Senate debates

Thursday, 8 October 2020


Treasury Laws Amendment (A Tax Plan for the COVID-19 Economic Recovery) Bill 2020; Second Reading

1:21 pm

Photo of Mathias CormannMathias Cormann (WA, Liberal Party, Vice-President of the Executive Council) Share this | | Hansard source

I move:

That this bill be now read a second time.

I seek leave to have the second reading speech incorporated in Hansard.

Leave granted.

The speech read as follows—

This Bill implements the Morrison Government's tax plan for Australia's economic recovery from COVID-19 announced last night by the Treasurer.

The Bill delivers lower taxes for individuals and businesses. It will stimulate demand, support investment, boost economic growth and most importantly, create jobs.

These measures are central to the Government's JobMaker Plan.

First, we are lowering taxes for more than 11 million individuals who pay personal income tax.

These tax cuts support low and middle-income Australians, with the majority of the benefit in 2020-21 being received by those on incomes below $90,000. In 2020-21, low and middle-income earners will receive tax relief of up to $2,745, for singles, and up to $5,490, for dual income families, compared with 2017-18 settings.

Over the next 12 months, personal income taxes will be cut by $12.5 billion. Taxes will be cut by $17.8 billion over the next four years. With more money in their pockets, Australians can spend more in our economy, boosting demand and jobs.

Personal income taxes will be cut by bringing forward the second stage of the Government's Personal Income Tax Plan by two years to this financial year. This involves increasing the top threshold of the 19 per cent bracket from $37,000 to $45,000 and increasing the top threshold of the 32.5 per cent bracket from $90,000 to $120,000. Under stage two, the low income tax offset increases from $445 to $700, which will deliver more money into the pockets of some of the lowest income earners.

The Government will also provide an additional low and middle income tax offset, worth up to $1,080, in 2020-21 that would have been removed under stage 2.

It all forms part of our plan that ensures that by 2024-25, around 95 per cent of Australian income earners pay no more than 30 cents in the dollar, on every dollar they earn.

Not only do we need more Australians with more money in their pockets out spending, we also need to back businesses that have a go.

The COVID-19 economic recovery will be driven by the private sector. Eight out of ten jobs are private sector jobs.

That is why our Economic Recovery Plan includes substantial incentives for businesses to invest. This Bill will provide 99 per cent of businesses access to temporary full expensing until 30 June 2022. This will reward business for bringing forward investment. Businesses with a turnover of up to $5 billion will be able to deduct the full cost of eligible depreciable assets of any value in the year they are first installed. Whether it is a farmer investing in a tractor, a café in a new coffee machine, a manufacturer in new machinery or a services business in IT software, these investments will boost their productivity and boost our economy. With more investment, there is more work to do and with that comes more jobs along the supply chain.

We know that there are many businesses, which were sound businesses before COVID-19, are now in a loss making position. Under this Bill, companies with a turnover of up to $5 billion will be able to apply their losses against profits taxed in a previous year as far back as the 2018-19 income year. This temporary measure will be available until 2021-22. It will allow these companies to access cash by using their losses now, to stay in business, rebuild and invest, rather than waiting until they return to profit.

Also in this Bill, the Morrison Government will invest a further $2 billion in Research and Development through the Research and Development Tax Incentive. Business investment in R&D is central to the development of new products, processes and services that will help make Australia more competitive. Investing in R&D provides jobs now and jobs for tomorrow.

The Bill implements measures contained in existing legislation before this Parliament, with several enhancements. The enhancements increase the tax offset rates for all claimants of the R&D Tax Incentive compared to the 2019 Bill, remove the $4 million cap on annual cash refunds, streamline the intensity test from three to two tiers, and defer the start date of the changes to 1 July 2021.

And we know small business is the engine room of our economy. Under this legislation businesses with an aggregated annual turnover between $10 million and $50 million will, for the first time, have access to up to ten small business tax concessions.

This will cut their red tape, improve their cash flow and allow them to spend more time on their business than with the tax office. The changes are estimated to support around 20,000 businesses and their employees.

These tax cuts and business incentives are all about delivering money into people's pockets, getting the economy going as we recover from the unprecedented impact of the COVID-19 pandemic, and getting people back into jobs.

Treasury estimates measures in this Bill will create an additional 100,000 jobs by the end of 2021-22.

Full details of the measure are contained in the Explanatory Memorandum.

1:22 pm

Photo of Larissa WatersLarissa Waters (Queensland, Australian Greens) Share this | | Hansard source

Could I ask that our opposition to the preceding few votes be recorded?

Photo of Helen PolleyHelen Polley (Tasmania, Australian Labor Party) Share this | | Hansard source

Yes. Senator Gallagher, you have the call.

1:23 pm

Photo of Katy GallagherKaty Gallagher (ACT, Australian Labor Party, Shadow Minister for Finance) Share this | | Hansard source

I welcome the opportunity to rise to speak on the Treasury Laws Amendment (A Tax Plan for the COVID-19 Economic Recovery) Bill 2020—perhaps a little earlier than we had expected to be having this debate! This debate brings together a number of tax measures announced in the 2020 budget—in total, five of them—which I will speak to separately.

I would like to start my contribution by acknowledging the very difficult economic times the country is in, the very significant economic challenges facing the country, the millions of Australians who have had their lives uprooted, their jobs lost, their businesses shut over the last seven months as the coronavirus pandemic has brought in changes which have had not only significant health consequences on our community but very significant economic consequences as well. This budget was the government's opportunity to address, both in the short and long term, some of those significant challenges.

The budget in itself is the third economic package that the government has introduced in response to the pandemic. It comes at a time when we are in a deep recession—the first recession in this country in almost 30 years—where we have 3½ million Australian workers being supported by a wage subsidy scheme, JobKeeper, that Labor called for and the government adopted. We have over 1.6 million Australians on the JobSeeker payment, the old Newstart. I think there are over two million Australians who have been receiving the coronavirus supplement to assist them to get through the very, very difficult times and put money back into the economy at a time when it is desperately needed. So we are in a very unusual and challenging time for so many Australians. The budget was the opportunity for the government to respond to some of those challenges, not just in the short term but in the long term and, in many ways, it was a missed opportunity.

The budget outlined a debt-and-deficit trajectory that this country has not seen before. We have combined deficits of $480 billion and a deficit this year of $213 billion. We have net debt increasing to just under $1 trillion and gross debt exceeding $1 trillion—in fact, based on this budget and not any subsequent economic responses that might be needed, the Minister for Finance confirmed that it will peak in 2029 at $1.7 trillion.

I can't not take the opportunity to remind the government of the hypocritical and damaging campaign they have run to demonise debt and deficit over the last decade. In many ways, the challenges faced by the Australian community and the responses required have been a complete rejection of the approach that the government took over the last decade or so, where they used their so-called 'debt-and-deficit disaster' language to weaponise any sensible narrative about the use of a government's budget and the levers available to support people, the community and society. The contradiction and the hypocrisy and all of the dangerous language about a 'disaster' that they used at a time when they faced inheriting gross debt in the order of $280 billion—compared to releasing budget papers which have now outlined gross debt reaching $1.7 trillion—is not lost on the opposition.

I would hope, out of all of the learnings from these last seven months, that there has been some in that regard: that the budget does exist to serve a purpose. It is not the same as a household budget. It has a very different purpose. It is to be used in a way that delivers outcomes for people. So when you introduced a budget like you did in 2014—in pursuit, at any expense, of your fiscal strategy at the time—that slashed a whole range of supports for vulnerable Australians, you left a whole load of people behind and that had impacts and it caused damage. Again, the complete rejection of that fiscal strategy, and the adoption of one which acknowledges the role and the need for government to invest in people and in our community when it's needed, is important. We've heard in recent days the government trying to pretend that debt under Labor is terrible and a disaster, while debt under them is manageable and fine—'no issue here'. So I do make that point.

The bills that we see before us today form a large component of the government's stimulus response, in a sense, to the problems that we are seeing in the economy. There is a bring-forward of the stage 2 tax cuts to 2021 at a total cost of $18 billion. Labor has been calling for these tax cuts to be fast-tracked, I think, since August last year. We think they play a key role in part of the response. They shouldn't at any time have been considered the entire response, and so our support is contingent on that. They have a role to play, and we are not going to stand in the way of millions of families and working people across this country getting some extra dollars in their wallet every fortnight. We think that does have a role to play, and it is a change that we support.

We would have preferred to deal with that bill on its own and separate out some of the other measures that perhaps aren't as time critical and could have been dealt with in a more orderly way, allowing the Senate to use its scrutiny powers to inquire into those. However, the government have made it clear, and they've played this game before where they package up a whole range of initiatives into an omnibus bill and serve it up on a plate and claim that if you're not for all of it then you're clearly standing in the way of getting the tax cuts out the door. This is this government's style: push through, barrage through, blame everybody else, point the finger and take the attention off itself.

We would prefer—and I want to make this point very clear—having more than 48 hours, essentially, to work through the detail of the other measures, including the small business turnover, the amendments to the R&D tax incentive and particularly the large measure of temporary full expensing of depreciation assets at $27 billion. I should make it clear that we do support the increase to that small business turnover threshold and the loss carry-back against previous profits. There is a price tag of $5 billion attached to that loss carry-back, not an insignificant amount of money at all, but we do think those are sensible measures. In fact, I think we had proposals very similar to those before, and they should be supported.

Our concerns relate largely to the amendments to the R&D tax incentive cuts and the full expensing of depreciating assets or the instant asset write-off of 100 per cent. That is at a cost of $27 billion. It is a massive measure that I think the Senate should have had the opportunity to inquire into for a bit longer than 48 hours. The member for Rankin in the other place has raised a number of issues around that. One is the fact that there is no long-term solution to business investment in this country. This is a very short-term measure, and it will create a very significant cliff at the end of it, which I'm sure the government acknowledge but which they haven't dealt with in this budget. It doesn't deal with a long-term business investment strategy. We know business investment was tanking in this country long before the pandemic. It was a problem. If you talk to anyone in the business community, the major issue they raise around the lack of appetite for business investment is the lack of an energy policy. I think everyone on that side of the chamber knows that too, but it is a tricky one for them to resolve. But that is the solution in many ways: to provide confidence and certainty to the business community if there were energy policy certainty at the same time.

In terms of the time that the Senate has available to it today on those two measures that I've drawn out, including the R&D—and I know Senator Carr has a much better knowledge of the issues and the disagreements around the research and development tax incentive, including the cuts of $1.8 billion that were being proposed, how they relate to this new program that's been put in and whether the money is real—I think we need to understand that a bit more. We will have the opportunity in estimates to explore that a bit further. In the interests of the government wanting to pursue their strategy of pushing this through the chamber so quickly, any problems relating to these two measures are really worn on their head. They have to be responsible. If there are changes that need to be made as the detail of these programs is rolled out, then they need to make them. I don't think the government should accept that our support for this bill, the omnibus bill—and we have had no choice around how these measures are separated out—gives them a blank cheque endorsement of these programs. I say to the government: these are your programs. You've had the opportunity of months to design them. You are telling the Australian people they will work and they will deliver the outcomes and the jobs that we need to see across this country. It really is on your head. You need to address any problems. It is on your head if these policies don't do what we need them to do, which is to make sure that unemployment in this country gets as low as it can be, as quickly as it can be. We have very significant concerns around that.

We think the other issues that are related to the budget and not in these bills are interlinked in the sense that the government are putting all of their effort behind these measures to drive the economic recovery at a time when they are cutting JobSeeker and cutting JobKeeper. I think the failure to address the permanent increase in JobSeeker in this budget is just mean. It's simply mean. There is absolutely no reason why, in the first weeks of October, the government is not in a position to give an answer about what it's doing for the 1.6 million people surviving on that payment in the long term. It's just wrong. They're trying to give certainty in a whole range of areas for the next 18 months to two years, but people who are surviving on the lowest of incomes don't deserve that kind of certainty? They cut JobKeeper. They restrict JobMaker to those under the age of 35—we have to explore some of the thinking behind that because it leaves almost a million people on that payment who aren't eligible. They have no plan for aged care. I think it's well understood that 51 per cent of the population seems to be ignored in this budget, and there's a lot of concern around that. They do not address issues around child care, women's homelessness or social housing.

I'm sure we will continue to debate this budget in the months ahead and through estimates. Whilst we support the passage of these omnibus bills, we do lay down some markers that we do have concerns with a couple of the measures. It's firmly in the government's court to change those, but it's also firmly the government's position that these be passed today. The opposition will be supporting that, but we have raised some concerns which we hope the government is listening to and will take on board.

1:38 pm

Photo of Paul ScarrPaul Scarr (Queensland, Liberal Party) Share this | | Hansard source

I'm absolutely delighted to rise and speak in this chamber in relation to the Treasury Laws Amendment (A Tax Plan for the COVID-19 Economic Recovery) Bill 2020. I'm absolutely delighted because the budget that was delivered on Tuesday night delivered for all Australians. The budget handed down on Tuesday night delivered for all Australians—every single Australian, including in my home state of Queensland and including people living where my office is located, in the Ipswich region of Queensland. It delivered for those Australians.

Senator Gallagher referred to there being no business investment strategy. That is simply incorrect. There are a whole range of matters which were brought down in the budget on Tuesday night which will promote business investment. The one thing you have to realise, Madam Acting Deputy President, is you don't have to dictate to private enterprise, to the entrepreneurs in our society and to the people who want to get ahead in this country what they should do with their capital and with their income; you simply need to get out of the way. You simply need to get out of the way and you need to structure the tax system so that it incentivises people and doesn't penalise people. That's what you have to do. You don't have to dictate to them that you should invest in this or invest in that. Government should get out of the way and structure a tax system that provides incentive for investment in this country, not disincentive.

That is exactly what the budget delivered on Tuesday night. There were a number of initiatives in the budget that fall into that category, including the immediate write-off of eligible assets, which will be an absolute boon for 99 per cent of businesses across this country. There will be investments made in this country that we can't even dream of coming out of this budget. It also includes promoting the use of gas and more supply of gas—increase the supply of gas, bring down gas prices, promote manufacturing. It's quite simple: increase the supply of gas, bring down gas prices, promote manufacturing. That's what this budget will also do. There is $2 billion for research and development. There is the sovereign manufacturing initiative, which will provide specific incentives for our manufacturers to develop those industries and provide jobs. And there are the tax cuts themselves that were brought down on Tuesday night. They will also deliver jobs, because when Australians are allowed to keep more of their money in their own pockets they'll go out and spend that money or they'll invest that in companies which invest that money and generate wealth and create jobs. That's what happens. That's what happens when you let private citizens keep more of what they earn.

One of the matters which really attracts me to the tax relief that is being provided through the budget is that it is proportionate and it is targeted. The people who receive the greatest proportion of the tax relief are low-income earners. For someone with a taxable income of $30,000 a year, their total change in tax compared with the 2017-18 year will be 21.3 per cent less. We know that people in those lower income brackets are more likely to spend each dollar that they are allowed to keep after tax. For someone earning $35,000 a year, their tax saving compared to 2017-18 year will be 14.8 per cent. By the time you get to someone who's earning $200,000 a year, the total change in tax falls to 3.8 per cent, and that's the way it should be. The tax cuts should be targeted at the low- and middle-income earners—and they are, as those percentages show in stark relief.

One of the other aspects of the tax changes that were brought down on Tuesday night that I fully support is the fact that you can carry back losses. A company that generated profits in the year ending 30 June 2019 can carry back the losses which they incur or have incurred in the year ending 30 June 2020 and offset those losses against tax paid in the year ending 30 June 2019. I think that's an absolutely tremendous initiative. It recognises the fact the companies, the owners of those companies, have been paying taxes to the Commonwealth over a period of time. Those taxes are used to pay for health and services. Then, when the company has generated a loss, not only can it carry that loss forward but it can actually carry it back so it can get a tax refund and use that money to either reinvest in the business or help it get through this period. I think that's an absolutely tremendous initiative.

Some of the other initiatives in terms of the tax relief have been targeted to make sure that the low- and middle-income earners are the ones who are actually going to receive those tax cuts. And they'll spend that money. They will spend that money that they're being allowed to keep through these tax cuts. Treasury estimates—and these aren't my estimates; these are treasury's estimates—that reducing the personal income tax burden on hardworking Australians through this measure will boost GDP by around $3.5 billion—billion with a 'B'—in 2020-21 and $9 billion in 2021-22, and will create an additional 50,000 jobs by the end of 2021-22. Those are Treasury's estimates—not my estimates, Treasury's estimates.

In the current economic situation, we need every single job we can get. These tax cuts will help generate those jobs. How? By putting more money in the pockets of the hardworking Australians who have earned that money, by allowing families to keep more of what they earn, and by allowing families to spend more on what their personal circumstances need. They will be the ones who make that choice, not government. The hardworking Australians who have earned that money will be the ones who make that choice. I would remind the chamber again that the income tax cuts are proportionate; they are weighed in favour of low-income earners and middle-income earners. As I said at the start of my speech, for someone earning a taxable income of $30,000, the percentage change in tax saved is 21.3 per cent. For someone earning $200,000, it goes down to 3.8 per cent. For someone earning $60,000, the tax saving is going to be 17.8 per cent. Compare that to someone who earns $160,000; their tax saving is only going to be 5.1 per cent. That is exactly how it should be—to make sure those tax cuts are targeted to help those Australians in the low- to middle-income tax bracket.

We should remember that eight in every 10 Australians are employed in the private sector. In order to rebuild our economy and create more jobs, we need to kickstart that part of the economy, the private sector. It is expected that the tax relief given to businesses, the instant asset tax write-off, will also be a boost to GDP and job creation. It will provide opportunities for everyone in our society—in our cities, in the country and in our regional centres. My office is in the Ipswich region in Queensland, where I know many businesses are going to take advantage of these opportunities. I have visited TAE Aerospace in the Ipswich region. It is based in the industrial centre in Bundamba. As this budget was brought down on Tuesday, I was reflecting on how they will be able to use the tax relief that will be given to their business to invest in more capital—updating machinery, expanding their product range and providing opportunities to young people in the Ipswich region. And they are already doing great work in terms of providing those opportunities to young people in our regions.

The $2 billion for research and development is also desperately needed in the economy at this stage. It will be exciting to see what Australian initiative, Australian enterprise, Australian knowledge and Australian know-how can generate with that R&D incentive. I'm looking forward to visiting businesses to hear about how they are applying that R&D incentive to generate jobs, create wealth and provide opportunities for all Queenslanders, for all Australians, to fulfil their true potential, whatever their background and wherever they come from.

1:49 pm

Photo of Jenny McAllisterJenny McAllister (NSW, Australian Labor Party, Shadow Cabinet Secretary) Share this | | Hansard source

I rise to speak on the Treasury Laws Amendment (A Tax Plan for the COVID-19 Economic Recovery) Bill 2020 and to consider the context in which it is presented. Senator Scarr has given us a long dissertation about the underlying economic management philosophy of this government. He spent quite a lot of time talking about how what we need is for government to get out of the way. I would make two observations. One is that it's a pretty funny thing to hear from a group of people who have just delivered a budget indicating that we're about to hit a trillion dollars in debt. It's a pretty jarring thing to hear in that context. The second thing I'd say is that it's also pretty tone deaf, because if the pandemic has shown us anything it is that government matters. When a virus, beyond our control, sweeps through our country and across the globe, government can't get out of the way. We've seen overseas what happens when they do: uncontrolled spread of the virus, uncontained disruption to the economy, unemployment, financial hardship and financial distress.

It was actually the inclination of this government to take that same approach. They had to be dragged kicking and screaming to provide financial support to households and businesses and to provide fiscal support to the Australian economy. Wage subsidies were totally impractical and not on the table, until they were. The government were not interested in measures to support businesses until the Labor Party pushed for them. It's been the pattern, all through this period of COVID-19 and all through this year, that the government has only acted to support the economy when we push them to do so—measure after measure after measure in response to a Labor suggestion. We have tried to be constructive. It is a national crisis and an international crisis, and we have tried to play the role that a good opposition should at this time: to hold this government to account but to be constructive. But these guys make it pretty hard, because their contempt for ordinary people, their contempt for the information they hear from people on the street and their exclusive focus on their own interests make it very, very difficult to support the direction that they seek to chart.

We didn't have a lot of confidence in their economic management. The economy was already floundering before we came into the pandemic. Every now and then, when the government gets desperate, it thinks, 'What are we going do?' and it searches around in the bottom drawer for some ideas about how they're going to grow the economy, restore productivity and get the country moving again. Usually they say, 'Yes, we've got this marvellous Productivity Commission report from 2017: Shifting the dial: improving Australia's productivity performance.' I just thought I'd have a look at that. I recall it had a good set of initiatives. When you go to the Productivity Commission website, it indicates that there is still no government response to the Shifting the dial report. So you've got an economy with flatlining productivity and a desperate need to get jobs moving—this is even before we come to the pandemic—and a government that can't be bothered to even go and respond to the document that they commissioned from the Productivity Commission.

I remind people on the other side of what was in that. There were some suggestions about healthier Australians and reforming the health system. There was a whole set of recommendations about future skills and work. There's a set of recommendations about better-functioning towns and cities. There's a whole section about improving efficiency of markets, with an intense focus on the energy market, the great policy failure of this government, which has managed to get through seven years without a single energy policy that's actually implemented but 20 policy ideas that they never got around to doing anything with. The fifth thing is more effective governments.

Wouldn't it be nice if there'd actually been some economic reform of some kind in any one of those domains prior to hitting January this year? Wouldn't it have been nice to go into the pandemic with an economy that was actually firing on all cylinders? Wouldn't it have been good to have a training system that was actually preparing our young people, and people throughout their lives, for jobs of the future? Wouldn't it have been nice to have an R&D system that was actually supporting innovation in the business community? Wouldn't it have been nice to have done something about women—about the pay gap, the retirement incomes gap, their participation in the labour market and their need for child care that is affordable and of a high quality?

Wouldn't it have been nice to have done something about all of those things, all of those reform options that have been laid out time and time again for a tone-deaf government that refuses to listen and refuses to take responsibility for its role in the Australian economy? We've had to wait till there's a pandemic to see them actually take responsibility of any kind, and then, as I said, only when pushed by the Labor Party.

So we find ourselves this week with a budget that tells us we're up for a trillion dollars in debt but signals no coherent story at all about the future of the Australian economy. People will know that I've spent quite a bit of time since I had the very good fortune to be elected to this place thinking about the role of women in our economy. This pandemic has highlighted how significant the female workforce is and how important the female workforce is, particularly when things go bad, but also how precarious the nature of women's employment truly is. When the pandemic hit, who got laid off first? The casuals. And who comprises the casual workforce? It is the women of Australia. So it was women's hours and women's jobs that suffered the greatest hit. It was women who took up more and more care obligations at home when children were at home and being homeschooled. And it was women who bore the risk of turning up to frontline roles—in nursing, cleaning, retail, teaching and early childhood—to continue to keep things ticking over while we faced down this pandemic.

You might have thought that the conversation that had started to bubble away amongst Australian women would have filtered through to those on the other side. You might have thought they would find it within themselves to come up with just something of meaning for Australian women and their workforce participation in this budget. But, no, it is a budget devoid of empathy or interest in the lives of Australian women. It is a budget devoid of empathy and interest in the economic security of Australian women. It contains very little for them. We are spending twice as much on an IT system for the Department of Human Services as we are on the initiatives in the Women's Economic Security Statement. It is incredible! The Women's Economic Security Statement comprises one-third of one per cent of the new measures in the budget.

I think that, in part, this situation arises because there are so few women in the cabinet, so few women on the ERC and, worse, so little interest by the men of the coalition in listening to the women around them. It is just shameful, because if they listened to the women in their electorates—listened to the women who work in their schools and the women who are dropping their kids off each morning—they'd know that there are a whole range of priorities that Australian women want to see addressed. But we won't find them in this budget. You won't find anything about tackling the pay gap. You won't find anything about improving access to child care. You won't find anything about the disproportionate taxation that occurs when women increase the number of working days from three to four, if they happen to be the second income-earner in their household—you won't find any responses to that. You won't find any relief for the women who emptied out their superannuation accounts because they were shut out of JobKeeper, because JobKeeper was designed in a way that didn't support the working lives of Australian women. You won't find any additional money for women fleeing domestic violence and looking for support from frontline services. It is incredible to me, and incredibly tone-deaf, that, in a period when there has been article after article in every mainstream news outlet about the rise in the prevalence and severity of domestic violence, this was not made a priority in the budget this year. What a depressing indication of the seriousness with which this situation is taken on the other side! How can you rack up a trillion dollars in debt and not do something about the epidemic of violence that is sweeping through Australia's households?

This is not a budget that responds to the economic needs of this country. It is not a budget that responds to the social needs of the households in this country. It is not a budget that does the job in charting our new course.

Photo of Scott RyanScott Ryan (President) Share this | | Hansard source

Order, Senator McAllister. It being 2 pm, we'll go to questions.