but the global economy. I have suggested that, in the medium term to long term, farmland prices are only going to head in one direction, and that is north, given the coming supply-and-demand equation for food in the global market. So I think there is some scope for more innovative and broader thinking about drought policy.

I have written about the idea of some form of reverse mortgage where investors would take a stake in struggling farms, with an opportunity to take some of the upside of increasing farm values while providing some much needed cash relief for farmers during difficult times. Are these sort of schemes without risk? No, they are not. No economic investment is. But I do believe there is an opportunity for the private sector to do things in the drought policy space that governments have not been able to do over many years, with initiatives that do not pass some of the tests I spoke about earlier and certainly do not pass the Commonwealth budget test in terms of the great expense some of those have cost the budget bottom line. These would not be investments in individual farms, necessarily. These would be investments in bundled securities and an aggregate of farms in the farm sector. Given the supply-and-demand situation of the global market, I think there are very significant opportunities for the private sector and markets generally.

Why hasn't this happened? I think there has been a lack of attention to and understanding of the farm sector in the boardrooms and the equity houses of those around the world who invest. But I think if we start having this conversation we just might alert people to some of the opportunities in the agricultural sector. We have seen these things play out with Warrnambool Cheese & Butter and the very heavily contested play for a stake in that company. We are now seeing it slowly but surely happen in other parts of the agricultural sector. I am hopeful that in the not-too-distant future the equities market and others will start taking an interest and will look at our agricultural sector and farmers in trouble and say to themselves, 'We can have a win-win here. We can take an interest in these farms. We can provide much needed cash flows through some of these difficult periods. We can even help with consolidation and producing economies of scale for farming enterprises and make those farming enterprises more productive and more profitable, both for the farmer and for us as external investors taking a stake in that farm enterprise.'

These might be radical ideas for some people, but I believe they are worth investigating. I encourage the private sector to start taking an interest. While they might be radical for some, they cannot be any less effective than our very real and genuine attempts to address the drought in the past. It has been expensive in the past. Our attempts have contained those perverse incentives that I have talked about. You would have to say, given that here we are in 2014 talking about drought in the same way as we were at the time of Federation, the government has not been all that successful in dealing with this question. So we should be partnering with the private sector to see whether it cannot do better than governments have been prepared to do or able to do. As I said in the article I wrote for Fairfax, there might even be a quid in it for them too.

I welcome these changes. As I said, they were initiated by the former Labor government. I am very pleased that the change to the farm management deposits scheme is now being supported by the government of the day. I think the outcome will be a very significant win for the farm sector.

Scott Buchholz (Wright, Liberal Party) Share this | Link to this | Hansard source

I welcome the opportunity to follow the speaker from the opposition, the shadow ag minister—thanks, Joel—who is probably one of the few members on the other side of the House who understands the complexities of this bill that is before the House today. The Tax Laws Amendment (2014 Measures No. 1) Bill 2014 quite simply has two parts to it. There is schedule 1, which speaks to the farm management deposits scheme which the previous speaker went some way towards addressing. He spoke about the bipartisan spirit that exists in the House around farm management deposits schemes. For that, I thank the member. It was a far cry from the speaker before him, who had absolutely no content in his speech that spoke to farm management deposits schemes. The second schedule in the bill basically speaks to overpaid GST by mischaracterisation. I will speak to both parts of the bill in due course.

Firstly, my electorate's major revenue source is predominantly agriculture, horticulture and cattle. Farm management deposits schemes are a tool used across a number of sectors in my electorate. It gives me great pleasure to stand and support the tax law amendments here today in the House because they go a long way towards assisting people in a real fashion. This is a sector that has continually said that it does not want handouts; it just wants a level playing field. This is a sector in regional and rural Australia that unfathomably has some of the toughest competitive restraints in the way it has to do business.

First, they have to battle weather conditions. If you could forecast when the rain was going to come or when labour forces were going to arrive at your place to pick vegetables and know that you were going to be unencumbered by weather conditions, you would be an extremely rich man. But unfortunately we as humans do not have an exact science for predicting the weather.

In addition, there is the uncertainty that they have with their market prices. Once they have gone through the arduous process of planting a crop there is no guarantee that they will receive their yield. They take that yield—whether it is a crop, a litre of milk or a beast—to the market, but they are not able to know at the time of the planting of that crop or the starting of that entrepreneurial chain what the final dollar amount will be. What happens in this sector is that they are subjected to price taking. Those prices are determined not by local markets but by global commodities. The prices are driven by supply and demand. In addition to that, on occasion growers in my area then compete against other nations who have some of the most heavily subsidised agricultural industries in the world. When you take that into consideration, our farmers in Australia, without a doubt, are a most resilient mob, fighting weather, fighting commodity prices and competing in a global market against industries that are heavily subsidised. We should bow down every day and thank our agricultural sector in regional Australia for the contribution that they make, for finding the energy every day to get out of bed and putting food on the table for our nation so that we can grow and become a stronger nation. The unsung heroes are the farmers of this nation, and I am proud that in my electorate I have multiple farming sectors.

I will put into context the value of the Farm Management Deposits Scheme across the sector. In totality, we are looking at $3.2 billion currently being tied up in farm management deposit schemes. Before I take you there, I may as well for the Hansard record give you a bit of an overview of what a farm management deposit is. It is about volatility in revenue. Most people in this place get paid weekly, fortnightly or monthly, but on the farm the only source of revenue for your enterprise in some circumstances may only arrive once a year or sometimes in extreme circumstances twice every three years—it could be a cattle enterprise or a horticulture enterprise. With a cereal crop, where you are relying on a summer crop, you may only get paid once a year. If you are lucky enough and live in an area where you have suitable rainfall, you may be able to put in a summer and a winter crop, giving you two revenue streams. If you are a smaller grower in agriculture, with more intense farming, you may get four cheques a year. You need to fathom this: every week you are having to eat, every week you are still having to service your standard household expenditure, plus put fuel in your tractors. So, to put it into perspective, the expense side of your operation still has to be serviced, but your revenue side can be sparse from one cheque every two years to a cheque every quarter. In the case of the dairy sector, it is a little more fluent with the cash flow; they can get cheques on a monthly basis.

There is $3.2 billion currently tied up in the Farm Management Deposits Scheme. In the horticultural sector, in my state, we have got just over $109 million. In the grains and cereals sector, we have about $66 million tied up in the Farm Management Deposit Scheme. The largest area where the money is consolidated is in the beef sector. There are about 2,000 participants, or 2,000 management schemes, totalling just over $200 million. In the dairy sector, it is around the $21 million mark. Predominantly, these guys, with bipartisan support—support from both sides of the House—take the opportunity to utilise farm management deposit schemes, because not every year is going to be identical to the one that preceded it; not every year is identical. If it were, it would be considered easy and everyone would be doing it. The fact is that it is not an easy sector to compete in for the reasons that I outlined earlier. What these guys do is when they have the opportunity in a good time they take some of that revenue and, without paying a tax increment on it, the government provides this instrument whereby they can place that revenue into a farm management deposit scheme. There is no tax liability. In the case of a grain operator whose crop may have failed but who is still incurring all the expenses—the diesel cost and the fertiliser cost for putting in the crop—those expenses still need to be met. So the premise of a farm management deposit scheme is that in the good year you put the money away and, in the times when things are tough, you are then able to go into that specialised bank account, pull that money back out, actualise the tax on it for that year—not the year in which it was earned—as revenue, bring it into your system and pay your expenses. It is not a new phenomenon.

What this amendment seeks to do is to increase the cap from $65,000 through to $100,000 for all farm income in terms of access to a farm management deposit scheme. Most farmers are trying to offset risk management. They may have a warehouse or a shop that they lease in town. They might own a farm out of town or own several pieces of real estate in a nearby town. These are referred to as off-farm investments. If the rent on those reaches in excess of $65,000, it would not allow a farming operation, a primary industry operation, to take advantage of a farm management deposit scheme. What the amendment seeks to do is to increase that revenue cap from $65,000 to $100,000. That is not clear. That is not net gain; that is gross. If the revenue on your warehouse is $65,000 and you still have to make payments to the bank for $65,000, it is neutral. Where you get your rent and you make your payments to the bank on it, that precludes you from getting access to the farm management scheme. It is not the net gain; it is the gross gain. I need to make that clear. This amendment allows us to go from $65,000 to $100,000.

The bill also seeks to allow you to consolidate farm management deposits up to a total of $400,000. For example, if you had a good year and put $100,000 away—and you may have been able to lock that in at five per cent—and the following year you had another good year and put away another $100,000—and locked that up in a term deposit and you may have got six on that—previously they would have all been treated separately. What this bill seeks to do now is allow consolidation of that and work on an amortised value of up to $400,000.

The second schedule speaks about overpayments of GST by mischaracterisation. Predominantly, in a nutshell, if I as a business have purchased something and paid the GST at the point of purchase and if, inadvertently, the person I have made the payment to is unable to claim the GST, this provision does allow me to claim that back from the tax department because that money is not subject to GST. It is a housekeeping measure. Again, I suspect that this has bipartisan support. In fact, I am more than confident that it has because I believe that the Treasurer and the Assistant Treasurer announced in a joint media release that the government would proceed with the previous announcement measures with some amendments. I think the Labor Party did some earlier work on this in the last parliament, to stand corrected. I do not suspect for a moment that we will have any problem pushing these very logical and measured amendments through the House.

The previous speaker, the member for Hunter, who I regard as well grounded in the area of agriculture, spoke about ways that he could assist the sector, particularly the agriculture sector. He spoke about reverse mortgages and how he genuinely thought that would assist the sector. If he and the opposition truly wanted to help this sector, if they truly wanted to understand the hardship that this sector wake up and face every day of every year and if they truly wanted to assist then they should have thought a lot longer and a lot harder about their actions and performance. When they were in government they woke up one morning and had an absolute brain-snap and decided to shut down the entire live cattle export system and decided to shut down the entire protein source to—

Andrew Leigh (Fraser, Australian Labor Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

Weren't you talking to me about relevance?

Scott Buchholz (Wright, Liberal Party) Share this | Link to this | Hansard source

Oh, you stop it! I take the interjection from the first speaker who had absolutely nothing to say about the bill and when I—

Andrew Leigh (Fraser, Australian Labor Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

I moved a second reading amendment.

Scott Buchholz (Wright, Liberal Party) Share this | Link to this | Hansard source

Nevertheless, if you wanted to help this sector the first thing you would not have done was shut down the live cattle export. Ramifications will be felt through this sector as a result of Labor's mismanagement relevant to this bill and to farm management deposits. Why is it important? You should always have farm management deposits on hand because one day when Labor get back in, rest assured, they will single-handedly go about destroying the agricultural sector in regional and remote Australia, not by choice but by default. This opposition are so disconnected from the agricultural sector that when their speaker got up and spoke he was unable to link more than two sentences together that had any relevance to the two amendments in these schedules presented to the House. By contrast, the coalition, through this budget, is the only government that will restore confidence not only to the budget but also to this sector and hopefully start rebuilding Australia after the calamity that we have been left with.

Dan Tehan (Wannon, Liberal Party) Share this | Link to this | Hansard source

It is an absolute delight to stand here this morning after the budget was delivered last night: a budget which is in the national interest, a budget which provides hope and a future for our children, a budget which did not burden them with debt, a budget which provided an honest path back to surplus. We are here this morning looking at the Tax Laws Amendment (2014 Measures No. 1) Bill 2014 with a great sense of pride and understanding of the job we now face as a government of making sure we implement and deliver on the budget, which was so excellency delivered by the Treasurer last night.

This is an important bill. Obviously it comes in two parts. The first schedule refers to the farm management deposits scheme, which has become the most effective drought-proofing financial measure that farmers have today. The second schedule allows self-assessment in GST overpayment refunds. This was introduced by the previous government. It allows individuals to self-assess their tax refunds due on overpayments of GST. It will have an expected cost of $4 million over the forward estimates, but it is something that lapsed at the last election and something that this government is happy to move ahead, with the support of the opposition.

When it comes to the farm management deposits scheme, there is a little bit more detail on what is being proposed. I must say that what is being proposed is a simplification and also takes away a lot of the unnecessary regulation which farmers are burdened with under the current system. The idea of the farm management deposits scheme is that it teaches self-reliance, and it teaches self-reliance to our farming sector. This is something which comes naturally to farmers because they are used to being self-reliant. In enhancing this scheme in this chamber today, we are doing farmers credit and we are also doing the nation credit in recognising what farmers contribute to this nation and what they will continue to contribute to this nation.

I stand here proudly in this parliament as the representative of the electorate of Wannon. Wannon contributes significantly to our agricultural sector. We produce more wool than any other area in the country; we produce more lamb and sheep meat; we produce more dairy products than any other electorate in the country. I stand here proudly on behalf of my electorate in saying that the agricultural sector contributes to this nation, and my electorate does so as well. It is why we need to help our farmers. They have to run businesses, but, because these businesses can be hit by events outside of their control, farmers need the tools to be able to deal with those events. Through the Farm Management Deposits scheme, we are giving them the tools to deal with such events.

I saw firsthand the difficulties that farmers can have when they are hit by unseasonal conditions. In the summer before last, the dairy sector in my electorate was hit by unseasonably dry conditions. That had untold ramifications for those dairy farmers because, particularly when it came to purchasing grain to feed their dairy cattle, it was costing them up to $10,000, $20,000 or, in some cases, $30,000 a month to buy the grain to keep those cattle fed so that they could keep producing milk and keep an income flowing. The Farm Management Deposits scheme enables farmers to prepare for those types of occurrences.

We also have to be mindful—and I must say, once again, both sides have done this in a bipartisan way—that there are also those circumstances, such as if we get 10-year droughts or even droughts of longer periods, when Farm Management Deposits schemes will not be enough. This is where we have stepped in with the Farm Finance package. It is something which is being rolled out, especially in Queensland and New South Wales at the moment, to help in those situations where farmers are not just dealing with one, two or three years of bad seasons but looking at prolonged periods. The Farm Finance package has shown that there is an understanding and a realisation in this place that there are circumstances that our farmers will face when, even if they are prepared through having put savings away for those non-rainy days, drought and severe drought will hit and there will be a need for us to say, 'We understand the contribution you make to the nation and the income that you provide us. Therefore, we, as government, need to be able to step in and give you the assistance as necessary.'

What do the measures being introduced today mean? The first measure is an increased non-primary production threshold. The first enhancement will increase the non-primary production income threshold from $65,000 to $100,000. Therefore, the off-farm component—that income test—increases from $65,000 to $100,000. This is a sensible recognition of how more and more farmers, or their partners, are earning off-farm income. It is a sensible recognition of how important that off-farm income is to the business and how the farming business is planned. Therefore, it is a very sensible reflection of where current farming practice is at.

The second measure is around the consolidation of accounts. This will enable farmers with multiple FMD accounts to consolidate them without affecting their ability to access them when needed. Under the current arrangement, it is common for farmers to hold FMDs in several accounts with the same or different institutions. Obviously, being sensible managers of their money, they have gone looking around for the best deals that they can get from their banks, and that does not necessarily mean that they go to the one bank and have the one account. What we are doing now is making it easier for those farmers so that they will not face tax implications if they withdraw any funds from an account within the following 12 months. This is another very practical and sensible approach to doing this.

We are also taking measures around the unclaimed moneys exemption. We all remember that, because they got the budget into such a precarious state, the previous government had to go about trying to find measures to put revenue back into government coffers. In one of the ways that they came up with to do this, where money lay idle in accounts—it used to be that, if it was there for seven years, the Commonwealth would become the owner of that money—the previous government reduced this. They reduced it for no sensible policy reason. It was just, basically, a pure revenue grab. This obviously has implications for the Farm Management Deposits scheme, because farmers, in many instances, are putting this money into those accounts and leaving it there. The new measures, basically, exempt the Farm Management Deposits scheme from the unclaimed moneys exemption, which is another practical and sensible response to some of the measures that had to be put in place by the previous government to fix the catastrophe which was their management of money. Another aspect of this program is that it delivers on the commitment made by the Australian government through the Intergovernmental Agreement on National Drought Program Reform. This commitment will ensure farmers have access to a range of measures to build their resilience and provide effective risk management tools. This fits with the agreement between the Commonwealth and the states on how we should prepare for drought and how we can help farmers deal with those severe one in 10 or sometimes one in 20 events.

This is good sensible law-making. That is probably the best way to describe it. It is terrific to see that both sides can come together and put together proposals like this which will be of benefit to our agricultural sector. It will reduce red tape and it will make it easier for farmers to plan for their future. That is what the philosophy of this government is all about. We saw it last night in the budget that the Treasurer delivered. The budget was all about enabling families to plan for their futures and it was all about making sure that future generations would not be burdened by us trying to maintain our current living standards. Today's enhancing of tools for our farmers is all about that as well. We are saying to our farmers today that we want to make it easier for you and we want to give you the tools to plan for your future and plan for those non-rainy days, in a way that secures your future and the future of your children.

The amendments dealing with self-assessment of GST overpayment refund claims and farm management deposits obviously have the support of this side of the House. When it comes to the agricultural sector in particular I look forward to working with members both on this side and on the other side to make sure that we can secure the future of agriculture in this nation for the next 20 to 25 years. The agricultural sector is vital to our economy. It has been recognised by this government as a key pillar for our future economic growth. It is a sector which has the potential to continue to help grow employment in this nation. We continue to see value adding to our primary production, and more jobs will result if this can be sustained over the long term. The sector is also an incredible source of export income to this nation and, as everyone knows, export income means real jobs. This government will continue to pursue measures that will enhance our agricultural sector. We have seen it through free trade agreements that have been delivered and we will see it through the ones that will be delivered. They will provide future opportunities for us to grow the sector. In summary, I commend both of these tax law amendments to the House.

Greg Hunt (Flinders, Liberal Party, Minister for the Environment) Share this | Link to this | Hansard source

I would like to thank all of those members who have contributed to this debate from both sides of the House. Schedule 1 of the Tax Laws Amendment (2014 Measures No. 1) Bill contains improvements to the Farm Management Deposit Scheme which will enhance the scheme's effectiveness as a financial risk management tool for farmers. As set out by the member for Wannon, it is a sensible and practical way forward. The three amendments to the Income Tax Assessment Act 1997 and the Banking Act 1959 that comprise this measure are: firstly, allowing consolidation of multiple farm management deposits; secondly, raising the non-primary production income threshold; and, thirdly, removing farm management deposits from the unclaimed moneys rule. These will allow the Farm Management Deposits Scheme to better achieve its primary objective of assisting farmers to run a sustainable business with a steady flow of income.

Schedule 2 amends the GST law to allow taxpayers to determine whether they are entitled to a refund by reference to objective conditions rather than having to rely on the commissioner to exercise a discretion to refund an excess amount of GST. Schedule 2 to the bill also amends the GST law to allow taxpayers to determine their entitlement to a refund of an overpayment of GST irrespective of whether the overpayment arises as a result of a mischaracterisation or miscalculation of the GST payable. Schedule 2 also amends the Taxation Administration Act 1953 to restore taxpayers' review rights under existing refund provisions, following the recent decision of the Administrative Appeals Tribunal. The provisions are intended to prevent taxpayers from receiving a windfall gain of overpaid GST and encouraging suppliers to refund their customers for overpaid GST. The government does not support the pious amendment moved by the opposition. I would also, on behalf of the parliament, thank all of those officials, both within Parliament House and within the department, for helping to progress, consult on and deliver these sensible changes. I commend this bill to the House.

Rob Mitchell (McEwen, Australian Labor Party) Share this | Link to this | Hansard source

The original question was that this bill be now read a second time. To this the honourable member for Fraser has moved as an amendment that all words after ‘That’ be omitted with a view to substituting other words. The immediate question is that the amendment be agreed to.

Question negatived.

Original question agreed to.

Bill read a second time.

Message from the Governor-General recommending appropriation announced.