Senate debates

Tuesday, 3 March 2015


Tax and Superannuation Laws Amendment (2014 Measures No. 7) Bill 2014; Second Reading

5:34 pm

Photo of Christine MilneChristine Milne (Tasmania, Australian Greens) Share this | | Hansard source

I know you will all be very disappointed that my colleague Senator Whish-Wilson was not able to continue from where he left off, which of course was parking his boat next to something on Rottnest Island! But I do wish to make a serious contribution to this debate. I want to indicate that with regard to this Tax and Superannuation Laws Amendment (2014 Measures No. 7) Bill 2014 the Greens will be opposing schedule 1 and schedule 6. When we get to committee we will be seeking to have those voted on separately and will oppose them. I wish to speak to those issues now and indicate why we are opposing them.

Schedule 1 relates to excess superannuation contributions, and this is very much the frustration the Greens have that the Abbott government talks constantly about the budget problems, talks constantly about making life harder for ordinary people—everything from the GP co-payments and the like—and here we have a proposal once again to let the big end of town off scot-free. It is just wrong. What is being proposed here is that, if a person exceeds the legal cap on their non-concessional superannuation contributions, they be virtually let off scot-free. I just think it is wrong.

The substance for this is that the government is in its explanatory memorandum assuming that many of the relevant tax law violations are inadvertent. The government argues that people just somehow overlook it, make a mistake, exceed the contribution and—oh dear!—they should not then have to suffer any real penalty for that. I keep making the point, as I did in the tax estimates the other day, that if a person gets into trouble with Centrelink or gets a pension overpaid for a period of time then before they know it they are in the courts, but when it is the big end of town it is always assumed, 'Oh, it must've been inadvertent; we mustn't do anything that would cause them any difficulty.' Industry Super Australia had a look at that and they have said that they are concerned that the legislation, in its current form, would undermine incentives to comply with the tax laws and further threaten the sustainability of superannuation tax concessions, including by exposing superannuation to gaming behaviour. They say that very few people are in a position to violate the non-concessional contributions cap—that is, the $180,000 extra that you can put in. There are not many people who have $180,000 extra to put into their superannuation so, in the case of voluntary contributions, we are talking about a small number of very wealthy people, and the legislation would enable those few people to engage in gaming behaviour. In this game there would be a number of ways to win.

First of all, the tax office may not detect or enforce a tax liability against excess contributions. If that happens, individuals who breach the law get to enjoy significant tax concessions on earnings and income arising from these unlawful contributions. However, if a violation is detected and the tax office seeks to impose a tax liability, individuals who breach the law are then given a free pass: they can have the excess contribution returned to them with no penalty. How is this fair? The law is the law. If you breach the law, you should pay the penalty. Everybody else does. Why is it that, for high-income earners, it is assumed that it is just inadvertent and they should get the money back—that they should get it out of their fund and pay no penalty for what they have done? That is what this is. That is why it is so wrong.

In fact, the legislation creates perverse incentives by giving an individual who has broken the law the option to choose to withdraw the excess contribution, which returns the individual who has breached the law to an approximation of the same position they would have been in had they not violated the cap; plus they get any earnings that accrue between the assessment date and the withdrawal date, compounded over time. They can also pay the penalty and keep the concessional treatment on earnings and retirement income. Further arbitrage opportunities are available under the proposed legislation because earnings for tax purposes are calculated by reference to a formula that is the average general interest charge for the relevant financial year, rather than the actual earnings received; and as a result, if the constructed earnings are less than the actual earnings, a further benefit is possible.

This is a ridiculous piece of legislation you are bringing in here which once again gives the wink and the nod to the big end of town. It is simply wrong to suggest that it is inadvertent because most individuals in a position to exceed the non-concessional contributions cap are likely to be receiving professional advice and tax preparation assistance. Let's face it—if they have that much surplus cash to put into super, they are going to be getting their tax done. This goes back to the financial services industry and all the problems we have with that.

If there is a legitimate concern around inadvertent violations, more moderately targeted reforms could be contemplated. But I do not accept that we should be presuming this is accidental or inadvertent and that there should be no penalty. That is why we should recognise that it is wrong and a mistake.

Everybody should be equal under the law. That should be a fundamental premise in Australia. Everyone is equal under the law. If there is a law which says that you cannot get the pension if you have a certain amount of money or if certain changes apply and you breach that, then you suffer the consequences; but equally, if the big end of town stacks up this money in their super beyond the cap they are allowed, they should pay a penalty when they are found out. Why is it that we assume rich people make mistakes to their financial advantage inadvertently, but poorer people are clearly not innocent and have done so for some criminal intent? That is wrong, and that is why the Greens will be strongly opposing schedule 1 of this particular tax bill. It shows again that the Abbott government cannot help itself. Where the rich are concerned, no penalties apply. Where other people are concerned, every penalty applies and the book is thrown at them. It is wrong.

The other schedule we will be opposing today is about the destruction of the environment and using public funds to benefit mining companies. That is exactly what exploration tax credits do. What this schedule does is provide tax credits for junior mining companies—essentially, mining start-ups that have no current investment from which to redirect existing profits into further exploration. It is giving these mining start-ups a credit when they are exploring greenfield areas. In other words, this is about new miners on new exploration projects. Guess what? They are trying to get into every protected area around the country. We would be offering a tax credit for these miners to open up areas that ought to be protected. The fact of the matter is that frequently they go in and destroy these areas. State governments fall over themselves to give them licenses, a royalty holiday and every concession under the sun. They go in and wreck the place; they go broke; and then they leave. They never meet the bond, if there was one, to rehabilitate the area.

Photo of Barry O'SullivanBarry O'Sullivan (Queensland, National Party) Share this | | Hansard source

That's not accurate. That's not fair.

Photo of Christine MilneChristine Milne (Tasmania, Australian Greens) Share this | | Hansard source

I am glad there has been an interjection there, because I am going to give you some very good examples. If the mining industry cares to have a look, I refer them to the Tarkine in north-western Tasmania, where the Australian Heritage Council recommended that the area be protected for its natural values. I was appalled, during the last government, when the Labor minister decided not to implement the Heritage Council's findings and protect the area. Minister Burke came out strongly saying he would prefer mining to go ahead in the area, even though there was no business case—even though these tin-pot miners were going to make a wreck of the place. And that is exactly what has happened.

So let me just go through what has happened—and they get this, of course, in addition to accelerated depreciation for their capital, materiel and exploration costs and fuel tax credits. It goes on and on in this mission to use taxpayers' dollars to dig it up, cut it down and ship it away. That is essentially the only vision you have got. Why would you be using taxpayers' dollars to give these miners access to greenfield sites?

Venture Minerals proposed three open cut mines in the Tarkine. Mount Lindsay mine has tin, tungsten, copper and iron. The mine has a predicted life of eight years. It is the main mine in the group, and the lease was granted by the Tasmanian government in July 2014. The Stanley River mine has hematite, iron and tin. The predicted life of the mine is two years. The Riley Creek mine has hematite. The predicted life of the mine is two years. Work began in May 2014 and was suspended in August 2014. All of these mines sit within the area recommended by the Heritage Council for a Tarkine National Heritage listing. The Mount Lindsay and Stanley River mines are within the myrtle forest and the button grass and heathland in the Meredith Ranges reserve created under the Tasmanian Regional Forestry Agreement. The Riley Creek site would involve clearing myrtle forest. Threatened species that may be impacted through the clearing include the Tasmanian devil, the spotted-tail quoll and the wedge-tailed eagle, as well as the expected increase in road kills.

And then, of course, we have Shree Minerals. What a disaster! Their hematite, magnetite and iron ore mine at Nelson Bay on the west coast had a predicted life of two years. Imagine giving an incentive to these miners to go in and wreck the place for a mine life of two years! The mine was approved by the federal minister in July 2013. Work started in November 2013 and was suspended in June 2014—after the Tasmanian Labor government gave Shree Minerals a royalties holiday. So the federal minister overlooked the heritage listing and the Tasmanian Labor government gave them a royalties holiday. Worse still, we now find that legal action was taken against the Environment Protection Authority in Tasmania for allowing Shree to store at its mothballed mine more than 20 times the amount of acid-producing waste rock than was in the environmental permit—20 times more, stacked on the surface, than was in its environmental permit. And then, in August 2014, Shree surrendered its licence to explore at Rebecca Creek.

These miners have gone in and wrecked the place. They have left a great mess in the Tarkine. They have not said they are walking away, because then they would have to rehabilitate it. It is just going to sit there as a horrible great mess. All of this acid-producing waste rock will be sitting there in a mess as a tribute to the former minister Tony Burke and the former Tasmanian Labor Premier Lara Giddings. Good on them! Those photos will be there. The destruction is there. And now, in this federal parliament, suddenly it seems like a very good idea to the Abbott government to give more of these tin-pot mining companies taxpayer's dollars to go and wreck greenfields areas with relatively little possibility of ever creating the jobs they promised or indeed the production they promised.

I am sick to death of the fact that we cannot get real in this country about making the transition away from digging up, cutting down and destroying our natural resource base to recognising that the future depends on a transition to a low-carbon economy which invests in brains and capacity building—universities—and selling the technologies and the advancements rather than continuing to think that we are suddenly going to find all these great new mining prospects. The fact is that the mining companies have had a good go at Australia. They would argue that all of the major deposits that are relatively accessible and profitable have already been accessed. Now we have got the petroleum industry, the mining industry and the coal industry just out there after more, and I have absolutely no intention of ensuring that the mining industry gets access to even more taxpayers' dollars.

As I said, on top of their fuel tax credits, which is an absolute fossil fuel subsidy, and their accelerated depreciation, you now want to give them an exploration tax credit. Well, not with taxpayers dollars. You have not got the money to invest in universities and to support the healthcare system so that you do not impose co-payments. Let's be very frank, the so-called pause in index payments is just a continuation of what the former government proposed, which is to freeze the indexation, which is a cut every single year to support doctors and the health system. Let's face it, if we do not have the money to provide health and education, if we do not have the money to provide the basics in terms of public transport, we as sure as anything do not have the money to tip into the pockets of tin-pot miners who go in there and get the licences—and, if they do happen to hit it big, they of course have an arrangement with one of the big miners to move straight in and transition that prospect. If they walk away, the big miners do not have the liability that goes with cleaning up the site.

It has been my experience from one end of the country to the other that these rehabilitation bonds are not worth the paper they are written on. If you have a look in Victoria at the moment, with Hazelwood for example, why aren't they interested in closing down that coal fired power station and mine? It is because if they do close it down they are going to have to rehabilitate it. Rehabilitation is going to cost them way more than has ever been provided for, so they do not want to have to cop the cost of rehabilitation. That is going to be the case from one end of the country to the other—whether it is in the Hunter Valley, Victoria or wherever. That is because governments have failed to make mining companies accountable. They make their profits and their profits go offshore—overwhelmingly to foreign shareholders—and Australian communities are left holding the baby with the pollution of waterways and the destruction of agricultural land. It is just appalling.

People are going to look back and say, 'What sort of governments did you have in this country that were so keen to maximise the profits of the mining corporations at the expense of the community?' That is why the Greens will not be supporting this particular schedule. The Greens will be opposing schedule 1 and schedule 6 and would like the opportunity to vote on those separately in the committee stage.

5:52 pm

Photo of Nigel ScullionNigel Scullion (NT, Country Liberal Party, Minister for Indigenous Affairs) Share this | | Hansard source

First of all, I would like to thank those senators who have contributed to this debate on the Tax and Superannuation Laws Amendment (2014 Measures No. 7) Bill 2014 and the Excess Exploration Credit Tax Bill 2014.

Schedule 1 demonstrates that the government is committed to ensuring that individuals need no longer be disproportionately penalised for inadvertently exceeding their superannuation non-concessional contribution caps. Individuals will have greater confidence to save long term for their retirement.

Schedule 2 will provide for more efficiency in government by transferring the tax-complaints-handling and tax investigative functions of the Commonwealth Ombudsman to the Inspector-General of Taxation. The transfer will simplify tax scrutiny by replacing the split jurisdiction that exists currently with a single-agency jurisdiction over tax complaints and systemic reviews.

Schedule 3 ensures that life insurance policies are treated properly in the capital gains tax provisions of the taxation law.

Australians look for certainty in the superannuation tax and regulatory laws when saving for retirement. Schedule 4 shows that this government will deliver on that front. The measure will clarify that superannuation fund mergers will not trigger a tax integrity rule. This provides greater certainty for superannuation funds undertaking fund mergers to achieve greater efficiencies and comply with regulatory requirements. It also ensures that members do not incur a potential unintended tax disadvantage from the merger.

Schedule 5 clarifies the position of Commonwealth, state and territory law enforcement agencies regarding the ability of the Australian Taxation Office to share information with them.

Schedule 6 and the Excess Exploration Credit Tax Bill 2014 deliver on this government's election commitment to provide an exploration development incentive which will encourage greenfields exploration expenditure by junior exploration companies. The incentive recognises that the future prosperity of the mining sector and the Australian economy is dependent on our ability to make new mineral discoveries. It also recognises a tax disadvantage that junior exploration companies face relative to large miners and explorers. The cost of the incentive is capped at $100 million over three years. The scheme will be reviewed in 2016 and, subject to the outcome of the review, may be extended for a further period. The incentive is similar to a scheme in Canada which has been described as a spectacular success. The Canadian scheme has been extended numerous times since its introduction.

Schedule 7 provides increased certainty for taxpayers by making a number of tax law amendments. These address unintended legislative outcomes, correct defects in the law and make sure that the law operates as intended. I commend the bills to the Senate.

Question agreed to.

Bills read a second time.