Senate debates

Tuesday, 18 March 2014


Minerals Resource Rent Tax Repeal and Other Measures Bill 2013; Second Reading

1:23 pm

Photo of Penny WongPenny Wong (SA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | Hansard source

The Minerals Resource Rent Tax Repeal and Other Measures Bill 2013 says everything that needs to be said about the skewed values of the Abbott government. At the heart of this bill is a fundamental injustice and at the heart of this bill is a fundamental deception of the Australian people. The government present this bill as being only about repealing a tax—and we have just heard a lengthy dissertation from Senator Back in which he continued this. Let us remind ourselves what is in this bill that they do not want to talk about. It includes increased taxes on low- and middle-income families, increased taxes on workers saving for their retirement, increased taxes on small business, cuts to benefits for working families and cuts to investment in regional Australia.

The bill gives with one hand but takes and takes and takes with the other. It really should not be called the minerals resource rent tax repeal bill; it should be called the 'hitting those who can least afford it' bill. It gives a tax cut worth $3.3 billion to the biggest mining companies in the world but hits Australian families and small business owners with $16.3 billion in higher taxes and cuts to benefits. That is the financial arithmetic at the heart of this bill, the financial arithmetic lauded by those opposite—a $3.3 billion handout for mining companies and a $16.3 billion slug for battlers.

This bill shows that, under this Abbott government, there is indeed a new age of entitlement—an age of twisted priorities where there are tax cuts for the few and tax hikes for the many, where millions of Australian families are slugged while big mining companies are given a tax cut. This bill hurts low- and middle-income earners, erodes the superannuation savings of working Australians, makes small businesses pay higher taxes—this is the Liberal Party supporting higher taxes on small business!—and cuts investment in communities and regional Australia. No doubt the doormats in the Nationals will simply ignore that fact. They will simply gloss over it.

This piece of legislation is entitled the Minerals Resource Rent Tax Repeal and Other Measures Bill. As with so much that this government does, the sting is in the tail—the 'other measures' which are included in the bill. I will take the Senate through some of these other measures. They are regressive, they are unfair, they should not be supported and they hit those in our community who can least afford it. These other measures fall into four main categories.

First there are the hits to low- and middle-income families. This bill abolishes the former Labor government's schoolkids bonus. This bonus provides payments to around 1.3 million families—low- and middle-income families whose children are at school. The payments are worth $410 a year per primary school student and $820 a year for high school students. They go to eligible families receiving family tax benefit part A and to schoolchildren receiving youth allowance or payments from the Department of Veterans' Affairs. This bill scraps those payments from January next year, just when parents will need help with the cost of children going back to school. The Senate Economics Legislation Committee heard evidence from the Australian Council of Social Services that more than half a million children in Australia are currently living in poverty. Scrapping the schoolkids bonus hits those children and their families and many more. You do not hear those over on that side talking much about that aspect of the bill, do you? The explanatory memorandum to this bill shows that this cut will hit families to the tune of $4½ billion over the four years from 2013-14 to 2016-17.

The bill also seeks to scrap the Labor government's income support bonus. The income support bonus provides eligible social security recipients with $250 a year for singles and $350 a year for most couples. It helps people on low incomes to meet unexpected living costs, such as medical expenses or the cost of getting a car repaired. For people struggling to make ends meet, these unexpected costs can be financially crippling. Scrapping the income support bonus will hit 1.1 million people on low incomes, mainly Australians receiving Newstart or youth allowance. The hit is $1.1 billion over the four years of the forward estimates from 2013-14 to 2016-17.

As we have heard in recent days—reaffirmed again by the Prime Minister—the cut to the income support bonus includes taking money away from the children of war veterans who have been injured or killed while serving their country. That is one of the most obnoxious aspects of this legislation and one that the Prime Minister of this country defended stoutly in the House of Representatives. 'Yes,' he told us, 'I do want to pay billions of dollars over the next few years to wealthy families for paid parental leave, but I am going to take money away from the children of veterans who have served this country and who have been injured or killed whilst doing so.' What an obnoxious set of priorities from this government! Yet they come in here and proudly declaim about the end of the age of entitlement. I remind those opposite that the cost of the income support bonus to children of war veterans is $260,000 a year. They are cutting that support at the same time as they are proposing a multibillion-dollar paid parental leave scheme.

The next category of this bill's regressive 'other measures' is a set of major attacks on the retirement savings of working Australians. It delays the increase in the superannuation guarantee entitlement. Under reforms introduced by Labor to ensure Australians have a decent retirement income, the superannuation guarantee entitlement is legislated to increase from 9.25 per cent to 9½ per cent in July 2014. Under this bill, that increase will be delayed for two years. That also means that the long-term goal, which is to get the superannuation guarantee entitlement to 12 per cent, will also be delayed by two years. Twelve per cent is widely acknowledged as the level of superannuation contribution that Australians will need in order to ensure they have an adequate retirement income.

The explanatory memorandum discloses a budget impact from delaying the increase to the super guarantee entitlement of just under $1.6 billion. But of course that impact is only the effect of cutting the government's own superannuation contributions, because the negative effect on the Australian workforce will be much larger. This is a measure that will directly cut into the retirement savings of every Australian employee who relies on the superannuation guarantee—and that is millions and millions of Australian workers.

As if that were not bad enough, this bill also abolishes the low-income superannuation contribution. This was a measure which involved a government payment of up to $500 a year to help workers on incomes up to $37,000 to save for their retirement. It is effectively a refund for low-income earners of the 15 per cent superannuation contributions tax. The reason it needed to be introduced is that those who benefit most from the current concession system for superannuation are high-income earners. Those who do not currently benefit from the system of concessions for superannuation are working people, people earning up to $37,000 a year. They do not benefit from the current concession system for superannuation, so this measure redressed that unfairness. By scrapping the contribution, the bill puts a tax hike on the superannuation of millions of Australian workers, Australia's lowest-paid workers.

Do you know who is hit the hardest by this in that group? It is women. Of the 3.6 million workers who benefit from this contribution, 2.1 million are women. We know that women are less likely to finish their working lives with adequate savings for their retirement, and the Abbott government's cuts and the Abbott government's policies do nothing except worsen this. Not only do they say this is okay, they actually do not mind making the current inequality worse.

I think that superannuation does give a stark insight into the values of this government. They boosted superannuation for around 16,000 people with superannuation balances of more than a couple of million dollars; now they want to cut superannuation for millions of workers earning less than $37,000 a year. It is another example of their regressive philosophy: you slug the many and you pay for the largess for the few. It is not just socially regressive; it is economically regressive and short-sighted. It is an incredibly short-sighted, myopic policy.

Hitting the retirement savings of working Australians will only increase pressure on the age pension in coming years. It also reduces the nation's pool of savings available to fund investment and growth in our economy. Industry Super Australia estimates that these two measures—the two I have just described: delaying the increases to the superannuation guarantee and scrapping the low-income super contribution—will reduce national savings by $53 billion by 2021-22. It is quite clear from this legislation that you just cannot trust the government when it comes to superannuation for working people.

The third category of tax hikes and cuts in this bill is targeted at the nation's small business owners. Those opposite claim to be the friends of small business. This bill exposes those claims as fraudulent because in this bill the Abbott government is increasing taxes on small businesses and they do so to pay for a tax cut to mining companies. The former Labor government provided a small business tax cut by increasing the instant asset write-off threshold from $1,000 to $6½ thousand. This boosts small business cash flows by allowing the business to claim an up-front tax deduction for the value of an asset worth up to $6½ thousand in the income year when the asset is first used or installed. This bill reduces that write-off threshold. That means it cuts tax deductions for 2.7 million small business owners across Australia when they choose to invest in new equipment and assets to grow their businesses—a tax slug on small business worth $2.3 billion over four years.

And the hits on small business continue. The bill closes the loss carry-back scheme which provides incentives for investment by small and medium-sized enterprises. Scrapping these provisions will remove tax breaks for up to 110,000 businesses, increasing the Abbott government tax take by just under $1 billion over four years. The bill also winds back accelerated depreciation for motor vehicles—another tax measure which gives cash flow relief to small business. This is a move that slugs small business by another $450 million over four years.

These adverse changes to the taxation of small business have been opposed by COSBOA, the Council of Small Business Organisations of Australia. They are policies which are both regressive and economically wrongheaded. The Abbott government lectures everybody about the importance of investment. Senator Back did it here again today. He suggested that the Labor government was anti-investment. The fact that the largest investment boom the nation had ever seen occurred while we were in government is something he conveniently ignores.

Senator Back interjecting—

Importantly, he is in here, as are all the coalition senators, the government senators, saying, 'We really want to ensure we increase taxes on small business—yay, us! We want to tax small business heavily.' That is what they are doing. They come in here and try to pretend that they are pro small business and pro investment just as they are increasing the tax measures which would give a disincentive to such investment.

Just on that, the tax hikes and the tax burden on small business and particularly on investment are precisely at the wrong time for an economy which is undergoing transition. We are moving, in terms of where our economy is at, from a mining boom in its investment and construction phase to a production phase that is going to have significant consequences for employment and significant challenges for the economy. It is a time when you want to give incentives to other parts of the economy to invest, and all the government is doing by removing these incentives for investment is making that transition more difficult.

I turn now to the final set of cuts that the government is making in this legislation: the scrapping of the Regional Infrastructure Fund and the Regional Development Australia Fund. The Regional Development Australia Fund is supporting the infrastructure needs and economic growth of many regional areas in this nation. It funds capital infrastructure projects which local communities identify as priorities. What we have seen is cuts by this government to that fund which will mean that hundreds of approved projects will not go ahead—devastating news for local communities. The cuts to the RIF, the Regional Infrastructure Fund, will also mean that important projects for local economies will not proceed. So the government is taking $2.7 billion out of regional communities in this legislation and it is being supported in doing so by members of the National Party and regional members of the Liberal Party.

In summary, this bill delivers a $3.3 billion tax break to mining companies; it cuts benefits to families by $5.6 billion over four years; it cuts superannuation entitlements and hikes superannuation taxes by $4.3 billion; it hikes the tax take on small business by $3.7 billion; and it cuts regional investment by $2.7 billion. What we have before the chamber is $16.3 billion in unfair, economically damaging tax hikes and spending cuts. Unsurprisingly, the Labor opposition opposes this bill. We oppose the government's tax hikes and cuts targeting low- and middle-income families, small businesses and regional communities. We also oppose the government's short-sighted stance on the MRRT itself. Australians deserve to share in the benefits of minerals we all own, and that is the purpose of a resource rent tax like the MRRT.

The government, as is its wont, has conducted yet another deceitful scare campaign over the MRRT. It is a deceit which is exposed by the internal contradictions of its position. On the one hand it claims the MRRT is devastating the economy—it is an onerous cost burden, stifling investment, jobs and growth in the mining industry—but in the same breath it says it is a policy failure because it is not collecting significant amounts of revenue. You cannot have it both ways. You cannot have a position that says, 'This is a tax which is crushing the economy, but it's a tax that doesn't do anything.' But that is the specious position that is put forward by those opposite.

This is a profit based tax. When profits are high revenue is up, and when profits are low revenue is down. That is how the tax was designed to work. The MRRT was not put in place for the next six months; it was intended to look to the next generation. Labor recognises and supports the important role played by the resources industry in generating wealth, exports, jobs and incomes for all Australians, and we accept there is scope for improving the MRRT, but we say that the fundamental principle underpinning a minerals resource rent tax remains sound. That principle is this: this country's endowments of mineral resources are owned by all Australians, and all Australians are entitled to a fair share of the wealth generated from those resources. I for one am very happy to defend that principle against the government's alternative argument, because the alternative vision embodied in this bill is to slug millions of families and small businesses to pay for a tax refund to large mining companies.


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