News

14 February 2023

I rise to speak on the Treasury Laws Amendment (Cost of Living Tax Cuts) Bill 2024. Whilst I support the assistance that this amending legislation will provide to many in our communities, I do have great reservations as to how we have arrived at this point and the way in which the government has handled this issue over several years now. I was in this place when the original tax package was first legislated in 2019 and raised concerns then in relation to the stage 3 tax package because it was not due to take effect for some five years and that good policy would require keeping an open mind and considering the economic circumstances of the time. So it was with mixed feelings that I watched the PM and the new government repeatedly dig in, denying that there would need to be a consideration of that tax package, after having supported it in the last government, and resisting time and time again. I think this ultimately created an unnecessary hole, which is unfortunate.

I also really dislike, and many in my community have raised, the tone of class warfare coming from the government, which is disappointing. It's a populist pitch. The pitch that those on higher incomes can afford to receive less of a tax cut than the coalition's legislated package shows the core of the issue. We rely far too much on personal income tax to fulfil government coffers, which is overwhelmingly contributed to, ultimately, by tax on higher incomes. We need a wholesale review of the tax system. That means everything should be on the table: the GST, company tax, capital gains tax, taxing resources and, certainly, taxing multinationals.

The Treasury's Intergenerational report 2023 highlighted that Australia's population and productivity are projected to grow more slowly over the next 40 years, leading to slower economic growth compared to the past 40 years. An ageing population will also be a challenge. The participation rate is projected to decline, as will average hours per worker. That's going to pose a challenge to how we fund the government services we all rely on. The same Intergenerational report noted that, over the next four decades, the five main spending pressures of health, aged care, the National Disability Insurance Scheme, defence and debt interest payments will rise from around one-third to around one-half of all government spending.

Speaking to the report last year, former Treasury secretary Dr Ken Henry was scathing: 'People who are weighted down with HECS debt, who are going to have to repay a mountain of public debt, who are dealing with the consequences of climate change and who are facing diminishing prospects of ever being able to afford a home of their own, these poor buggers are also going to be the ones who are facing ever-increasing average rates of income tax.' Dr Henry's sentiment gets right to the nub of it. We need urgent reform. The current model is simply not sustainable.

Australia currently has one of the lowest income thresholds in OECD countries for the higher tax brackets. We rely far too heavily on personal income tax to fund our essential services, yet we do nothing to make resource conglomerates pay their fair share. The petroleum resource rent tax, the PRRT, that is currently being proposed by the government is a joke; let's get real about that. It is one of the most lax resource rent tax systems proposed in the world, even including recent reforms—in particular, the reforms the government is proposing. Its failures have been highlighted in recent years as gas companies have reaped windfall profits, yet many projects have not paid any resources tax. Add to this the fact that many of these companies are also not paying any company tax and you're really adding insult to injury.

As I've noted before, foreign owned Arrow Energy, Australia Pacific LNG, Chevron and ExxonMobil didn't pay income tax for seven years, resulting in all profits heading straight offshore. Australians are horrified that these companies can make $138 billion from our natural resources and pay nothing in tax. Australia has one of the weakest resource tax regimes in the world, and one of the most generous to oil and gas companies. In contrast, Norway taxes 78 per cent of export resources profits, delivering a $2 trillion sovereign wealth fund. This supports health care, child care and other social measures, all without discouraging investment. The government is shirking its responsibilities to undertake comprehensive tax reform.

I want to raise a concern about how we got here and the way the government has approached its decision-making and then communicated the changes to the stage 3 tax cut package. In the lead-up to the last election the Prime Minister gave a guarantee that the stage 3 tax cuts would stay locked in, as had been legislated. On numerous occasions since the last federal election he repeatedly said there would be no changes. In one interview he is quoted as saying, 'My word is my bond.' I watched all this with misgiving, because all this does is erode trust. You dug the hole yourself, Prime Minister. The government should never have gotten itself into a corner by constantly assuring people that they would not touch the original stage 3 tax cut package.

I'm not opposed to good policy changes being implemented as circumstances require. These tax cuts were legislated as a package of reform. It was always problematic that stage 3 would come into effect five years after being legislated. Honest government would have been upfront with the public. Government policies must adapt to changing circumstances, and circumstances have changed over the last 12 months. This is not something that just happened in December and January of this year. Instead, we saw an abrupt policy change out of the blue and a tax change without an exposure draft and certainly without public consultation.

The question that is out there is, what else is up for sudden change without proper, sober consultation or due policy process? Will the climate change targets be up for renegotiation because there's pressure in some electorates, maybe? Or the commitment to a net-zero economy? That's the issue the Prime Minister and the government must now contend with: trust. In the 2023 Edelman Trust Barometer, trust in government leaders has declined to 41 per cent, marking a decline for numerous consecutive years. I feel that the loss of trust can't be overlooked. There's no doubt that cost-of-living pressures are hurting many in the community: prices, power bills, inflation, interest rates and insurance premiums have gone up and are squeezing household budgets. There is no doubt that economic circumstances have been tight for more than 12 months. So I absolutely welcome that this provides support for many in our community.

I want to thank all the people in Warringah who have reached out to me to let me know how they feel about the government's proposal and who have provided me with their feedback. Many of them are impacted by the change in terms of receiving less, in particular receiving less of a tax cut than they had been planning to receive. It's heartening to see the generosity of so many who want to see those on lower incomes receive more benefit. In fact, more than 80 per cent of those who have corresponded with me are in favour of those tax cuts, with many indicating that they were due to receive more but favour the amendments. And I note that according to Treasury data Warringah has some 82,000 taxpayers who will receive an average tax cut of $2,226 under the new package. It will leave about 56,000 taxpayers better off, which is approximately 68 per cent of taxpayers in the electorate. Treasury analysis also indicates that this will support more women and greater participation in the workforce—all good things.

But I have asked for, and I would welcome, further information or modelling explaining why the settings by the government have been put where they are and how they've been decided on. I appreciate that the income thresholds that are indicated in the bill are significantly above average Australian wages, with incomes of between $137,000 and about $200,000. I would say, though, that often they are not in a class of uber-wealth as would be described by many on the government benches, particularly when one considers exploding house prices in electorates like Warringah.

So I have written to the Treasurer to request clarification of what the modelling was and why putting the 37 per cent tax rate at the threshold of $135,001 and the 45 per cent tax rate at the threshold of $190,001. In the Treasury advice released by the government there's no clear reason that these thresholds have been chosen and what alternative thresholds and rates were considered, if any. Are there clear benefits or drawbacks compared with other thresholds? There are no clear answers from the government on this. There is also no provision in the government legislation to index tax brackets, to really address bracket creep, which will impact millions of Australian taxpayers in the coming decade. I've written to the Treasurer with those questions but have not received any response.

Changes to the tax system should be done openly. They should be done with consultation, and I would argue that they should be done with exposure drafts so there is a broad consensus and ability to really assess the benefits and the merits of what is being proposed and where it's being proposed. We also have to be cognisant of the timing of this. We are seeing sittings of parliament till 10 pm on endless nights because of the timing. We know what was already legislated has been done for several years. Accountants and financial professionals have set up their advice and planning based on the original time line and measures. The ATO has set up its calculators. Everything was in place for the system as legislated, and the government repeatedly assured everyone that they would not amend or repeal. Now all the systems and practices put in place to address what was legislated must be overhauled in time for 1 July 2024, assuming this legislation passes. I would argue that it is bad policy to be changing at so late in the piece without the right kind of consultation. We should be approaching a serious issue of tax reform that impacts every Australian taxpayer with due process and care.

I absolutely support simplifying the personal tax brackets and incentivising Australians to work hard, earn more and keep more of their income. We need to move away from so much reliance on personal income tax revenue and make resource giants and multinationals pay their fair share. Focus needs to also be on those suffering the most right now. Whilst this is addressing many in our communities, the most needy are actually not really benefiting much. The reality is that those suffering the most are the poorest in our community. They're those on JobSeeker, student allowance and age pensions. They won't be benefiting much from this package. So, if the government is really committed to helping those who are doing it tough and they're not just out for votes because of the popular appeal of this policy, then they would be committed to increasing payments such as JobSeeker to ensure that it is above the poverty line, alongside increasing other support payments.

The detail of the bill—for many, there's been a lot of discussion, and I encourage residents of Warringah to go to the website. We will be putting up the detail in relation to the stage 3 tax cuts. The most important aspect is that essentially what was passed in 2019 has been repealed and has been replaced completely with new personal tax rates, which will bring the following brackets into effect. The bill will change the 19 per cent tax rate to 16 per cent for those earning between $18,200 and $45,000. This is welcome for young people in particular. It will change the 32.5 per cent tax rate to 30 per cent for those earning between $45,001 to $135,000. It will increase the threshold above which the 37 per cent tax rate applies from $120,001 to $135,001. It will increase the threshold above which the 45 per cent tax rate applies from $180,001 to $190,001, noting though that it was legislated to be at $200,001, so it's really an increase in tax for that bracket. That means that all taxpayers essentially earning around less than $150,000 a year will receive a larger tax cut than they would have done under the original stage 3 package, while those earning more will receive a lower tax cut. The concern, again, is that there is no provision for indexation, and so with bracket creep what we will see is more and more people getting less of that benefit.

Despite my concerns, I'm absolutely in support, and I thank again all the people from Warringah who have written to me to let me know their thoughts. But I urge the government to think about trust and integrity and to bring the Australian people along with them when they are considering major policy changes. At the end of the day, whilst this may have gone down well, it raises the spectre of the question of what will be next. Trust in government once lost is lost, I think, forever. So, for me, there is that question. I must say that the Prime Minister, I think, on a number of occasions has identified his word as his bond, but that ultimately cannot be believed. When I look at other significant policy areas, such as climate change, energy, commitments in relation to net zero and commitments to a local issue like PEP11, which have still not been implemented—the Prime Minister promised that it would be dead, yet it is not—the question of trust and integrity will forever be there.