The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Wayne Swan

Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

28 July 2011

Joint Press Conference with
The Hon Bill Shorten MP
Minister for Financial Services and Superannuation

Press Conference

Sydney

28 July 2011

SUBJECTS: Tax Forum discussion paper; tribute to Rob Chalmers; LNG announcement; successful operation of minority government and passage of legislation; US economic and political situation; directions and timeframes for tax reform.

TREASURER:

Well, today Bill Shorten and I are releasing a discussion paper for our upcoming Tax Forum. Now the tax system is a major driver of the type of fair and prosperous society that we all want. It funds the quality public services that we need, like health, education and defence, and at the same time it delivers the incentives that we want, the rewards for hard work, and of course keeping our economy competitive.

Now when I released the tax review over a year ago, I said as a nation we needed to have a decade-long discussion about tax reform, and this is part and parcel of that process. It's about engaging the community in a fair dinkum discussion about where we go into the future, and in particular how our tax system should be re-shaped to meet the challenges that are before us - particularly growth in our Asian neighbours, the ageing of our population, and of course our transition to a clean-energy future. Now in responding to the recommendations of that review and the community discussion, the most important thing is to make sure that our tax reform priorities make our economy stronger and of course make our tax system fairer and simpler over time.

Now before I talk about the paper and the process, I just want to make a few points about where we are in terms of tax reform. Because this Government has put in place a wide range of tax reforms over the past few years - significant reforms in personal tax, very significant reforms in superannuation and saving, significant reforms in the transfer payments system, and significant reforms for business tax and resource tax.

We've delivered three rounds of personal income tax cuts - they have been quite significant. And we are trebling the tax-free threshold from $6,000 to $18,000 - rewarding work and taking more than one million Australians out of the tax system. That is a bunch of very significant tax reforms in the personal tax area.

And we are also reforming the superannuation arrangements - taking the superannuation guarantee to 12 per cent and introducing fairer concessions for 3.5 million low-income earners, and of course larger contribution caps for the over 50s. These are also very significant reforms.

And significant reforms in business tax as well. We are cutting the company tax rate and we are introducing a $6,500 instant asset write-off for small business - a very significant small business tax reform. And with that, significant new concessions for research and development particularly targeted at small business. And on top of that, we're putting in place better resource tax arrangements as well.

We've also reformed the age pension and we've put in place a historic increase in the base rate of the age pension in 2009, and we've got a new pension Work Bonus. We have put in place Paid Parental Leave. We've increased Family Tax Benefit for teenagers, and we've got a better income test for single parents and school-aged kids and for Youth Allowance. So there are a bunch of reforms when it comes to the transfer payments system that have been significant.

And we're also improving the fringe benefits tax treatment of cars. And we are putting a price on carbon, which is a major structural reform which is recommended by the tax review process.

Now the Tax Forum is going to play an important role in progressing our future reform agenda. I want to see a robust debate in the community about priorities and directions in tax reform. The paper that we are releasing today is not a Government policy statement. It points to some of the major themes in the reform process. There's going to be six sessions for discussions at the forum, but the paper itself is not exhaustive. If you want to go back to the 1,000 pages in the Henry review, please do. What the paper does is point in the directions of reform, but it doesn't pretend in any way to be exhaustive.

So I want to make a couple of points. Any reform in the tax area has to be consistent with our fiscal policy and our strict fiscal rules. The debate at the forum will then feed into the ensuing parliamentary debate, and of course those matters will then come before the Government for final decision.

In terms of the invitation list, we've really tried to make it as broad as possible. We do live in a community, not in a corporation, and I want to see really strong community participation in this discussion. So all sectors are present - professional bodies, the business community, trade unions, academics and of course the wider community.

So about a third of the participants are named. And participants will also be chosen by organisations that are coming - that's about another third. And roughly a third will be chosen through an application process to ensure the broadest possible community participation, the broadest possible cross-section.

There will also be a website which will go up where people will be able to contribute to the discussion. It's an unfortunate fact that not everybody can necessarily come to the forum, but it's important to make participation in this discussion as broad as possible.

Now people who come to the forum will have a wide range of views and a wide range of priorities. I want to hear those priorities from all of those people at the forum and so does the Government, but from my own personal perspective, I'd just like to outline some priorities.

I think most importantly, whatever we do with the tax system, we must first and foremost reward hard work and put in place incentive for hard work. We've also got to have a tax system that makes our businesses competitive, and it's got to reflect the challenges which many businesses face in what is a patchwork economy. I also think we need to look at ways of improving our retirement savings given the huge challenge that we face as an ageing population.

Now before I hand to Bill, I'd just like to say one or two other things. This morning or overnight Mr Rob Chalmers, a giant of Australian journalism, has passed away. I just wanted to take the opportunity of extending my condolences to his family. He will certainly be missed by many friends in the Press Gallery. He was a great Australian journalist and also a great person, and I'm saddened to hear of his passing overnight.

I'd also just like to make a comment or two about the origin LNG project which has been to final investment decision and is being announced in Queensland today. We're quite excited by this decision. It demonstrates the faith that international investors have in the future of our LNG industry. It's an investment of some US$20 billion. It's great news for the nation and even bigger news, as I said before, for my home state of Queensland. It will create 6,000 construction jobs and an additional 1,000 ongoing jobs.

What it does say is that our LNG industry has a great future in the global supply chain. Half of the world's planned additions to LNG capacity are currently under construction here in Australia. And of course what this investment yet again proves is that Mr Abbott's campaign against the carbon price and his claims about what it will do to investment are complete bunkum and nothing more than scaremongering. I wish Mr Abbott would just stop talking down our economy.

Announcements like today just tell us what a bright future we have in this country - a bright future which is directly linked to the opportunities which will flow from the Asian century. We are seeing massive investment in coal and LNG, particularly in Queensland, by companies that have already factored in to all of their investment plans a carbon price.

I'll just throw to Bill and then we'll take your questions.

SHORTEN:

Good morning everyone and thank you Treasurer. As the Treasurer said the Tax Forum will play a really important role as we build upon our already ambitious tax reform agenda. We believe that tax reform has a central role to play in encouraging greater investment. If Australia is to take best advantage of its natural resources and its highly-skilled workforce, we need the physical capital as well - the machinery, the computers, the plant, the equipment - all of the things which power a modern economy. We also need to continually innovate our technologies with our research and development, and we also need to ensure that we have adequate capital to fund it - this is crucial.

So the Government's tax reform agenda and future vision has a strong focus to ensure that Australia remains an attractive, competitive destination for global capital, and that Australian businesses have the availability of capital so that they can be the businesses of innovation and globally competitive. To this end, cutting the company tax rate is vital to our immediate investment growth and our investment profile, and also to our longer-term approach of building prosperity beyond the mining boom.

Labor taking the company tax rate to 29 per cent recognises the benefits and the growth that flows from corporate tax reform. And of course this company tax reduction is funded by the Minerals Rent Resource Tax. Small businesses will also gain from this by getting a head start to the reduction in the company tax rate in financial year 2012-13 - all funded by the MRRT. There will be approximately 770,000 companies which will benefit from the reduction in the corporate tax rate. Of this, 720,000 are small businesses which would immediately benefit from the changes we wish to implement by 2012-13.

So before we hear any predictable negative commentary from Tony Abbott and the conservative Coalition in response to our announcement today, let's hear what they will do for small businesses in Australia - 720,000 small businesses in Australia - in the middle of next year.

The Coalition also regularly like to pretend that the Labor Government is a higher taxing government relative to our Coalition predecessors. But the facts show that overall Australia is not a highly-taxed jurisdiction. In fact, what the Coalition are doing is selling the tax equivalent of snake oil. As part of our fiscal strategy led by Treasurer Swan, the Gillard Government has been committed to ensuring that our tax-to-GDP ratio - the proportion of tax paid in the Australian economy - remains below the 2007-08 year which was what was left to us by the previous government. The ratio when we came to power was something like 23½ cents in every dollar of the Australian economy was paid in tax. Under the Gillard Government it is at 21.8 cents in every dollar in the economy.

Furthermore, as the Treasurer outlined, with the tax cuts we've provided, a single person who receives $50,000 of taxable income is now paying this year $1,750 less tax than they would have been three years ago. And a single person with $80,000 of taxable income, including the Medicare levy tax and flood levy this year, will be paying $1,400 less than they would have been three years ago. In fact, amongst the 30 OECD countries which Australia regularly compares itself to, we are the six lowest amongst that group.

We're determined to keep Australia a country where taxes can fund the important public services that we require, and are fair, simple, sustainable and pro-growth. It was once said that a good tax system buys you civilisation, and we believe that a good Tax Forum will bring us good ideas for that civilisation. That's what the upcoming Tax Forum is about. It's an opportunity to plan for the future with new ideas and discussions to build upon an already ambitious agenda of tax reform.

TREASURER:

Okay, who wants to kick off?

JOURNALIST:

Treasurer, you said that the Tax Forum will take in a broad range of community perspectives. Why then are things like the GST, the carbon tax and mining tax not necessarily being (inaudible)?

TREASURER:

Well, there's a couple of points there. First of all, we can't click the pause button on fundamental reforms. So we have been through a very extensive period of consultation on resource rent tax - on the MRRT. The first exposure draft of the bill has been out. We're about to go through a second phase of that. That is going well. There's been extensive consultation on that item and we're not going to hit the pause button on it, because as Minister Shorten just indicated, the revenues which will come from the MRRT are going to fund very substantial tax relief for companies in general, but in particular for our 2.7 million small businesses in this country. This instant asset write-off is a very, very substantial tax break and cash flow benefit to small business, which ironically is being opposed tooth and nail by Mr Abbott and the Liberal Party.

Now you raised the question of the GST. Let me make this absolutely clear: the Government will not be touching the base or the rate of the GST, end of story. It's a commitment that we've made and I make it again. There is plenty to talk about in this Tax Forum. Now I know there will be some people who will want to front up and advocate an increase in the GST so they can give themselves a tax cut. Well the Government will have no part of it. If a state government wants to come along and say they want us to increase the GST, we're not going to be in it, because that's the lazy way for them. What we've got to do is have a genuine discussion about broader reform. There's a huge agenda here. We've nominated six areas of reform. There's plenty to talk about across a wide range of areas and sure, I'm sure some people will come to the forum and articulate that view, but the Government's view is we're not touching the base or rate of the GST and there's plenty we can do in the tax reform area which will simplify and make our system fairer, and that's what we're going to do.

JOURNALIST:

So in what way will the Government go about keeping things on topic then during the forum? I mean, naturally there will be a few people that may take the opportunity…

TREASURER:

I'm sure there's people that will want to come along and raise those issues and they're welcome to raise them, but I'm just being absolutely upfront about what the Government's priorities are. And the Government has made it abundantly clear over a long period of time that we are not going to touch the base or rate of the GST.

Now I understand that some in the Liberals, there may be some in the business community, who want to do that. I'm just making it very clear we're not doing that. I'm also making it very clear that any reforms have to fit within our strict fiscal rules. Some people think that tax reform is just about giving themselves a tax cut and getting someone else to pay for it. Well, that's not what tax reform is about. It's got to be broadly based. There's got to be a community consensus for it.

We've put in place a very substantial range of tax reforms over the past four years. If you just go through some of them, not only three rounds of tax cuts, but the very significant reform contained in the clean energy package that we put out, a tripling of the tax-free threshold. This is a fundamental reform of the income tax system, consistent with the general direction which was recommended to us in the tax review. And we've built on many of the recommendations in the tax review in the past year, on top of the ones that we announced when it came through. You might recall the number one recommendation of the tax review for implementation was a resource rent tax, and that would be put in place to fund lower corporate rates. That's exactly what we've done. This is a huge reform.

So we've already got a pretty big reform agenda and we want to go forward looking further afield for other reforms. I've given you some idea of my own personal priorities, but what we want to do is to hear from the community and they will raise all sorts of issues. They're welcome to do that. I think everybody will come to the table, I hope, in a constructive way, so we can have a good conversation.

JOURNALIST:

And if a business does propose an idea that doesn't necessarily sit with the Government's agenda though, is this going to be ignored?

TREASURER:

Well, at the end of the day the Government will take decisions about tax reform. I said when we released the review well over 12 months ago that this would be a decade-long process. If you go through the recommendations in that report, many of them are not ready for implementation now. Many of them have very long timeframes. Many of them are concepts rather than policy proposals. So there's going to be a wide range of views.

I mean, I think one of the most important challenges that we've got say in the area of business taxation is: how do we orientate our business tax system to take into account the patchwork economy that we are now seeing as a consequence of mining boom mark II. Now we began to move with our decision to cut the corporate rate overall to 29 [per cent] and give some substantial tax cuts for small business in recognition of the fact that we will have a multi-speed or patchwork economy coming from the nature of trade, the level of the dollar, and the fact that not everybody in the economy is going to be in the mining boom fast lane. That's why we're moving down this road. It was also a central thrust of the tax review, and maybe we need to go further there. To go further there will of course need to fit within our fiscal envelope, but I think that's an interesting discussion. What is the type of tax system that best suits the way our economy is going to evolve given mining boom mark II and the Asian century and the pressures that it puts on parts of our economy?

JOURNALIST:

Have you got any plans to, any ideas to help businesses that are affected by the higher dollar?

TREASURER:

Well, I think that's precisely what I was just talking about. There is substantial structural change happening in our economy as a consequence of the elevated terms of trade, which are going to be with us for some time to come. The elevated terms of trade brings with it a higher dollar. The higher dollar is primarily a reflection of two things: the relative strength of our economy against the strength of other developed economies, and on top of that it reflects the terms of trade. Our terms of trade are currently at 140 year highs. This does therefore impose structural pressures on large sections of Australian business - for example, the tourist industry. So it's appropriate in that environment for us to consider what is the best method within the tax system to recognise the pressures that some businesses face from the elevated terms of trade and the elevated dollar that comes with it.

JOURNALIST:

I just wanted to ask you: Kevin Rudd has urged the Government to distance itself from the Greens and move towards appealing to mainstream Australia. What do you think of his comments and how would you be able to distance yourself from the Greens if you need them to pass legislation?

TREASURER:

Well, I've always seen the Labor party as representing mainstream Australia, mainstream working families, and you see that priority there in our Clean Energy Package. It's a Labor package to the bootstraps, absolutely Labor all the way through. Labor all the way through when you look at the household assistance package. Look at what we've done in terms of trebling the tax-free threshold. The beneficiaries of that are lower-income earners and particularly working women - they're the fundamental beneficiaries of that reform. Or those that are working in a second job, or those that are stringing together a couple of part-time jobs - they're the beneficiaries of that substantial reform, that's Labor to the bootstraps. It's Labor to the bootstraps when you look at the assistance we are providing to those energy-intensive trade-exposed industries. This is a Labor package through and through, absolutely with the mainstream, absolutely consistent with the Labor Party that I've been a member of now for going on 40 years.

JOURNALIST:

Treasurer, how concerned are you about the effects on the Australian economy of the ongoing political impasse in the US regarding the (inaudible) there?

TREASURER:

I think, like most finance ministers and governments around the world, we'd like to see a speedy resolution of this matter both in the United States and of course issues within Europe. What we are witnessing there is the particular impact of a group of people in their Congress who are known as the Tea Party movement. This is the movement that seems to have taken over the modern Liberal Party in Australia, and they both seem to be employing the same sorts of tactics - out there talking down the country, threatening good public policy. It's a sad thing to see it happening in the US and it's a sad thing to see it happening here.

JOURNALIST:

In regards to Mr Rudd's comments, do you think he was right to come out and publicly say those things about…

TREASURER:

I happen to find his comments absolutely consistent with my position and the things that I say all of the time. I don't see anything remarkably different about…

JOURNALIST:

So you think that you should distance yourself from the Greens?

TREASURER:

No, what I think is that we have to, and are, a Labor Party and Government implementing Labor policy which is consistent with our best traditions. We are the mainstream and always have been, always will be. At the moment to pass legislation through the Parliament we require the support of Independents and other minor parties. I can proudly report to you that we have been very successful in the Parliament in getting our legislative program through. We have passed 160 bills through the House of Representatives. We have passed 130 bills through both Houses of Parliament. At this stage I think it would be fair to say that the passage of our Budget has been quicker and more successful than any of my previous three Budgets. So in our parliamentary situation we are governing very effectively as a Labor Government implementing Labor principles.

And that stands in stark contrast to the sorts of events you see happening either in Europe or in the United States where there is political gridlock. The one thing we have going for us here is we have a Government that gets its legislative agenda through, and has now got a commitment to a carbon price and we're going to get that through. That's the sort of good decision making and sound government that countries need in an uncertain international environment.

JOURNALIST:

You talked Minister about making business more competitive. Can you explain: I mean obviously you talked about the instant tax write-off and the cut to 29 per cent, what more can you do for businesses that are being so hit by the Australian dollar, and particularly in the context when you're also trying to make the tax system simpler?

TREASURER:

Well that's a good question Jenny, and that's why I particularly highlighted the priority of business tax reform and where we can go in the future. That's what I want to really talk to industry about. And in the weeks ahead I'll be out there talking to industry about these issues. I think there is a real willingness to engage in a discussion of these issues, whether you're talking to the manufacturing industry, whether you're talking to the tourist industry - it's a real live issue. I don't want to really pre-empt those discussions, except to say that I think we've got to continue to have a discussion about how we put in place arrangements which keep them competitive in the new environment that we're in.

JOURNALIST:

But you don't have any firm view at the moment?

TREASURER:

Well, I think Jenny there are a number of directions talked about theoretically in the tax review. But for example, the instant asset write-off is a very good example of what you can do for small business - you know, do something to really boost their cash flow. That was the spirit within which that recommendation came forward in the first place from the Henry review. They were looking for ways to actually make the tax system simpler as well as making businesses more competitive. Because what we're doing here is getting rid of a whole lot of red tape. At the moment there are depreciation schedules, you know it's complicated. So we've only got basically two frameworks now - they replace three. They can get everything up to $6,500 written off immediately - that's a tremendous cash flow benefit to small business. That type of reform is the sort of thing that we'd be looking for more broadly.

JOURNALIST:

Are you going to be looking for quick action as a result of the tax summit, or are you going to say no, it's all part of the long term?

TREASURER:

Well, we've already got a range of measures which have yet to even start - this is the point that I really want to make. The instant asset write-off, the lower company rate, starts in 2012-13 and it all comes in on 1 July. So with tax there always are longer time frames, so we're not looking at things which will start tomorrow or even next week. As you can see, moving as quickly as we have, the reduction in the corporate rate, the instant asset write-off, the superannuation measures - all of those are yet to go to the Parliament. They'll be in the Parliament later this year so they can start on 1 July next year - this is the next phase after that.

SHORTEN:

In addition, you know, we wouldn't want everyone just focussing on the Tax Forum, because frankly there's a lot of care and maintenance issues where we're interacting with business every day. From the reform of trust law, to rectifying consolidation law, to working through how we can assist people in small business in terms of their interactions with the system, to the creation of a Tax Advisory Board which business has been looking for. There is a lot going on on a daily basis between this Government and business in the care and maintenance issues of tax reform, which the forum appropriately is looking at the bigger picture, but business everyday is seeing the benefits of what the engagement is.