Wednesday, 15 November 2023
Treasury Laws Amendment (2023 Measures No. 1) Bill 2023; In Committee
Just so that everyone is up to speed: we are now dealing with two opposition amendments, one of which I have moved, which is on sheet 2038 and would repeal schedule 4. Soon we will move to the second opposition amendment, on sheet 2043, which deals with the removal of schedule 5.
By removing schedules 4 and 5, the opposition is seeking to hold the government accountable and save the government from itself and the breaking of an election promise—a promise that was given by the former leader of the opposition, now Prime Minister Anthony Albanese, and a promise given by the Treasurer, Mr Chalmers, on not one but five occasions: in January 2021, 30 March 2021, 15 December 2021, 17 January 2022 and 4 March 2022. The two most senior economic people in the government aspiring to win the election, Mr Anthony Albanese and Dr Jim Chalmers, gave a commitment to the Australian electorate that they would not change the franking credit regime. They gave that election commitment because they were worried that, having incurred an election loss in 2019, it was in large part—not solely, but in large part—due to a commitment by the then opposition leader, Mr Bill Shorten, to change the franking credit regime, which cost them that election. To create some immunity from that risk for Anthony Albanese and for Dr Chalmers, they went out into the community and said: 'Have no fear. Franking credits will not change in this country.' They said it five times.
What we're dealing with today in the Senate with this Treasury Laws Amendment Bill relates to the government breaking that promise. Proposing that two schedules, schedule 4 and schedule 5, be removed is holding the government accountable, saying to the government, 'Don't proceed with yet another broken promise.' Unfortunately I suspect that the government will proceed, will get the votes to break this election promise, supported by the Australian Greens and by some Independent senators in this chamber.
I just want to stay with the matter of revenue. Senator Bragg asked some questions, but I would like to narrow the commentary and get some commitments and some understanding from the government in regard to my own line of inquiry regarding this matter. I thank the minister for her cooperation to date in making some answers to questions on notice available. I'm just curious to know the time frame in which those questions you've taken on notice will be made available to the chamber.
In answer to questions on notice, Treasury has made a number of claims about this particular bill. Senate question on notice 1695 asked Treasury whether it acknowledged that the changes to franking credits in the last budget were a tax increase. The Treasury response to that was, 'No, the off-market share buyback measure is designed to improve the integrity of the dividend imputation system and is not a tax increase.' I'm happy to table that response if necessary, but I don't think that really will be necessary. Does the government maintain that the measures contained in schedules 4 and 5 are not a tax increase on Australian companies, investors and retirees?
So, it's not a tax increase; it's about closing a loophole. Senate question on notice 1694 asked how much of the revenue raised through that measure comes from personal income tax receipts. The answer from the Treasury read: 'Over the forward estimates, personal income tax receipts are expected to increase by $150 million as a result of this policy. Does the government maintain that the measures contained in schedules 4 and 5 are not a tax increase on Australian investors?
The answer to Senate question on notice No. 1694 clearly states:
Over the forward estimates, personal income tax receipts are expected to increase by $150 million as a result of this policy.
Some in this chamber would contend that that reads that this policy increases income tax receipts by $150 million. Do you agree or disagree?
Senate question on notice No. 1692 asked how much of the revenue raised through the measure is realised through increases to superannuation tax receipts. In response the Treasury said:
Over the forward estimates, superannuation fund tax receipts are expected to increase by $400 million as a result of this policy.
Does the government maintain that the measures contained in schedules 4 and 5 are not a tax increase on Australian retirement savings?
The government stands by the response to question 1692, which shows that there would be an increase in tax receipts of $400 million. And the government stands by its response to question 1694, which identified that there would be an increase of $150 million in tax receipts.
The answer to Senate question on notice No. 1693 states that there will be no impact on company tax receipt expected as a result of this policy. If this is a crackdown on companies exploiting a tax loophole, as the government claims, and not a broken promise on taxing franking credits, why does it raise zero dollars from company tax?
This is about closing the loophole that we've talked about quite a few times throughout today. That loophole began when the previous government, under Scott Morrison as Treasurer, opened that door in 2016 and never closed it, which is why we are here today.
In that intervening period, there is the ATO direction, I would add. How does the government reconcile a measure that raises revenue exclusively off personal income tax receipts and superannuation fund tax receipts with the government's claim that this will not hit retirees' franking credits?
We know that when you consistently come forward with the same questions it is about your side of politics recognising that you failed to close a loophole. We know that this is an important piece of legislation in terms of closing a loophole that your side of government never did.
More fundamentally, it is about a commitment being given by a person who wanted to be the prime minister of this country and by someone who wanted to be the Treasurer of this country saying to the electorate that they would not change the law in regard to franking credits. They made that commitment on five occasions and then decided to break that promise. That's the core issue here. Is it then true—and does the government concede—that this is in fact a retiree tax?
Let's talk about commitments, shall we? You clearly do not want to move past the fact that this began under Scott Morrison as Treasurer in the lower house with wanting to see the closing of this loophole. It never occurred under your government. We are now doing it. The answer to your question is no.
In January 2021 the then opposition leader, now the Prime Minister, gave a commitment that franking credits would not be changed, that the tax law in this regard would not be amended. He gave that commitment. Then a commitment was given on ABC Radio on 30 March 2021. Then a commitment was given in Tasmania on 15 December 2021. The then shadow Treasurer gave the commitment on 17 January 2022. Then the Prime Minister on ABC Radio in Perth on 4 March 2022 gave a commitment that there would be no change to franking credits. Then in September 2022 the Treasury distributed a consultation paper on its exposure draft legislation. In which month between March 2022 and September 2022 did the Prime Minister decide to break his promise?
It has everything to do with sheet 2038, because we are seeking to remove from this bill two schedules which go to the core of the Prime Minister's and the Treasurer's commitment. By removing these two schedules, a promise will not be broken. So, on which month? Was it March 2022, April 2022, May 2022, June 2022, July 2022 or August 2022 that the Prime Minister decided to break his promise?
Minister, given that this change to franking credits will raise almost half a billion dollars in superannuation and income tax, can you clarify what the Prime Minister meant when he was quoted in the West Australian newspaper as saying:
I can confirm that Labor has heard that message clearly and that we will not be taking any changes to franking credits to the next election …
Given that this policy raises almost half a billion dollars, can you explain to the chamber and to the Australian electorate, who took the Prime Minister on his word, what he meant by that comment?
It's not for me to know what is in the minds of anyone when they make any comments. But I do know that the Prime Minister would like to see this piece of legislation pass.
We've had a parliamentary inquiry and a consultation process. A number of those consultation submissions—I'm being generous, as they were in their thousands—weren't released publicly. I'll ask again: can the Treasury name a single corporate law firm, investor group or industry body that supports these franking credit changes?
It troubles me that you are trying to imply that there has been a lot of secrecy here when we know that public submissions are exactly that—they are on the public record.
That point takes us right back to where we started today. A high level of secrecy and a lack of consultation was revealed today. This afternoon, I think, many various peak associations reported in the media that they don't feel that they were consulted on that original amendment that was agreed to by the Senate. I think the accusation or suggestion that these things had been done with poor consultation on one level—perhaps even with a level of secrecy at the other end of that—stands up to the evidence.
I reject that outright, and you are making a reference to this particular amendment, which did not include your questions around the amendment that you lost. If you feel very hurt by that, well, clearly it was the wish of the Senate to move that amendment. In terms of this particular amendment, those submissions aren't public. In terms of the question that you just raised previously, they are public. They are on the website, as they should be.
Can the minister confirm that the nature of concerns that were raised included concerns over retrospectivity, concerns over the policy objective and concerns over the potential for the legislation as drafted to capture legitimate commercial practices?
I'm more than happy to repeat what I said in my summing-up speech on the concerns raised. Schedule 5 will improve the operation of the measure by ensuring it operates on from royal assent, thereby providing greater certainty with regard to the treatment of past transactions. The original start date was 15 September 2022. Secondly, it clarifies that it is targeted to artificial and contrived arrangements, mitigating any unintended consequences arising from the original schedule, including clarification that a distribution funded by capital raising in response to a regulatory requirement will not be captured by the legislation. It penalises only the part of the distribution that was funded by the relevant capital raising rather than the entire distribution.
These amendments address feedback provided to the committee, and I'll just refer to that. The amendments limit the amount of a distribution that is made unfrankable to the portion of it that was funded by the relevant equity issue. Before the amendments, the whole distribution would be made unfrankable, even if it were only partially funded by relevant capital raising. The amendments clarify that the principal effect of an equity issue must have been to fund a substantial part of a distribution, as opposed to any part of a distribution. The amendments clarify that the purpose, other than incidental, of an equity issue must have been to fund a substantial part of a distribution, as opposed to any part of a distribution. The amendments clarify that the measure does not apply to an equity raising or distribution made in response to a regulatory requirement, directive or recommendation—for example, one by the Australian Prudential Regulation Authority to authorised deposit-taking institutions. The amendments change the start date of schedule 5 so that it applies on a prospective basis to distributions made after the date of royal assent rather than to distributions made on or after 15 September 2022. These amendments contain important narrowing of dates.
Minister, because the policy will raise $400 million from superannuation tax receipts and $150 million from personal income tax receipts, don't you think it works against the interests of retirees and others when they are facing a cost-of-living crisis?
I refer to my previous answers here, which were that this is an important piece of legislation to close a loophole that your government refused to follow through on, and the answer is no.
Thank you very much. In conclusion, I think it's important to say this. In the vote that will happen very shortly, the opposition's attempt to remove schedule 5 and schedule 4 from the bill will most likely be defeated. That means that this Senate chamber will have legislated the Prime Minister's broken promise—a promise that he and the Treasurer made on five occasions—and, as a consequence, $550 million will be raised from superannuation tax receipts and personal income tax receipts. That's not just any broken promise; that is a very significant broken promise. I make this point: it was given on five occasions, yet there was hardly a heartbeat between the election in May 2022 and the Treasury's decision in September 2022 to release the consultation paper. It's hard to imagine that the original plan was not always to break that election commitment.
Not once in the deliberations this afternoon have the government said, 'Things changed so dramatically for us that we had to review all of our election commitments.' You've not said that, not once. I think the conclusion that Australian electors might come to, which is that the Prime Minister and the Treasurer always had it in mind to break this election commitment, is true. It wasn't an election commitment that was given in good faith and had to be broken as a result of significantly changed circumstances—not at all. This commitment, given in January 2021 and on 30 March 2021, 15 September 2021, 17 January 2022 and 4 March 2022, was always going to be broken.