Monday, 2 March 2015
Tax and Superannuation Laws Amendment (2014 Measures No. 5) Bill 2014; Second Reading
I rise to speak on the Tax and Superannuation Laws Amendment (2014 Measures No. 5) Bill 2014. There are some schedules here which the Labor Party support and some schedules here which we will oppose in the other place.
Honourable senators interjecting—
Excuse me, Senator Conroy, just one moment. All those senators having conversations who do not need to be in the chamber—I think they know who they are, Senator Conroy—could you please leave the chamber. Thank you.
Firstly, in schedule 1, this bill seeks to abolish the mature-age tax offset. Labor will support this measure. This was a process started by Labor in government. It is a sensible saving. The government have their own measures that they have put in place to replace this measure, and we will not stand in the way of the passage of this particular schedule. It represents a considerable saving, and Labor is always prepared to support sensible savings put forward by the government. Of course, unfortunately, 'sensible' and 'savings' are two words that are not often associated with this government. But this is an exception, and we will support this measure.
To be clear: Labor is in favour of measures that support older Australians who want to work, but wage subsidies are not enough. Labor knows that a comprehensive mature-age employment agenda needs a comprehensive suite of measures. That is why we established the seniors work bonus, increased the superannuation guarantee, established an Age Discrimination Commissioner, reformed the age pension to make it strong and sustainable, and set up the Advisory Panel on Positive Ageing. By contrast, this government has slowed the strengthening of the super system, has scrapped seniors concessions and wants to cut pensions.
The Abbott government announced in the 2014-15 budget that it was abolishing the mature-age-worker tax offset. The previous Labor government had commenced the phase-out of MAWTO in the 2012-13 budget, limiting it to taxpayers born before 1 July 1957. That measure had an estimated $255 million gain to revenue over the then forward estimates period. At the time, the then Labor government stated: 'The MAWTO is a high-cost method of facilitating mature-age workforce participation. The government will be investing in better-targeted workforce participation programs.' We believe that encouraging mature-age workers to participate in the workforce can be done more effectively through direct payments or incentives.
The government claims to have replaced the MAWTO with the Restart program, which provides a payment of up to $10,000, which will be available to employers who hire a mature-age job seeker aged 50 years or over who has been receiving income support for at least six months. Labor will continue to fight for older Australians—for their rights to work and participate in society, for their pensions and for appropriate aged-care services.
Labor will oppose schedule 2. This is the government's proposed abolition of the seafarer tax offset. The seafarer tax offset commenced from 1 July 2012. This measure was part of the then Labor government's shipping policy reform Stronger Shipping for a Stronger Economy, announced in the 2010 election, and was designed to stimulate employment opportunities for Australian seafarers to gain maritime skills. The offset provides a refundable tax offset for qualifying companies employing eligible seafarers. Currently, companies are eligible to claim the seafarer tax offset—a refundable tax offset linked to the concept of withholding payments paid to Australian seafarers for overseas voyages—in certain circumstances. The overseas voyage must be made by a certified vessel and the seafarer must be employed by the company claiming the offset for at least 91 days in the income year.
It is possible the government does not understand the impact of its policy here or, alternatively, perhaps it has thought it through and it does understand the negative impact of its policy. Either way it has got it wrong. The shipping trade is important for Australia. One-tenth of the world's sea trade goes to or from Australia, and Australia has the fourth-largest shipping task in the world. It stands to reason as we are a maritime trading nation. It is in our national and security interests to revitalise Australian shipping.
As I indicated, the previous Labor government did considerable work in this regard. The former Deputy Prime Minister and Minister for Infrastructure and Transport, Mr Albanese, has very passionate views about this and was the leader of reform when Labor was in government. One of the reforms introduced by Labor was this tax offset back in 2012, following lengthy industry consultation. The object of the offset is to stimulate opportunities for Australian seafarers to be employed or engaged on overseas voyages and to acquire maritime skills.
There is a straightforward principle here. Under our tax system, if you are an Australian citizen and you are working elsewhere in the world, you are covered by the tax system of that country. We are not like America, under whose system an American working anywhere in the world is regarded as being subject to the revenue task of the United States government. In Australia there is a different approach. But we say that, if you are working on a ship which is not in Australian waters, that should apply as well. This was an offset introduced by the previous government, designed by the Treasury—not by others—to achieve that policy aim. The policy is supported by the Australian Shipowners Association. They said:
The Seafarers Tax Offset was a key element of the 2012 reforms which helped to reduce the operating costs of Australian vessels, increased the competitiveness of Australian shipping and provided significant opportunity for employment of Australians in international trades … the impact—
of the abolition—
is severe with regard to future opportunity.
I will be interested to hear if those opposite acknowledge this point. The Australian Shipowners Association have called them out. Labor will defend the seafarer tax offset and we have circulated an amendment to be debated in the committee stage that will remove schedule 2 from this bill because we do not agree with the government's position on this matter. This is not for a large saving; we are not talking about billions of dollars. It is a quite modest measure but it is an important one. I ask the government to reflect on this measure, maybe to consider the views of the Australian Shipowners Association, and to acknowledge that it has got it wrong. If it acknowledges it has got it wrong, then it will have our bipartisan support on its back-down.
Labor will also not be supporting the schedule which goes to the changes to research and development. In relation to research and development, we have seen a disappointing pattern from the government. It is a government which is prejudiced against science, research and development, and important measures to encourage innovation in the Australian economy. Almost everybody knows that innovation, science and technology are important key drivers for future economic growth. I say 'almost everybody' because it seems that everybody except the government knows that. Remember, this was a government that belatedly added a minister for science to its line-up in December last year. Seriously! Tony Abbott, science, December last year—15 months after they took office. It is a tribute to the pressure that many organisations and, might I say, the Australian Labor Party, principally through my colleague Senator Carr, that they finally acknowledged science was important enough for it to be included as a ministerial title. I know Senator Carr is looking forward to making a contribution in the debate on this bill a little later on. This could be one of your finer moments, Senator Carr—through you, Mr Acting Deputy President Whish Wilson. I am sure the whole chamber will be looking forward to hearing from Senator Carr on this—and do not think we do not know who wrote the speech!
But, of course, real support for science and innovation goes beyond having a title on a letterhead. Unfortunately, the government has been severely lacking in this area. It is a government which cut research and development spending and cut science research spending quite considerably in its heroic 2014 budget. We have seen the CSIRO cut by $115 million. We have seen the Defence Science and Technology Organisation cut. We have seen the Australian Nuclear Science and Technology Organisation, the Australian Institute of Marine Science, and Geoscience Australia suffering cuts of $51.4 million. One that I had some association with previously, NeCTAR, has been gutted. We have seen co-operative research centres, which have been so important over many years for the Australian innovation task, have their funding slashed. We have seen important government programs when it comes to commercialisation and innovation abolished and replaced by a new program, which has roughly half the amount of funding that was previously in place and has a vague and ill-defined mandate. In many ways, the government has just been playing catch-up and trying to cover the fact that it is making cuts in this important area.
Why does Labor say this is so important? It is because these are the drivers of future economic growth. We have condemned the government for its budget because it is unfair. We have condemned the government for its budget because it represents prejudice against working Australians. We have condemned the government for its budget because it represents fundamental breaches of promise and a web of deceit that the Liberal and National parties engaged in at the last federal election. We also condemn this budget because it represents an attack on future sources of economic growth.
This is in great contrast with Labor. Time and again Labor has demonstrated that it is the party that looks to the future, with a vision for tomorrow's Australia. By contrast, the current government looks only in the rear-view mirror—not in an Australian-built car of course—because it has only a backward-looking policy. It represents an approach to policy which does not recognise the importance of innovation in Australia.
The fact is that high-growth technology companies currently generate less than 0.2 per cent of our GDP. PricewaterhouseCoopers have estimated that, with the right policy environment, this sector could contribute four per cent of our GDP, generating more than half a million jobs by as early as 2033. In order to achieve this Australia needs a government which embraces innovation, commercialisation, research and development, start-ups and the spirit of entrepreneurialism. The government are happy to talk about these things, but their policies, as in so many areas, go in exactly the opposite direction. We have a Prime Minister and a Treasurer who think that if they say something it makes it so. But it is actually their policies that make it so—and their policies do not reflect the rhetoric.
A measure before us here is a $620 million cut to the research and development tax concession. I will say a number of things about this. First, the support given to research and development through the incentive in the tax system has been very important in Australia's research and development efforts. What the government is doing here is relinking the concession to the corporate tax rate. The previous Labor government explicitly delinked the corporate tax rate and the research and development incentive. We did that to provide certainty so that Australian companies investing in risky research and development ventures knew the sort of support they would receive from the government when they were undertaking the difficult decision about how much to invest. Some of these ventures will not pay off for the company but, if they do pay off for the company, most of them will have spillover effects for the entire economy. That was the approach taken by the previous government.
This government has taken the approach of relinking the corporate tax rate with research and development incentives. I accept that there is a legitimate debate to be had about that and that there could be good arguments put on both sides, but the approach taken by the Labor Party in office that we continue to defend, protect and promote is that it is important that firms have certainty when it comes to investing in research and development.
The government is so incompetent that, even if you accept its arguments, it has actually been quite tricky with the Australian business community. Firstly, this bill seeks to reduce the research and development tax incentive because the government wants to relink it with the corporate tax. The government is proposing to cut the corporate tax rate to 28.5 per cent from 1 July next year, but this change applies not from July next year but from before then. If there is to be any justification for the government to implement this measure, it should apply from the same date as the corporate tax rate which the government intends to introduce comes into effect. I urge the Senate to support Labor's amendment to remove schedule 3 from this bill.
We will support schedule 4, which relates to the introduction of new deductible gift recipients. In the tradition of both Labor and Liberal governments, this is the normal process. As the bill explains, a deductible gift recipient is an entity to which gifts may be claimed as tax deductions by taxpayers. Subdivision 30-B of the Income Tax Assessment Act 1997 sets out general categories of purposes or activities within which funds, authorities or entities are able to receive tax deductible gifts. Such entities are known as 'deductible gift recipients' or DGRs. Whether or not an entity falls within one of the general categories is determined upon application by the Commissioner of Taxation. The deductibility of any gift is subject to any conditions or limitations set out in subsection 30-15(1) of subdivision 30-A of the Income Tax Assessment Act 1997.
Where a certain fund, authority or entity is not eligible to receive deductible gifts because its purposes or activities do not fall into one on the general categories of deductible gift recipients, it has been the practice of governments to propose to the parliament that a certain fund, authority or entity be listed by name in the tax laws. There are no coherent guidelines, criteria or principles guiding when the government will propose to the parliament that an entity should be specifically listed. Once listed, entities are known as 'specifically listed deductible gift recipients'. Subdivision 30-G gives an index to all the specially listed deductible gift recipients in subdivision 30-B.
There are three organisations that schedule 4 will insert into the Income Tax Assessment Act 1997 to enable them to receive gifts that are tax deductible for the donor. These are: Australian Schools Plus, an organisation which supports the education of students by collecting donations from the public and distributing these funds among disadvantaged schools; the East African Fund, which promotes the education of children in rural communities in East Africa and runs the School of St Jude located in the Arusha region of Tanzania; and the Minderoo Foundation Trust, which was founded by Andrew and Nicola Forrest and supports programs to combat Indigenous disadvantage, both within Australia and across the world. These are worthy organisations and, accordingly, schedule 4 will attract our support. Labor look forward to the support of the chamber for our amendments and, if schedules 2 and 3 are removed, we look forward to supporting the bill.
The Tax and Superannuation Laws Amendment (2014 Measures No. 5) Bill 2014, as Senator Conroy has so eloquently pointed out, has some measures in it that Labor are able to support but we oppose two schedules and seek their deletion. I would like to concentrate on the first of these matters.
The passage of this bill in its current form would further degrade the R&D tax incentive, which is one of the most important mechanisms available in the taxation system to foster innovation. The incentive has already been undermined by the passage of the Tax Laws Amendment (Research and Development) Bill 2013, which restricts its operations to outlays of up to $100 million. The current bill seeks to reduce incentives by 1.5 percentage points, supposedly to preserve its value relationship to the company tax rate. I understand there has been some speculation as to whether the government is intending to reduce the company tax rate, but that is an aside.
The government has reneged on its promise to cut the corporate tax rate. If that is in fact the case—and I am waiting for an announcement on that, but I understand that is the government's position—it will demolish the justification for this bill. Anyone wondering just how this bill and its predecessors can be rational, in terms of innovation policy, need not bother.
The reality here is straightforward. This bill is a farrago of bills and has nothing to do with innovation policy. The government is using these changes to the R&D tax incentive to gather savings, not to make the R&D tax incentive more effective. This is typical of the way in which this government has failed to understand the crucial role of innovation in an advanced industrial economy. This is an economically myopic government. It is intent on a short-term cash grab, even at the expense of longer-term growth. The government likes to talk a great deal about its need to reduce the deficit, but it has embarked upon a course of action that will slow growth down and, along with it, the revenue streams that the government requires.
In advanced industrial economies—I think the argument is well worked—innovation is the chief driver of increases in productivity. Without a strong innovation system, Australia cannot build a more diverse economy, and if we do not build a more diverse economy we cannot protect living standards and we cannot ensure that prosperity is spread throughout our population. Without a more diverse base, future growth will be unreliable, fluctuating with booms and declines in commodity exports. This is understood by industry stakeholders and their representatives. The government should heed the advice of the Australian Industry Group in its 2015-16 budget submission, which calls for a reconsideration of further restrictions on the R&D tax incentive. Ai Group argues in its submission:
… the budget will only see a sustainable improvement when revenues improve, and for this to occur we must see strengthening in industries across the economy from the anaemic pace of growth in recent years. Only when businesses lift their sales and profits and grow their workforces will there be a sustained pickup in revenues.
Consequently, Ai Group believes the Federal Government should continue with sensible programs of investment in infrastructure and skills and training—
And I emphasise here—
as well as targeted programs to lift the rate of innovation among Australian businesses and encourage businesses to develop export opportunities.
The government, of course, is doing precisely the opposite, even though there is hard evidence for the case that Ai Group has made.
According to the Australian innovation system report, innovation 'almost doubles the likelihood of productivity growth in Australian businesses'. Firms that innovate are '78 per cent more likely to report increases in productivity' from their previous year's output. And firms that collaborate with research organisations and universities are almost two-and-a-half times more likely to report increases in productivity.
In the 1980s, Labor introduced the R&D tax concession, making Australia one of the first countries in the world to foster innovation through the use of taxation measures such as this. In 2011, another progressive Labor government updated the measures of the R&D tax incentive and converted the concession to a credit, doubling the benefit for smaller firms and raising it by a third for larger firms. This was a landmark reform, and the effect was immediate. The amount invested by business grew by 20 per cent, and registrations have continued to increase. As of 30 September last year, more than 12,000 companies had registered $20.53 billion of R&D spending for the 2012-13 income period. This was an increase of more than 1,600 firms engaged in R&D over the previous year. More than 3,000 companies are new to the program—growth in the innovation system that the government is apparently willing to put at risk.
When Labor was in government, the national innovation agenda—set out in the document Powering ideas, which was a 10-year comprehensive innovation strategy—explained the relationship of the R&D tax incentive to the wider tax system. Powering ideas stated that the aim of the change from the former concession to the incentive was 'to increase certainty by uncoupling the level of R&D support from the corporate tax rate'.
The change proposed in this bill undermines that uncoupling, even though the expected cut in the corporate tax rate is no longer guaranteed. It creates an expectation that when there is a change in the corporate tax rate the incentive will be adjusted accordingly. But multinational companies, in particular, often need to make large, periodic investments in R&D capability if they are to undertake their R&D in Australia. I know in some quarters there is a view that you should not support large companies investing in R&D in this country. They are the major drivers of R&D investment in this country and the major drivers of capability extensions in this country, and moving against them in terms of their R&D investments is an incredibly short-sighted attitude.
To attract those investment decisions, Australia must provide an investment environment that offers certainty, transparency and international comparability. The measures proposed in this bill, however, will only erode certainty and transparency. The effect of the bill will be to discourage R&D investment in Australia. In particular, the bill punishes small- and medium-sized enterprises. I know there is this fantasy around that if we only attack the big ones then somehow or other there will be a trickle-down effect to the small ones. On the contrary, what this bill does is undermine the small- and medium-sized enterprises as well, not to mention the universities and all the other supply-chain enterprises that are affected by these proposals
It is the small and medium sized enterprises which rely on the existence of a permanent and stable tax incentive in order to invest in R&D. This is critical to their business case as much as it is to the larger firms.
Senators will be familiar with the name of Cochlear, an Australian company which has been at the forefront of manufacturing innovative advanced medical technology. More than 250,000 people around the world have become the recipients of Cochlear's implantable hearing devices. The vast majority of Cochlear's R&D activities are conducted in Australia, where more than 300 scientists and engineers are engaged in this work. But in a letter to the Senate standing committee on economics, Cochlear's Chief Financial Officer, Mr Neville Mitchell, has explained how this bill and its predecessor are severely hampering the company's global competitiveness. Cochlear typically spends more than $100 million annually on R&D. In order to drive innovation, Mr Mitchell writes, the company would normally seek to increase its R&D investment in Australia, but that decision is now being reviewed because the incentive has been capped at $100 million. So this is one of the early consequences of that fateful decision that the government has made in recent times.
This reduction is counter to the international trend. As Mr Mitchell points out, the United Kingdom, Hong Kong, Singapore, Italy and France have all increased their R&D incentives in recent years. But Australia, under this government, is going backwards. Under the R&D tax regime that the Abbott government is intent on introducing, companies like Cochlear will be actively discouraged from conducting their R&D in this country. The consequences of that perverse stance are clear to everyone except the government. As Mr Mitchell writes:
Ultimately a reduction in the level of R&D undertaken in Australia will result in reduced employment and reduced corporate and individual income taxes.
Cochlear's concerns about this bill are shared by smaller and medium sized companies, which, as I have said, will be particularly affected by the reduction in the value of the incentive should this schedule be accepted by this chamber. The founder and technical director of a small engineering company in South Australia has written to me, stating that the bill will have 'a direct and adverse impact' on his company and on industry in Australia generally. The company is an engineering design consultancy, which for the past 20 years has developed new technologies and products in many industry sectors, including mining, medical, automotive, clean technologies and consumer goods. Its clients range from small firms of fewer than five employees up to multinational corporations. At both ends of this spectrum, the technical director writes, the R&D tax incentive is in many cases crucial to successful conclusion of their projects.
That plight is not unique to the company of which I am speaking. Smaller companies are frequently starved of development funds. Many survive on seed funding, which all too often is difficult to obtain in Australia. For companies in this position, the R&D tax incentive is commonly the difference between whether a project goes ahead or not. Because of the incentive, many of these projects have gone on to achieve commercial success. They have generated jobs, profits and export income. This government is evidently intent to see such projects fail, and the jobs and future economic growth that comes with them.
The technical director of the engineering consultancy notes that larger firms and multinationals often have the choice of developing new products in Australia or offshore. The capping of the incentive at outlays of $100 million, he says, has already made that decision more difficult for them. The cut in the value of the incentive will have the same effect for many more.
This bill also abolishes two tax offsets: the mature age worker tax offset and the seafarer tax offset. Labor supports the first of these measures. We had begun to phase out that offset when we were in office. In the 2012-13 budget the then Labor government limited the offset to taxpayers born before 1 July 1957, with an estimated $255 million gain over the forward estimates. At the time, the government stated that the offset was a high-cost method of encouraging mature-age participation in the workforce. That aim can be achieved more effectively through direct payments or incentives, so we accordingly have no objections to that measure.
We cannot, however, offer our support for abolition of the seafarer offset. This offset began in July 2012, as part of the Labor government's maritime reform agenda, Stronger Shipping for a Stronger Economy, which we had announced in the 2010 election campaign. The offset provides a refundable tax offset for qualifying companies employing eligible seafarers, to enable them to gain skills. This is a very useful measure, and its worth continues to outweigh any financial gain from removing it.
Finally, the bill updates the list of deductible gift recipients, a necessary item of housekeeping that we support.
The merit of the lesser measures in this bill, such as the abolition of the mature age worker tax offset does not compensate for the continued damage the Abbott government is intent on doing to Australia's innovation system. The government likes to boast about its credentials as a great economic manager, but its degrading of the R&D tax incentive and its trashing of the innovation system generally reveal those credentials to be worthless. What the Abbott government is doing in this bill is an act of economic vandalism which will leave all Australians worse off.
In rising to speak on the Tax and Superannuation Laws Amendment (2014 Measures No. 5) Bill 2014, I am reflecting that it is sad that the pattern of this legislation is so familiar. It is a pattern we have got used to. It is a pattern of a government that is focusing its attacks on the people that can least afford to be attacked—the poorest in our society, the people that need support—and ignoring the potential ways of balancing our budget by looking at the big end of town. In this legislation, there are attacks on workers, on older people and on science and development.
The measures that are laid out in this legislation are going to save a relatively measly amount of money. In comparison, if we had a government that was serious about really looking at where the money could be coming from and how it could be balancing the budget, it would be looking at things like making our superannuation system fairer and saving billions of dollars by doing that; removing fossil fuel subsidies and saving billions of dollars by doing that; and increasing the tax on the big profits of the big four banks. These sorts of measures, revenue-raising measures, are the sorts of things that would be really making a difference in balancing our budget, but instead we have an ideological attack on the people that can least afford to pay. The Greens are committed to maintaining strong protections for Australian workers and the industries that support them. So we are seeking to amend this bill, and we will be opposing the changes to the seafarers tax offset, to the research and development tax offset and to the mature age worker tax offset.
I want to start with the seafarers tax offset. Schedule 2 of this bill proposes to abolish this. In its current form, the seafarers tax offset applies to seafarers in a ship for which a company has the appropriate certificate and where the company employs the crew member for at least 91 days a year for these journeys. This tax incentive goes a long way to ensuring workers on overseas journeys can get a decent pay and it keeps their jobs viable, and it costs us the measly sum of $2 million a year. For the sake of $2 million a year, the government is continuing to apply measures that are going to be making it more and more difficult to employ Australian workers on our seas and to have Australian-flagged ships plying our coast.
You can see that there are all sorts of measures that are all coming together to completely decimate the Australian shipping industry, and that will be a disaster. It will be a disaster for the Australian workforce but also a disaster for us having good work conditions and safe environmental conditions for the ships that are in our waters. It is a tiny saving that the government is trying to achieve, and for that it is going to ditch security for workers and our shipping industry at the very time that they need our support. We must not let it happen. Right now, what the Australian shipping industry needs is certainty. The industry is awaiting the results of the minister's options paper. The last thing it needs is to be forced to negotiate the storm that abolishing this tax incentive would create.
The policy as it stands at the moment, which is going to be abolished, also promotes professional development and training of workers by including this in the period deemed to be on a voyage. This is an essential measure to train up Australian shipping workers and give them the know-how to maintain our status as a major shipping nation. It is a status that we do not need to let go. We have options. There are constructive ways forward for us to maintain a strong, healthy, viable Australian shipping industry with good working conditions for the seafarers and with good environmental protections.
Perhaps most importantly, the Australian shipping industry can be a shipping industry that is competitive with the rest of the world, because it needs to be that. It truly is an international business. The industry operates in a market that is largely tax free in international terms and in which other players—seafarers on other countries' ships—are given similar tax incentives. So to take away this benefit from our workers will be putting them at a disadvantage to the rest of the world just when we need to be doing everything we can in order to maintain their jobs.
The government argues that the seafarers tax offset has had a low uptake. But, while uptake numbers might appear low at first glance, the reality is that it reflects the small number of Australian ships operating internationally. We need to be maintaining those ships and increasing the number of Australian ships operating. At the moment we have a small number of ships, but it is a vital industry and a tax measure that we must keep.
Schedule 1 of this bill abolishes the mature age tax offset and removes access to this incentive for older workers to remain in the workforce. Up to a million Australians are receiving this at the moment. We all know the challenges that Australia is facing from our ageing population, and we need to be doing whatever we can to support older Australians continuing to participate in the workforce. We know that the government knows that that is what they are trying to do. We have seen in the media this week measures to try to maintain and encourage older Australians to stay in the workforce. The mature age tax offset puts $500 in the pockets of mature age workers as an extra incentive to get them to stay in the workforce, and we do not accept that ripping $760 million from older Australian workers is a fair thing to do. It is part of the Abbott government's unfair budget cuts. The Greens are committed to improving older Australians' access to and participation in work and believe that the government needs to be doing more, not less, including supporting employers where it is appropriate. Because of this, the Greens are going to be moving to amend this bill and remove this schedule from the bill.
Schedule 3 of the bill, of course, continues the Abbott government's attacks on science and research and development. The bill cuts 1½ per cent from the research and development offsets available to businesses and rips $620 million out of research and development spending over the forward estimates. This, again, is just what we do not need to be doing to have a prosperous Australia. We know that increasing investment in science and research is the way forward. We know that our wellbeing, our security and our economic viability as a nation depend on this research and on our having an innovative economy that is using our brains. That is where we are going to be able to continue to compete on the world stage. The government tries to justify this cut by saying it brings it into line with business tax cuts also outlined in the budget, but this cut will occur a year before those possible tax cuts, and the passage of those tax cuts through the Senate is, of course, by no means certain.
Of course, these cuts to research and development also come on top of the cuts to the R&D tax offset that targeted large company investment that recently passed the Senate. This is insanity—it is totally the direction that we should not be going. The insanity of these cuts is reinforced and underlined by the government's own figures on science expenditure. Just as we know that science increasingly needs to underpin our future as a nation, we are set to spend less on science and research this year than we did in 1979. We know that, over the past few decades, science and research has become increasingly important to our society and economy. The rot began under Labor in 2012, but Tony Abbott is taking spending on science and research to the equal lowest level since records began. We have had cuts to CSIRO. CSIRO scientists have been taking voluntary redundancy packages across the country. CSIRO scientists who have been working for decades are no longer going to have their contribution to our country used and valued. We have seen cuts to clean energy programs, and the cuts to tax concessions for R&D such as the cuts in this bill have contributed to this woeful result of spending on science and research being at its equal lowest level since records began.
We will never be able to compete with China or India on wages, but we have the potential to be stronger on research and innovation. That needs secure and significant public investment, something that other countries have certainly twigged to. We are trailing way behind countries that are our competitors in the world—countries like Germany, the UK and US—and we are outspent by key trading partners like Korea and Japan.
A few weeks ago, I visited a car component manufacturer in Adelaide, Precision Components, who are trying to work out how they can survive with the car industry disappearing from Australia. They are desperate to maintain their business. They are desperately trying to be innovators and doing a lot of research and development to discover new markets for themselves. They told me that some 50 per cent of their workforce are now employed in engineering as opposed to being workers on the factory floor manufacturing the products. Fifty per cent of them are in the engineering part of the business. This is the sort of business that needs to be supported by research and develop grants that enable us to have the innovation that would allow Australia to continue to compete on the world stage and to continue to provide jobs for Australians.
We keep cutting spending on science, research and innovation—and these spending cuts are happening because they are seen as being something that no-one will notice. It is just a small amount; the scientists are not going to complain very much; no-one will think about it. If we keep doing this, the country's brain drain will continue and we will wake up after the mining boom to find we are a hollowed-out, uneducated quarry with nothing left to sell to the rest of the world.
The Greens will always be committed to Australian workers and to maintaining innovation in our key industries. That is why we will seek to amend this bill, to remove these idealistic attacks on our workers.
First, I would like to thank those senators who have contributed to this debate. The Tax and Superannuation Laws Amendment (2014 Measures No. 5) Bill 2014 represents another chapter in the government's commitment to implement our Economic Action Strategy and to repair the budget. Our Economic Action Strategy is about setting Australia up for the future. It is about making some tough decisions now so we can build long-term prosperity, so we can make sure Australia has a social safety net which is strong and sustainable, and so future governments have the resources available to allow them to make decisions that are fair yet compassionate for the Australia people.
We have outlined a way forward to achieve this goal. This includes reprioritising government spending to spend less on consumption now and more on investing in our future. It includes ensuring that taxpayers' funds are spent wisely; taxpayers deserve value for money from their government. It also includes an expectation that everyone will contribute to budget repair. Each measure contained in this bill takes us a step further on our path to achieving this goal.
Collectively, the measures in this bill will return around $1.4 billion to the budget. Separately, each measure in this bill tells its own story about different groups of people. Schedule 1 abolishes the mature age worker tax offset. We understand that older Australians face challenges when re-entering the workforce, and data shows that older Australians face high rates of labour market disadvantage. We would like to change this. Older Australians want to work and we need them to work. The intergenerational report that the Treasurer will release later this week will demonstrate the importance of workplace participation, whether by older Australians or by women returning to work after having children, to future policy. A prosperous Australia depends on everyone contributing to a strong, sustainable economy, and older Australians just need to be given this opportunity to contribute.
But the mature age worker tax offset does not help older workers in getting a job; it merely reduces the tax that might be payable for those who are already working. Abolishing it will save the Australian taxpayer around $760 million over the forward estimates period. Our aim is to assist older workers to transition back into work. Once a person gets into the workforce, they are likely to stay there. This is why, from 1 July 2015, we will provide an incentive of up to $10,000 to employers who hire an older job seeker. This will be delivered through the Restart program. This payment will help older job seekers to get a job and keep the job. This is just one of the ways the government is working to assist older Australians.
Schedule 2 abolishes the seafarer tax offset. This is, sadly, another failed Labor policy. It provides a refundable tax offset to eligible shipping companies for 30 per cent of the salary, wages and allowances paid to Australian resident seafarers who are employed to undertake overseas voyages on qualifying vessels. Companies are eligible to claim the seafarer tax offset if the company employs the seafarers on such voyages for at least 91 days in the income year. The rationale for the introduction of the seafarer tax offset was to stimulate opportunities for Australian seafarers to be employed on overseas voyages and to gain maritime skills. The government is abolishing the seafarer tax offset because it is not achieving its policy intent.
There are significant differences between Australian wages and conditions and those of some other countries. For example, under the Seagoing Industry Award 2010, the minimum basic wage for an able seaman is $96,500, whereas under the International Transport Workers' Federation Uniform Total Crew Cost Collective Agreement the comparable wage is $23,303. The seafarer tax offset is unlikely to be sufficient to redress these differences.
The companies that employ Australian seafarers for overseas voyages typically have other reasons for doing so, such as English language skills and, particularly, the knowledge of Australian ports and coastline. Being a refundable tax offset of 30 per cent of the gross payments the company makes to the seafarer, the benefit may be small relative to the scale of shipping companies. The seafarer tax offset has not resulted in any appreciable increase in the employment of Australian seafarers. Its repeal will return $12 million to the budget over the forward estimates.
Schedule 3 reduces the tax offset available under the Research and development tax incentive by 1.5 percentage points for income years commencing on or after 1 July 2014. This was a difficult decision. However, repairing the budget must be done as fairly and as equitably as possible. It is only fair that everyone makes a contribution. The changes to the R&D tax incentive are simple and straightforward. The changes will not affect the eligibility of companies for the incentive, the way that companies claim the incentive or the administration of the incentive more generally. The R&D tax incentive will continue to provide generous, easy-to-access support for thousands of eligible companies in all sectors of the Australian economy. This measure will provide savings of around $620 million over the forward estimates period.
The government remains committed to each measure contained in the bill. However, we understand from the debate that opposition senators have foreshadowed amendments to the bill. The government will agree to opposition amendments to excise schedules 2 and 3 from the bill. These schedules remain crucial to the government's economic action strategy and our commitment to budget repair, and we will seek to reintroduce these schedules at a later date. The government will remove these schedules in order to assist the prompt passage of schedules 1 and 4 of this bill.
This brings me to the final measure of the bill. Schedule 4 adds three new deductible gift recipients. This will allow Australian Schools Plus; the East Africa Fund, which operates the School of St Jude; and the Minderoo Foundation Trust to receive tax-deductible donations. Australian Schools Plus is a vehicle for donations to be collected from the public for disadvantaged schools. This policy seeks to address the perception that these schools find it relatively difficult to attract donations. The School of St Jude provides free, high-quality education to children in Tanzania who would otherwise be unlikely to complete their schooling. Over 2,000 students from various regions and 35 different tribal backgrounds attend the school of St Jude, and over 1,400 of these students are boarders. Students receive meals from the school as well as annual health check-ups. The school monitors the general welfare of the students and can help students with issues they may be experiencing at home.
The Minderoo Foundation Trust operates three programs: the Walk Free Foundation, GenerationOne and Hope for Children Australia. The Walk Free Foundation seeks to eliminate modern-day slavery by supporting the highest quality research, enlisting business and raising funds to drive change in those countries and industries where slavery is most prevalent. Generation One is a national movement bringing together all Australians with the goal to end the disparity between Indigenous and non-Indigenous Australians through employment and to break the cycle of disadvantage. Hope for Children Australia supports orphans, vulnerable children and families affected by HIV AIDS and poverty in Ethiopia. The project aims to help orphaned and vulnerable children reach their full potential. Hope for Children initiatives include helping children gain an education, providing family health support and assisting families to pursue micro-enterprise initiatives.
The measures contained in the bill present a careful and reasonable approach to reprioritising government revenue. They bring us a step closer to reducing our debt and a step closer to a stronger, better and more compassionate Australia. I commend this bill to the Senate.
Question agreed to.
Bill read a second time.