Jon Faine:
Michael Sukkar, good morning.
Michael Sukkar:
Morning, Jon. Good to be with you.
Jon Faine:
I thought it was the Labor Party's policy to wind back negative gearing and the Coalition were vociferous in saying it would be a bad thing for the economy, during the last election campaign. So what's happening now?
Michael Sukkar:
No, no. Your understanding is perfectly correct, Jon. You've summed up the positions of the parties very well. The measure that you're referring to in the 'Fin review, is an integrity measure that we announced in the 2018-19 budget, some 18 months ago. It was part of a sweet of integrity measures that I have introduced to the House.
In essence, it's ensuring that people who are holding vacant land for no commercial purpose are not entitled to claim dedications. This was similar to a measure that the now Prime Minister, when he was Treasurer and I was his assistant, put forward in the 2017-18 budget which limited deductions for travel costs, claiming travel costs in relation to an investment property you held. So, we make changes to the integrity of our tax system all the time. This is another one of those. This is – let's be honest – pretty minor, but nonetheless important.
Jon Faine:
How can you claim a tax deduction for an asset that doesn't earn any income?
Michael Sukkar:
Well this is the entire point. The ATO have an issue with determining, on an evidentiary basis, whether somebody is holding something in preparation potentially. So you might be holding vacant land that you intend to develop in some way, shape or form. You might be incurring costs associated with that. The issue has been, 'how is that proven'?
Jon Faine:
The whole point of negative gearing is – and the principle underlying it – is that you can offset the cost of earning income against the tax you pay on that income. So if you don't earn any income on an idle asset, how can you claim there were costs associated with earning income when there wasn't any income?
Michael Sukkar:
Well, for example, Jon, if you've got a vacant land that you're incurring costs in the planning process, for example…interrupted.
Jon Faine:
I understand that you're incurring costs but you can't offset it against income that doesn't exist.
Michael Sukkar:
Well, you can under the tax law provided that you're undertaking it for a commercial purpose. What this change says, in essence, is it reverses the onus of proof onto the taxpayer to prove that they're doing it. We've got instances, and really this…interrupted.
Jon Faine:
So you can't land bank and claim dedications for the mortgage of land banking
Michael Sukkar:
Spot on. Or you have no intention of undertaking anything for a commercial purpose with that land. So it's pretty limited in its scope, Jon, because there aren't that many people who decide to hold vacant land for no purpose. Hence, why it's a very limited measure. But, nonetheless, it's an integrity measure that we think is important. I think that it's been a bit overblown and a bit overstated.
Jon Faine:
Oh no, journalists would never do that. But Assistant Treasurer the point I guess…interrupted.
Michael Sukkar:
Sorry, and to suggest that it was a surprise to anybody, when we announced it in the 2018-19 budget and obviously took it to the election…interrupted.
Jon Faine:
Sure, but the point that I suppose that inevitably has to be made, is that what you are doing by closing that loophole, you are conceding that there are rorts within negative gearing and that it costs revenue and that there's no social purpose achieved through it?
Michael Sukkar:
No, Jon. That does not prove that point at all. This is a very limited integrity measure to make sure that people who are claiming deductions, are doing so with a commercial purpose. For example, I'll give you a very simple example. If you own a holiday house, Jon, and it's just for your own use and your family use, it's out of the tax system so you can't claim any deductions relating to it. If you've got a holiday house, however, that's on Airbnb and you rent it out as a holiday rental, it then becomes a taxable asset that falls inside the tax system.
Jon Faine:
If you do actually earn income and you do pay tax on that declared income then, yes, you can offset the cost. But my understanding is that there's been various rulings. It has to be available 52 weeks a year.
Michael Sukkar:
Not technically, Jon. It has to be available. So you don't necessarily have to be, in those cases, always be deriving income. Although…interrupted.
Jon Faine:
No, no. It has to be available for rent 52 weeks a year. Doesn't mean it's rented 52 weeks a year but it has to be available for rent 52 weeks a year.
Michael Sukkar:
Couldn't agree with you more. The point I'm making, Jon, is that there are some assets by virtue of their use, fall into the tax system. Those can be negatively geared. There are some assets that we consider sit outside the tax system because they're not being used for a commercial purpose, therefore you shouldn't be claiming deductions against them. In relation to vacant land, the analogy is identical. If you've got vacant land that has no commercial purpose or future commercial purpose, we have just said that as an integrity measure…interrupted.
Jon Faine:
That that is wrong. Okay well while we're talking holiday houses, Assistant Treasurer, how can people hold a holiday houses in a self-managed super fund because it's one of the fundamentals of super funds that you're not supposed to derive personal benefit or enjoyment from the assets that are in it.
Michael Sukkar:
Well Jon, I don't have responsibility for that area and I wouldn't profess to be an expert on some of the legacy rules that allows certain assets to go into super.
Jon Faine:
Okay well moving along. Yesterday, it was announced by Oliver Yates and others that they were going to challenge the tenure in the Parliament of your colleague, Josh Frydenberg, the Member for Kooyong and Federal Treasurer. If you're Assistant Treasurer, you might suddenly find yourself being Treasurer, Treasurer?
Michael Sukkar:
Oh Jon. The likelihood of that happening is very, very slim. I don't want to pre-judge what the court of disputed returns might say but I think everybody can see what this challenge really is…interrupted.
Jon Faine:
Which is what? What do you say it is?
Michael Sukkar:
Oh well, Jon, we've got a failed candidate who is obviously not happy with the result.
Jon Faine:
But he is saying that…interrupted.
Michael Sukkar:
Jon, he can say whatever he wants. He is a failed candidate who is obviously unhappy with the result and I think that says it all.
Jon Faine:
Isn't it worth clarifying whether or not individuals – including for instance in the past, the leader of the National Party as he then was and Deputy Prime Minister Barnaby Joyce – whether they actually are or are not validly elected to the Parliament? That's worth checking isn't it?
Michael Sukkar:
Well Jon, I'm very uncomfortable with the path that they are going down for very obvious reasons.
Jon Faine:
What are the obvious reasons? Do you think this is in some way driven by holocaust deniers who are trying to highlight what they claim are gaps in the Frydenberg family history arising from being displaced persons after World War 2?
Michael Sukkar:
Well, you said it, Jon. I think it's very distasteful and I don't like it and I think it will be dealt with in the appropriate way but that's not my judgement.
Jon Faine:
And while I have you, there's a lively debate about whether or not Australia would be better off with a proper anti-corruption commission. With the disclosures over the last several days including the ones that have triggered various measures announced by your colleague, the Attorney General Christian Porter. Do you think that instead of having all this mish-mash, jigsaw puzzle of different bodies, anti-money laundering, this that and the other. Wouldn't it be better just to have a one-stop-shop, proper, well resourced, properly empowered anti-corruption commission? National integrity commission?
Michael Sukkar:
Well we've got a range of bodies that conduct and fulfil those sorts of purposes. Now let's see what the investigation that the Attorney General has instigated brings forward.
Jon Faine:
But the law enforcement integrity authority, they're checking up to see if the policy have missed anything. The criminal intelligence commission has limited powers and jurisdiction as well. I mean, that's the whole point. All these sort of, you know, these people look into this part of it and they look into that part of it. Don't we need one proper, overarching, well-resourced, properly empowered, national integrity commission, full stop and then we'll be right?
Michael Sukkar:
Well, no, I don't agree with that, Jon. I can understand absolutely why some people make that argument. I just, on the balance of all the argument, don't agree with it. I think there is a suite of bodies that conduct the integrity agenda of the Government. Not just our Government but all Governments. Let's just see what comes out of this investigation. But like all these things, Jon, you're forever developing and evolving and where there are criminals or others who are doing things that are a problem, are evolving, then the laws needs to evolve too. But I don't necessarily think that means what you're saying. I think we are pretty fortunate on all the corruption indexes that are published globally, we rank very highly and we do that for a reason, Jon.
Jon Faine:
Crown Casino have published full page ads in some newspapers, others have declined to run the ad. They say that it's an unfair campaign designed to damage Crown's reputation, containing unsubstantiated allegations, exaggerations and outright falsehoods. Do you think the stories published about Crown have been unfair?
Michael Sukkar:
I don't think so but I wouldn't profess to be an expert on them. As you know, Jon, the devil is in the detail in these sort of matters and I haven't scrutinised it to that level. But on the face of it I doubt it, although am I surprised that Crown would be defending their position, particularly if they think that they haven't done anything wrong? Well, I think that's probably unsurprising.
Jon Faine:
And just finally, I've had some text messages from people about negative gearing. When you say that if you have no commercial intent or obvious purpose for future development, I've got a couple of people asking me to ask you this. Is holding property for a future capital gain, is that in itself a future commercial purpose?
Michael Sukkar:
Well it always depends on the circumstances. In your typical negative gearing case, Jon, you are deriving some form of income by renting out the property. Here, we're talking about land that does not have a structure on the body of the land so to equate the two, I think, is problematic. In the vast bulk of negative gearing cases, I wouldn't say all but it would be close to all, you are deriving some sort of income.
Jon Faine:
Sure but if you're holding vacant land specifically for the purpose – as I said before, land banking, you're speculating on the future capital gain – is that in itself a acceptable commercial purpose, much like planning a subdivision?
Michael Sukkar:
I doubt it. Well, planning a subdivision is very different because you would be incurring costs in preparation of that subdivision that is clearly tax deductable. If all you're doing is sitting on a property and doing nothing else with it, and literally doing nothing else with it, I think a little bit like our holiday home example, Jon, it falls out of the tax system at that point because it's not being held for a taxable purpose. But of course, the devil is always in the detail with these things so to give broad brush answers is difficult. But again, it's a very simple analogy – are you in the tax system or not? And if you're holding vacant land for no commercial purpose either now or into the future, this is a very small measure, it doesn't raise huge amounts of money but it's an important integrity measure and to equate it to Labor's negative gearing policy is quite laughable.
Jon Faine:
Thank you for your time.