Daniel Mulino:
Really good to be here today to announce a significant step forward in the Scams Prevention Framework. And I’m really glad to be here today with colleagues – with Cassandra Fernando, Alice Jordan‑Baird and also Matt Gregg. And it’s important to have them here because they represent electorates, like I do, where scams are common and they affect people in a very insidious way. Scams are a very insidious and harmful form of economic crime. And I want to pay tribute to my predecessor, Stephen Jones, for the Scams Prevention Framework that was passed last term. It creates an important framework for dealing with scams in a more holistic way. It’s a world‑leading piece of legislation that approaches scams as an ecosystem.
Today, we’re adding a lot of meat to the bones of that legislation through 3 things. Firstly, we are officially designating 3 sectors: the banking sector, the digital platform sector and the telecommunications sector. And that will allow us to truly deal with scams as an ecosystem. Secondly, we are going to release today draft codes, one for each of those sectors. And that’s extremely important so that we can clarify for industry and consult on the precise obligations for how they should prevent, identify, disrupt and respond to scams. And finally, we are releasing a discussion paper in relation to dispute resolution in relation to scams. We are identifying that disputes in relation to scams will be resolved by the Australian Financial Complaints Authority, which is a low‑cost, low‑formality resolution, dispute resolution process.
But we are also identifying, and I’ve made a recommendation in this discussion paper, subject to consultation, that we believe, and I believe as Minister, that low‑value, high‑volume cases should be dealt with through automatic or semi‑automatic processes. Where disputes involve amounts under $3,000, industry should pay out automatically so that we don’t have the dispute resolution process flooded with very low‑value cases and that we have resolution in the interests of consumers as rapidly and fairly as possible.
Australia is putting into place a world‑leading, ecosystem‑based approach to dealing with scams. This has already paid dividends with scams at a lower level now than when we came to government. What we need to do is to build on that success through building up the codes and enforcement mechanisms and get good outcomes for consumers. So, thank you very much and open to questions on that now.
Journalist:
Thank you. I guess the obvious question that people want to know here is how the mechanism for those automatic transactions will work. How will you make sure, for example, that people aren’t scamming the scam system, so to speak?
Mulino:
Yeah, so, what we have at the moment is an arrangement where perpetrators of scams are putting into place scams that see a large number of people scammed for very low amounts. We also have a number of scams for significant amounts, tens of thousands or hundreds of thousands of dollars. We are working with industry to make sure that the system is as robust as possible so that we can prevent scams happening in the first place. And so we’re seeing actions taken by banks and by telcos and, increasingly, by digital platforms, where they’re preventing scams from happening.
What we’re saying, though, is that where very low value scams occur, $500 or $1,000 or up to $3,000, what we don’t want is for those cases to go through very lengthy and costly and stressful dispute resolution processes. We believe that where there is verification that there has been a scam, industry should just pay out in those cases and lead the dispute resolution cases for complex cases involving tens of thousands or hundreds of thousands of dollars where the dispute resolution authorities then can dig into the exact case‑specific circumstances. We believe that if we continue to work with industry to make our system as robust as possible and to prevent scams happening, that that is the right balance.
Journalist:
We hear fairly regularly – sorry – from industry, particularly digital platforms, that this is complex, given offshore actors. What does the framework look like for dealing with that?
Mulino:
So, what we are doing here in this framework is saying that we need to embrace an ecosystem approach. The systems in place overseas will generally focus just on banking. But the complexity, as you identify, means that if we’re going to truly make our system resilient and truly robust in terms of protecting consumers, we are going to have to move beyond just the banking system and deal with the international components of this, such as the telecommunications system and the digital platforms. It’s only by dealing with ways in which messages and other interactions come through to people, through those other sectors, that we’re going to genuinely be able to protect people.
Journalist:
So, have you been in conversation with those sectors prior to releasing these codes, drafting these codes?
Mulino:
Yes, we’ve been involved in in‑depth consultation with all 3 sectors, and also with consumer groups, and also with regulators for many months. We’ve held roundtables and also detailed workshops with the department, but roundtables which I’ve led, and will continue to do so. So, there is a very in‑depth consultation process that will continue after the release of these draft codes.
Journalist:
Mr Mulino, just a question on the Budget. The business community is now demanding that the government quarantine CGT reforms for housing only or [inaudible] package. Will the government consider this, and is your relationship with the business community now [inaudible]?
Mulino:
So, what I want to say in relation to CGT is just to clarify, we are returning to the indexation methods that were originally brought in in the Hawke–Keating reforms back in the early 1980s. And the rationale for those reforms is that we are identifying capital gains on a real basis. We are looking at the capital gain in nominal terms and taking out inflation. What happened in 1999 is that distortions were introduced into the capital gains arrangements, where an arbitrary reduction of nominal gains was introduced. The rationale for those reforms in 1999 was to increase investment in shares and other kinds of investment.
But in fact, since 1999, we have seen a material decline in share ownership – around 20 per cent. Instead, what we’ve seen post the 1999 changes is a significant increase in highly leveraged investment in standalone houses. So, it has had a completely opposite effect to what it was intended to do. So, the changes that we are bringing in will, in fact, lead to a more neutral capital gains treatment across asset classes.
The other thing I’d say is that in relation to some of the productivity assertions being made, everybody would concede that for the last 25 years, and in particular the last 10 years – which was just about the lowest productivity growth decade on record when we came into power – everybody would concede that we need to do better when it comes to productivity, when it comes to capital allocation in the economy. So, it seems rather strange now that the opposition is saying that we need to defend the status quo. If you genuinely want to lift productivity, we need reform that firstly reduces barriers to young people getting into the housing market, and secondly, that provides a more rational basis for taxing capital gains.
Journalist:
Dan, can I just ask, you just mentioned you’re going back to the Hawke–Keating version of this. When they made changes when introducing CGT, they cut the top rate of tax substantially, and from 60 to 40 something. You guys aren’t doing that. So, there’s not this balance between how much you’re getting in tax from the changes and how much you’re giving back. Why is that?
Mulino:
Well, I would argue there is balance in our tax package, in that if you look over the forward estimates at the taxes raised through the CGT, through negative gearing and through the trust package, the amount raised through those has been given back to taxpayers through the WATO and through the instant deduction. It’s almost exactly balanced. And the Treasurer has identified that in subsequent budgets, he will look at further changes to personal income tax. So, in this tax package that we are bringing forward, the taxes raised through these measures is being handed back.
Now, it’s not being handed back in that precise way; it’s not being handed back skewed to the top bracket. But what it is, the way it’s being handed back is, firstly, in a way that is skewed towards lower‑income earners because this is a budget about young people, about a budget that is more intergenerationally fair, firstly. But secondly, the WATO is designed in a way that is skewed towards people earning income from labour. And that is the other big theme of this Budget: that tax experts, tax academics, business leaders and then people in the community, people in community organisations – everybody has been saying our tax system needs to rebalance and realign between the way we tax capital and income from trusts and the way we tax labour. And that is exactly what our changes are doing.
Journalist:
And a follow‑up question on that. The mention of productivity – a lot of the changes to CGT would have an effect on companies that have high growth, not high yield. You see a lot of money go towards high yield, not high growth. But the high‑yield companies are the ones that don’t reinvest; they just give that money back through dividends. So, high‑growth companies that reinvest capital, that’s what you need to lift productivity, don’t you? More reinvestment in capital?
Mulino:
Well, look, there’s been a lot of assertions made, but I would return to some of the comments made by people like Sally Auld – the Chief Economist at NAB, or Luci Ellis. They have made comments which clearly say that the CGT changes that we are proposing are going to be a more rational basis, more economically rational and will encourage investment in high‑return, high‑productivity investments. This is basically saying that our CGT system should be taxing real gains. People who invest in high‑return assets, people who invest in high‑productivity businesses, will still receive greater returns. And the other thing to remember is that tax on capital gains will still be concessional compared to tax on labour in almost all circumstances. So, this is an economically sensible and fair set of reforms.