Tuesday, 25 June 2013
Tax Laws Amendment (2012 Measures No. 6) Bill 2012; Second Reading
Another day, another Labor Party tax bill. This is a government that has been very active in the tax space, generally because it was looking at raiding yet another part of the Australian population to plug yet another budget black hole created by Prime Minister Gillard and Treasurer Wayne Swan.
Here we are at five to six on Tuesday night. We are allowed to debate this latest tax bill, which has eight different parts to it and is highly complex, for a total of 35 minutes. I am very disappointed that the captain's pick, the aspiring member for Batman, has left the chamber, because I was rather looking forward to asking him some questions in the committee stage about some of the more intricate parts of the Tax Laws Amendment (2012 Measures No. 6) Bill.
Quite contrary to the usual approach to things, this tax laws amendment bill actually includes a tax cut, as well as a series of other measures that are not so good. Let me list all of the things we are dealing with in this particular bill. It seeks to provide an across-the-board tax exemption from income tax and capital gains tax for native title benefits. It seeks to update the list of deductible gift recipients by adding two entities and extending the listing of another three, which the government does from time to time. It seeks to extend the immediate deductibility of exploration expenditure provided to mining and petroleum explorers and to geothermal energy explorers. This measure is attached to Labor's failed mining tax, the mining tax fiasco being one of the massive failures of the Gillard-Swan government. It also seeks to extend the interim streaming rules for managed investment trusts until the commencement of the new tax system for managed investment trusts. It adds an income test to the rebate for medical expenses, from 1 July 2012. It seeks to clarify the definition of 'limited recourse debt' to ensure it includes arrangements where, in substance or effect, the debtor is not fully at risk in relation to the debt. It seeks to remove the concessional fringe benefits tax treatment for in-house fringe benefits access, by way of salary-packaging arrangements. It also makes a series of other amendments that are described as 'miscellaneous' amendments.
As you can see, it is a whole series of different measures across our tax laws, which will see our tax laws become even more complicated than they were before this bill. It builds on 30 new or increased taxes under the Labor government already. It builds on massive increases in red tape under the Labor government. And it builds on a very bad track record under this government when it comes to regulatory and tax arrangements more generally.
I will now go through the schedules one by one. Schedule 1 concerns the tax treatment of native title benefits. It seeks to classify such benefits uniformly as non-assessable, non-exempt income so that they are not subject to income tax or capital gains tax in the hands of the beneficiary or recipient taxpayer or taxpayers. The changes within the schedule also allow impacted taxpayers to amend their tax returns, in certain circumstances, where the amendment period has expired. This bill was considered in an inquiry of the House Economics Committee. Not surprisingly, you will find that the Indigenous organisations that were told that income from native title benefits would be exempt from income tax and capitals gains tax, moving forward, were—surprise, surprise—supportive of this amendment as they will no longer have to pay tax.
I am yet to find a taxpayer who, in the face of being given a 100 per cent tax exemption, is going to say, 'No, no, no; please make me pay some tax.' So it is not really a surprise here that Indigenous organisations have suggested that this is a good idea. In fact, Indigenous organisations that appeared before the inquiry—guess what?—thought this exemption should go further, that it should be broadened to include making investment income that is generated from these native title payments tax exempt as well. Maybe we should also scrap land tax, and GST payments on anything that is purchased with money that comes from native title! Maybe the government wants to add a whole other list: 'Whatever you do with this money, you don't have to pay any tax on it'! Obviously that would start to get a little bit ludicrous.
There is a proposition—and it is a proposition that was put very strongly by the state government of Western Australia—that tax-exempt status for native title benefits, as a matter of course, was not warranted outside the normal provisions for charitable trusts. Why should there be a 100 per cent tax exemption across the board? What is the justification for it, particularly given the mess the government has created with our budget, and particularly given that this government has spent $220 billion more than it has raised in revenue over the last five budgets?
Mining companies, who were generally supportive of a tax-exempt vehicle for such payments, have pointed out that this schedule should not proceed in its current form as it may encourage substantial up-front payments to individuals at the expense of longer term intergenerational goals. And this is really the point: by providing this tax incentive you are actually providing a very perverse incentive—in terms of the way some of these benefits, which are supposed to be long-term intergenerational benefits for Indigenous Australians—to front-load these sorts of payments. Given that they are going to be entirely tax exempt and given that there is now a lobby that seeks to ensure that investment income generated from these payments is going to be tax exempt, there is going to be a distorting effect that is not going to be beneficial for Indigenous Australians. That is certainly the risk mining companies have identified as part of this inquiry.
Now, there are unintended consequences. As I have said, one of them is that this sort of structure may actually—and is likely to—encourage large payments for individuals, which the coalition is concerned about. We are concerned about these unintended consequences from this change. This is also a view that was strongly put by the Minerals Council of Australia—that compensation paid to individuals versus that paid to groups or their trust funds, in particular, should be treated differently. The concern really is that individuals with an inside running would actually be able to benefit in a counterproductive way from the way the government is structuring the tax arrangements in the Tax Laws Amendment (2012 Measures No. 6) Bill 2012.
On a somewhat related point, these changes in schedule 1 make no distinction between native title compensation paid to individuals and that paid to groups or their trust funds. If paid to an individual or a number of individuals, with possible inside running, the benefits of native title are unlikely to be shared widely or equitably, which does not seem to be in the spirit of native title or the Native Title Act. Where such compensation payments are paid to a large group, possibly into a community trust or fund, then the benefits of native title are likely to be shared more widely and even across generations. This would enhance the justification for allowing these payments to be tax exempt. But having this schedule make such a distinction would add some complexity and might appear slightly paternalistic or be open to such arguments or claims. However, it would be more in the spirit of actually ensuring that native title compensation is provided to Indigenous Australians for the long-term benefit of Indigenous communities across Australia, rather than just for specific individuals who happen to be particularly well organised in the context of a particular claim.
There have of course been recent developments in this area. These concerns that the coalition has put forward have been borne out in a recent Federal Court decision, which was reported in the Australian Financial Review earlier this year, on 27 March 2013. The headline of the article was 'Court raised Aboriginal native title rort concerns'. The article described orders of the Federal Court that money paid to a native title group by gas companies in Queensland should be administered by a registrar. The decision followed government concern about money paid to native title groups not benefiting the Indigenous communities the group supposedly represented. The proceeds from native title were not being handled transparently and not being distributed widely or equitably across the relevant community, with some members not having enough money to pay for bus fares to attend meetings. This is not an isolated case. More specifically, and according to the article:
The Federal Court ordered a Queensland Aboriginal group to hand over millions of dollars paid by companies, including Santos, Origin Energy and QGC, after a judge raised concerns about rorting of the native title system.
The decision by judge Steven Rares in the Mandandanji claim in south-west Queensland is likely to have wide implications for indigenous groups across the country. Similar orders are set to be made as early as today in another Queensland native title claim.
The decision follows concerns from state and federal governments that billions of dollars from resources companies paid to native title groups have failed to benefit indigenous communities. As a result, the federal government is reviewing native title bodies and payments to them.
Justice Rares made the order as a result of a dispute within the Mandandanji about who should be in the native title claim group. He ordered a court registrar manage all money paid to the group by gas companies and any future payments made as a result of their native title claim.
Et cetera, et cetera.
Our argument is about the way the government are proposing to make all income from native title benefits, whether they go to individuals or whether they go to groups indiscriminately, exempt from income tax or capital gains tax. They are actually making this situation, which is already emerging now, worse. They are providing a perverse incentive that makes this situation worse.
This approach also offends the key tax principle of horizontal equity. The coalition is concerned that the operation of schedule 1—the proposed tax treatment of native title payments—offends this key tax principle of horizontal equity, which is something we expressed in our dissenting report to the committee. Making compensatory or any other income exempt from tax is a clear violation of the tax principle of horizontal equity. A dollar earned by one person, regardless of how it is earned, or from what activity, should be given the same tax treatment as if it were earned by another person. That is a pretty fundamental principle that, quite frankly, the Australian government should continue to abide by. It is for these reasons that the coalition will move an amendment to excise this schedule 1 from the bill.
The coalition does not have any particular comments in relation to schedule 2, on deductible gift recipients. We support the changes that are made in that schedule.
Schedule 3 of the bill seeks to extend the immediate deductibility of exploration expenditure provided to mining and petroleum energy explorers. This is a measure which is linked to Labor's failed mining tax. Remember the mining tax? It was supposed to raise $100 billion over the first 10 years. Then Prime Minister Gillard and Treasurer Swan got involved, and it became $38½ billion over the first 10 years. It was supposed to raise $4 billion in year 1. But, of course, we now know that the mining tax has come in 95 per cent below Mr Swan's original forecast—I repeat: 95 per cent below Mr Swan's original forecast. On the basis of this comprehensive incompetence where he comes up with a new tax which comes in 95 per cent below the original forecast, I cannot believe that Mr Swan still has his job. But that is not all. Not only is it a tax which targets an important industry for Australia, not only is it a tax which has come in 95 per cent below the original revenue forecast that Mr Swan put out there, but he has also already spent all the money he thought it would raise and more.
So what we have said, quite responsibly, is that we will not be supporting any of the measures that the government, irresponsibly and recklessly, has attached to the mining tax, because, unlike the Labor Party, we take a responsible approach to fiscal management.
There is much wrong with the mining tax, and way too much to explore in the short time available to us today. One of the big problems with the mining tax is that, even if all of Labor's predictions had come true, even if the blue-sky scenarios painted by Mr Swan had come true and we had raised $4 billion of revenue in year 1, over time the revenue from the mining tax was always going to be highly volatile. It was always going to change with commodity prices. It was always going to change with the exchange rate. It was always going to be downward trending over time, because, at a time when you have high and record commodity prices and you get a supply response which responds to the high commodity prices, prices are always going to come down. This is something that Treasury very clearly predicted in its forecasting. But what did the government do? They took a highly volatile, downward-trending revenue source, and to that volatile, reducing revenue source they linked about a dozen measures which were costing a lot of money. Not only were they going to cost a lot of money but the cost of those measures was going to be fixed and increase over time. It is a recipe for disaster.
No wonder that the Labor Party can never manage money. No wonder that the Labor Party can never live within its means. Only the Labor Party can come up with two multibillion-dollar new taxes which are bad for the economy and which actually leave the budget worse off. This is because the government spend more than they think the taxes will raise in revenue, and the situation gets worse over time, exposing the budget to a worsening structural deficit position. This is just one of the measures that the government quite recklessly and irresponsibly proposed to attach to the mining tax.
To remain consistent with our long-adopted position, we will not be supporting this measure. We will be moving an amendment to excise this particular schedule from this bill.
In relation to schedule 4, the extension of interim streaming provisions for managed investment trusts, this bill seeks to extend the interim streaming rules for managed investment trusts until the commencement of the new tax system for MITs. The interim rules enable the streaming of capital gains and franked dividends to beneficiaries, subject to relevant integrity provisions, until the new MIT regime commences. The commencement of the new MIT regime has been deferred by two years to 1 July 2014 to coincide with the intended commencement of rewritten MIT and other trust provisions in the income tax acts. Originally these streaming rules for MITs were to apply from 1 July 2012, but they were extended by two years to 1 July 2014 because the provisions for the new MIT regime were not ready in time. Surprise, surprise!
This is the most chaotic, the most dysfunctional, the most incompetent government in the history of the Commonwealth. Here we are at schedule 4, and we are about to run out of time to talk about all eight schedules. This is just another Labor fix to a Labor stuff-up, because Labor is not able to get its act together and do things in an orderly, professional, methodical way. Here we are, looking at another two-year extension, because it was not ready with the new MIT regime in time. This will now be an issue that will have to be sorted out after the next election.
This extension of the transition period is a direct consequence of delays in progress in other announced and anticipated changes in the tax laws. It reflects a growing backlog of changes to the tax law which have been announced but not enacted. It is entirely consistent with the chaotic, dysfunctional and incompetent nature of this government's approach to tax reform.
Schedule 5, dealing with the rebate for medical expenses, seeks to apply an income test to the rebate for medical expenses from 1 July 2012. It is a budget measure. It is another example of the government's desperation for more cash. It is a government where spending is out of control, which is why the government is always casting around for more cash. This is another grab for cash from a fiscally reckless and irresponsible government which is not able to control its spending addiction.
Schedule 6 of this bill, dealing with limited recourse debt, makes changes in the Income Tax Assessment Act 1997, following the 2011 decision of the High Court in Commissioner of Taxation v BHP Billiton Ltd. We actually support this particular schedule.
I am running out of time. I just want to say that, in relation to schedule 7, the change to in-house fringe benefits under salary-packaging arrangements is yet another grab for cash. This is a cash-grabbing government which, of course, has completely lost control of our finances, and this legislation needs more scrutiny. (Time expired)
I would like to thank my colleague Senator Cormann for speed in speaking his way through the eight schedules that we are supposed to be debating in the very, very brief time that we have been given for yet another bill to fix a bill. I noted, whilst preparing to speak on the Tax Laws Amendment (2012 Measures No. 6) Bill 2012, that in the House of Representatives the shadow Treasurer, Mr Joe Hockey, said:
Noting that we were given two minutes notice that this bill was being brought on for debate, I rise to speak on the Tax Laws Amendment (2012 Measures No. 6) Bill 2012, which deals with a range of changes to the taxation system …
Whilst we were given two minutes notice for the debate in the House of Representatives, we have been given not much more, 45 minutes, for the debate of the entire bill in the Senate under the gag situation that the Gillard government and the Greens have forced through.
I note also that the government would want to describe this bill as an omnibus bill, with eight schedules dealing with eight different aspects of tax. I would suggest that what we are, in fact, looking at is probably more like a dog's breakfast than an omnibus bill. We have schedules where the introduction of the provisions is being delayed. We have others where we are going back nearly 12 months in claiming moneys from the poor, ever-suffering Australian taxpayers, who are trying to prop up, firstly, the mirage of a deficit that this government has developed and who are now stuck in trying to pay off the debts of this government.
We have schedule 4 of the bill, which seeks to extend the interim streaming rules for managed investment trusts until the commencement of the new tax system for the managed investment trusts. The interim rules enable the streaming of capital gains and franked dividends to beneficiaries subject to relevant integrity provisions until the new MIT regime commences. The commencement of the new MIT regime has been deferred by two years to 1 July 2014 to coincide with the intended commencement of the rewritten MIT and other trust provisions in the income tax laws. Originally these interim streaming rules were supposed to apply from 1 July 2012, but now they have been extended by two years to July 2014 simply because the provisions for the new regime for managed investment trusts and the rewrite of other trust provisions in the income tax laws were not ready in time. We have an extension, a pushing out, of two years from July 2012 to 2014 because the government could not get its act together in time to proceed.
It is a direct consequence of delays in progressing other announced and anticipated changes in the tax law. It reflects that there is a growing backlog of changes to tax law which have been announced but not enacted. Every time the Treasurer is looking for a new way to save money—which really is a code for new taxes, new tax hikes, and new income and assets tests—it is a vain attempt to pay off the debts through more and more legislation. The legislation that may have been thought about and may have been considered is the legislation that got bumped, so that all goes to the back of the queue. As a result we have tax reform measures that provide no budget boost or, worse, come with a cost and are relegated to second-class status and do not come in. This is exactly what has happened with the managed investment trust regime. It got bumped and bumped, so we have the situation where we have a two-year delay in developing this regime. Goodness knows when it will get caught up.
This process has not been helped by the fact that the Assistant Treasurer's portfolio has been held by five different people. Five different people have attempted to be Assistant Treasurer to Mr Swan in just over five years since this government came into office. Of course, we have a similar problem in the small business portfolio. I cannot remember quite how many, but it is certainly at least five. With this swinging door of people, by the time someone gets around to getting their head around the legislation, it is time for them to get moved out and for someone else to get moved in.
We have schedule 4, around the managed investment trusts, which is delayed for two years. The next schedule, schedule 5, applies an income test to the rebate for medical expenses from 1 July 2012. Here we are in June 2013 debating a piece of legislation that came into force, allegedly—or would have if they had gotten it up in time—to apply from 1 July 2012. I guess the government will manage to get this through before the end of the financial year, so that will be all right, won't it? How incredibly bizarre! This is a budget move that was announced in May 2012 and yet, only now, we have the legislation in this parliament. This is yet another of the government's efforts to scrabble around looking for money, shouting their 'class warfare, class warfare' mantra to tackle families and others who quite recently expected out-of-pocket medical expenses to be reimbursed past a certain level, as they have been under an excellent policy developed by the former Howard-Costello government.
The current claim threshold is $2,120 per year for all taxpayers and it is indexed by CPI, with net expenses exceeding the threshold giving rise to a tax offset or rebate worth 20 per cent of the excess above the claim threshold. Of course, the government thought: 'This is a bit too good. We'll have to get into this. We don't want those rich people having any assistance with their health benefit.' So for singles they brought in an adjusted taxable income of $84,000. I guess a single who earns $85,000 is one of Mr Swan's richies who is out to rort the system and destroy the working class. If a single person earns more than $85,000, their claim threshold is $5,000 and they only get 10 per cent back. For married couples, it is $168,000 and, again, the claim threshold is $5,000 and they only get 10 per cent back. Because this government does not understand families and how to run them or how to budget, the income threshold increases only by $1,500 for each dependent child. This is yet another tax grab from an imprudent government that cannot control its spending addiction.
My colleague Senator Cormann earlier outlined that we will be seeking to amend schedules 1 and 3 of this bill because of their offensive nature. It continues to beggar belief that this government wants to ram legislation like this through when we have unintended consequences in the native title area and many other problems with this legislation.
I would like to talk at length to the Tax Laws Amendment (2012 Measures No. 6) Bill 2012, but of course I cannot. I follow on from Senator Boyce talking about people earning $85,000, such as schoolteachers and police officers. These are the wealthy? This is simply amazing. It takes me back to John Laws when he constantly said, 'You don't make the poor rich by making the rich poor.' That is something that the Labor government and the Greens have never learnt. They rob the people who are successful—the ones who invest, the ones who run large businesses that started off as small businesses and grew.
I would like to speak at length to this because of the tax treatment of native title benefits. Schedule 1 deals with changes to the tax treatment of native title benefits. It seeks to clarify such benefits uniformly as non-assessable, non-exempt income so that they are not subject to income tax or capital gains tax in the hands of the beneficiary or recipient taxpayer or taxpayers.
There are many things I would like to say here. I would like to go on about the failed minerals resource rent tax that my colleague Senator Cormann mentioned. I was on a committee with him. Amazingly, the government said, 'We're going to get $3 billion back to $2 billion,' and then they spent the money before they got it, did not get it and then wondered why their books were in such a shambles. I do not know how many hundreds of times over the last 18 months we have been promised by Prime Minister Gillard and Treasurer Swan that there would be a surplus this year. What a farce. There is now a turnaround of about $21 billion. The Australian Labor Party do not know what the word 'surplus' means. They do not understand money management.
I would like to talk on many things, but the guillotine will drop at 6.30 and I have to leave some room for my colleague Senator McKenzie, who desperately wants to say some words. All I can say is that the guillotine is well oiled, you are going to put it to use, and you do not care about the debate or the amendments in this place. It is contempt of the Senate. Fifty-odd pieces of legislation will be guillotined this week—nearly twice as many in a week as the Howard government guillotined over three years when they actually had control of the Senate. I cannot say any more; I have to sit down. To the Labor Party and the Greens: thank you for the guillotine and stopping debate on these very important issues!
I appreciate the minister's desire to get to his feet and close the debate, but I do have the right to say a few words about the Tax Laws Amendment (2012 Measures No. 6) Bill 2012. Schedule 1, tax treatment of native title benefits, and schedule 3, deductibility of geothermal energy exploration expenditure, are the two areas that the coalition is interested in making amendments to, to excise them from the plethora of other schedules which are very comprehensive and grab-bag, as they have been described previously in the debate on this bill before us. Essentially, in the very brief amount of time I have before me—and I am conscious that many other senators on the floor of the chamber are seeking the call—I can say that it is a case study of bad government.
Before us today we have policy redesign on the run, we have time lines pushed out, and we have measures budgeted for a year ago before us today—all to fix a 'revenue problem', as we have heard it described so many times before. What the Australian people know and what we on this side of the chamber know is: there ain't no revenue problem; it is an absolute addiction to spending, which Senator Boyce mentioned earlier. That occurs when you have designed a mining rent tax with the people who are designed to pay the rent tax. The Treasurer has been forced to admit that his personally handcrafted mining tax rates only a fraction of the revenue promised in the budget, and I am wondering whether he is being quite truthful in saying he designed it. He might want to retract that. I think he had a lot of help from the people that were actually looking to pay the tax. It is no surprise it is not raising any money. This government has introduced or increased 27 taxes since coming to office just five years ago—
The question now is that amendments (1) and (2) on sheet 7365 revised, circulated by the opposition, be agreed to:
(1) Clause 2, page 2 (table item 2), omit "Schedules 1 to 7", substitute "Schedule 2".
(2) Clause 2, page 2 (after table item 2), insert: