Income Tax Matters of Public Interest
I’d like to start off by commenting on a couple of comments my very good colleague Senator Ketter made there. He talked about the importance of revenue. Revenue is important, because if you don’t have revenue, if you don’t have a strong economy, then you can’t actually support all the things you wish to support, whether they be education, health or national security. One of the problems that the Labor Party has had for a long time when it comes to revenue is that when budget forecasts come from Treasury there’s always a span of estimates from a low side to a high side. On my side of politics we always take the conservative view, which is to say, ‘Let’s plan on the low side, in terms of income, and then regulate our spending accordingly,’ whereas those opposite take the optimistic high side in terms of the expectations of revenue. Time and again that brings them undone, not only in government but even in opposition. We saw that frequently during the six years of the Rudd-Gillard-Rudd governments.
When Treasury costed Labor’s retiree tax, for example, Labor said at the time that they expected to collect revenue of around a figure of $59 billion. With a bit more scrutiny it was then lowered to $55.7 billion, and now it’s come down to $45.8 billion. These costings reveal that there are actually huge budget black holes in Labor’s costings—in this case around $10 billion in the retiree tax—because of that propensity to overestimate revenue because it sounds good in the short-term.
I’m a great believer in always underpromising and overdelivering, as opposed to overpromising, and in this case the overestimation is bad. Not only is it bad in terms of overestimating; it doubles-down when people then spend what they estimated they would receive before the funds have come in. You’ve only got to think back to things like the mining tax. Not only was it an ill-considered tax that raised no money—in fact, it cost the government coffers money—but those opposite committed the revenue they thought they would achieve through the tax to other things and then the income from the tax never actually arrived.
The other thing Senator Ketter said was that Labor supports a bigger and better tax system. You can certainly believe that. If you add up all the various measures that they have looked to impose on the Australian public and business, you’ll see they come to around $200 billion more in higher taxes. There’s the retiree tax, which is around the receiving of refunds on the tax paid on share dividends. There’s the housing tax, which is a $20 billion tax on mum and dad investors through the plan to abolish negative gearing for established homes. There’s the investment tax, which is a $13 billion increase in capital gains tax for all assets through the halving of the 50 per cent CGT discount. There’s the tax return tax, a $1½ billion impost courtesy of Labor’s proposal to slap a $3,000 cap on the amount that individuals can claim for getting complex tax returns done. There’s the higher income tax, a further $22 billion tax on wages. There’s Labor’s family business tax, a $22 billion tax on family businesses through Labor’s plan to impose a 30 per cent tax rate on distributions from discretionary trusts. Bear in mind that discretionary trusts are the vehicles used by most small businesses because they help to balance out the peaks and troughs of cash flow, but small businesses have also been the engine, the driving room, of job creation over the past few years. In fact, throughout Australia’s history small businesses have been the ones that create jobs. So, perversely, Labor are attacking the very people who generate employment, which is what generates the revenue that helps us keep the country going.
Finally, there’s Labor’s saving tax, some $25 billion worth of new taxes on your superannuation savings. There are measures like lowering the non-concessional contributions cap to $75,000, lowering the high-income super contribution to $200,000 and significantly reversing things like the introduction of catch-up concessional contributions. Part of the reason this was brought in was that we recognised that many people—women, for example—had been out of the workforce for a while and hadn’t been paying into superannuation, and so catch-up provisions were made, so that the size of their superannuation nest egg had the opportunity to catch up. We think that’s a fair thing that we should be maintaining for the working people of Australia.
As for the tax plans of this government, we have a long-term plan aimed at building a stronger economy in Australia. As I said right at the start, the reason a strong economy is important is that if you want a good health system, a good education system and strong national defence then you need to have a strong economy, because that’s what underpins all these things. The tax relief we are looking for is phased in over a number of stages, but it’s aimed to both create tax relief for individuals, easing the cost pressures that they’re under, and to provide incentives for companies to create jobs. We’ve seen that those have worked. Over the last 12 months more than 417,000 jobs have been created, 75 per cent of which have been full time. Those who are cynical about those figures can also look at the number of people on welfare: 15.1 per cent, the lowest in 25 years. That means, even with the up and down of people who might lose a job or take a job when a job is created, in net terms we are moving people off welfare and into work. That is the best way of growing a stronger economy so we can afford the things Australia wants: better education, better health and stronger defence for this nation.