Ellen Fanning:
Soon you’ll be able to claim donations from as little as a cent on your tax. At the moment you have to donate at least $2 to claim it as a tax deduction. Dr Andrew Leigh is the Assistant Minister for Productivity and Treasury. Dr Leigh, why the change?
Andrew Leigh:
Well, thanks for having me on Ellen. Part of the change is just to ensure that people can do these round up for charity events which are, in many cases, raising hundreds of thousands or even millions of dollars for charities. There’s one example in which Woolies partnered with Foodbank and raised three‑quarters of a million dollars. There’s organisations such as Rounda and GoGive that allow people to round up for charity.
But right now those little round ups can’t be claimed at the end of the tax year. And what we’re saying is let’s scrap the $2 donation deduction threshold and so you can claim any charitable deduction you make.
Fanning:
I was at Woolies on the weekend and OzHarvest said, you know, ‘Would you like to round up by 60 cents?’ Yeah righto, so I did. I jabbed ‘Yes’, as I’m sure a lot of people would. How am I meant to keep track of that, Andrew?
Leigh:
Well, right now it’s not deductible because it was less than $2, and so you don’t keep track of it because you can’t claim it. But over the course of the year, if you do that on every shop, then you might be talking tens or hundreds of dollars that you can appropriately claim at tax time.
We hope it will encourage another pathway to generosity. And after all, this $2 donation threshold comes about in a very strange way. Back in 1927 it was set to be £1, which was then worth about $100 today, and then when we went to decimal currency, £1 became $2, and it’s stayed there ever since.
Fanning:
Really? I love that you know that Dr Andrew Leigh, Assistant Minister for Productivity and Treasury. Who’s been getting the kudos or deductibility for our donations to date for these little multiple cent donations?
Leigh:
I think nobody in many cases. Or in other instances it will be the entity that’s encouraging the round up. So, Myer partnered with the Family Co. in order to raise money, and there I suppose Myer would have taken much of the credit, whereas it should equally be recognised that there’s a whole lot of individual shoppers who were doing round up for charity. It’s just another way in which we can support charities. The government’s got a target to double philanthropy by 2030 because we think we’d like to get more money flowing through to Australia’s great charities.
Fanning:
Now, we’ve got organisations such as Orange Sky started by a couple of young blokes in Brisbane which is doing terrific work helping the homeless not only wash their clothes but also build a sense of community. And we want to back charities like that for the terrific work they’re doing across the country.
And you think this change makes a difference for those smaller charities in particular?
Leigh:
Small change makes a small difference. We’re also working on things like improving the pathway through to charitable deductibility status, encouraging workplace giving, which is in place for about half of all employees but only used by about one in fifty employees.
Fanning:
This is where you donate out of a pay packet every fortnight or so?
Leigh:
Yeah, that’s right. And so one of the great advantages of workplace giving Ellen, is you don’t have to save the receipts at the end of the year.
Fanning:
Right.
Leigh:
The money just comes out of your pre‑tax salary and therefore goes off to a good cause. About half the population have access to it. But as I said, relatively few people are using it. And then we’re working with some of those charities in order to ensure that charitable advocacy is warmly respected by the government. That’s been a driver of giving for many philanthropists.
Fanning:
You’re also trying to make just doing the tax return easier. Explain the instant tax deduction. How will that work?
Leigh:
Yeah, so everyone will get a thousand dollar tax deduction automatically, and so if you’ve got less than a thousand dollars of donations, you won’t need to keep receipts. So it’s a hip pocket benefit, but it’s also a paperwork benefit where people don’t have to keep track of receipts.
Fanning:
And it’s not just about donations; it’s about anything – anything that you would have to have a receipt for to claim a tax deduction, you’ll be able to just say, ‘Just take it from me; I spent $1,000. I’m going to deduct $1,000 worth.’
Leigh:
That’s right. So it might be textbooks if you’re doing self‑education related to your employment. It might be meal allowances or uniform allowances, if that’s relevant for your job. Or it might even be the charitable deductions. Of course, if you’re making a big donation – if you’re donating thousands of dollars to charities, then you’d keep the receipts in order to claim the amount above $1,000.
Fanning:
Yeah. When does this come in, the instant tax deduction – the thousand dollar instant tax deduction?
Leigh:
So that kicks in [for returns filed] from July next year. It’s a measure which sits alongside the cuts to income tax that we’re putting in place for all taxpayers. So everyone will see an income tax cut on the first of July this year, and then next year.
Fanning:
Yeah. You were a noted academic economist before entering politics, Dr Andrew Leigh. You wrote a book called Battlers and Billionaires, looking at the history and rise of income inequality in Australia. To what extent is that a focus; inequality more generally, across the economy, across generations et cetera, a focus of the Budget on May 12?
Leigh:
Look, it’s a huge focus. And I think it comes at its sharpest in terms of housing where we’re seeing increasingly young Australians struggling to get into a housing market that was much more accessible for baby boomers and even Gen Xers such as me. We’re building more homes working with states and territories on a 1.2 million home target in order to see more opportunities for people. Housing is a significant source of wealth for many Australians – an automatic savings mechanism, and ensures that people really have a strong stake in their communities. I’ve been deeply troubled, as has everyone from the Prime Minister down, at the drop in home ownership rates, and we’re working all we can to get that going again.
Fanning:
Yeah. What’s the logic behind the Treasurer saying today, ‘Look, we can’t be offering any more cost‑of‑living relief’?
Leigh:
We’ve offered cost‑of‑living relief through the fuel tax cut dealing directly with the temporary impacts of the war in Iran. We’ve got the income tax cuts that are flowing. We’ve increased payments significantly over time, Commonwealth Rent Assistance now up more than 50 per cent since we came to government. But I think the Treasurer is also making very clear that there are significant spending pressures on the budget, whether that’s the NDIS, what we’re doing with defence or the aged care implementation. So we need to be realistic about what’s affordable, and the Treasurer and the Finance Minister today were talking very clearly about the fact that there are going to be savings made in this Budget right across a whole lot of portfolios.
Fanning:
Put your economic professor’s robes on for me. Explain why it is when we’ve got this supply side driving inflation – that is, the cost of petrol just went through the roof, the cost of diesel went up even further – might the Reserve Bank be considering increasing interest rates even as we speak, they’re meeting now?
Leigh:
Well robes or not, I want to be very careful in terms of stepping on the Reserve Bank’s toes. That’s a decision they’ll make independently. Of course, they’ve got their mandate around inflation but also they’re cognisant of the impacts on growth. So they’ll be weighing that up at their meeting tomorrow. Our job as a government is to be working to do what we can to put downward pressure on inflation. We’re doing a lot of that. There’s a big focus on getting more fuel flowing to Australia. The supply side really is where we can do the most there. Likewise with housing – everything we can do on the supply side there helps to bring down some of those cost pressures in the economy.
Fanning:
Can you understand the frustration of Australians who may be lived through the last sustained period of inflation – well, it wasn’t the last, but during the 80s, the Reserve Bank was apparently trying to get everybody to stop drinking French champagne and driving around in Maseratis. It was a problem with spending in other words. It was a problem with demand. Now what’s driving the inflation is the cost of petrol and nothing anyone can do can change that. And there’s a feeling of kind of being bashed by the central bank in a way for something Australians can’t avoid, which is putting fuel in their cars and trucks.
Leigh:
Look I understand those pressures, and certainly the Reserve Bank is very aware of those as well. Those will be things they’re going to be weighing at their meeting tomorrow. I don’t want to step on their toes. I recognise the job that they’re doing, and it’s not an easy one. We’re seeing these cost pressures coming up in a whole lot of countries around the world. Inflation is surging now as a result of the decision the US and Israel have made in taking military action in Iran.
Fanning:
I know I shouldn’t joke with the Assistant Treasurer, but did you see, they used to call Trump ‘TACO Trump – Trump Always Chickens Out’. Now they’re calling him ‘NACHO – Not A Chance Hormuz Opens’. Not A Chance Hormuz Opens, do you share that gloomy outlook?
Leigh:
As they used to say on Q+A Ellen, ‘I’ll take that as a comment’. We look to work constructively with our partners, the United States. And we’ve urged a speedy resolution to the conflict. We believe it would be in the interests of all of the combatant parties, but much more than that – in the interests of the globe. We’re really feeling the pinch here, but people are feeling the pinch all around the world. And in Africa and Asia and some of these developing countries, there’s really acute pressures going on now as a result of what’s happening in the Middle East. An interconnected world drives a whole lot of these tough challenges. Let’s bring it to an end.
Fanning:
Guacamole and sour cream on the side. Before I let you go, what’s the latest from the government in terms of whether the Budget on May 12 will include changes to capital gains tax and negative gearing?
Leigh:
Well, the exciting thing about a budget Ellen, is we like to keep a little bit to still be revealed on budget night. So at 7.30 on Tuesday the 12th of May people will be able to tune in and discover things they haven’t learned before. If I’m to tell you everything in the budget it takes the fun away from it, and I think all Australians have that eager anticipation of the Treasurer’s speech on the second Tuesday of May. Far be it from me to want to take away that great sense of excitement. It’s Christmas for econ nerds.
Fanning:
Yeah, said the former economics professor. Thank you so much joining us.
Leigh:
Thank you Ellen.
Fanning:
Dr Andrew Leigh, Assistant Minister for Productivity and Treasury.