Sally Sara:
Well, turning to federal politics and the government will today introduce a bill to parliament to impose a 30 per cent minimum tax on distributions from discretionary trusts.
The Coalition is opposing the change, citing concerns about the effect on small business, while the Greens are demanding a Senate Inquiry, saying that an early draft was ‘watered down’.
Jim Chalmers is the federal Treasurer and joins me in our Parliament House studio this morning. Treasurer, welcome back to Breakfast.
Jim Chalmers:
Thanks very much, Sally.
Sara:
Before we get to today’s legislative program, we already heard from the government last week about a delay to a credit card ban for businesses paying their tax bills using credit cards, so that’s until the middle of next year. Last night we heard that the delay was implemented after the head of the Chamber of Commerce and Industry, Andrew McKellar, contacted the Prime Minister.
Here’s the PM and Mr McKellar speaking at a function at Parliament House last night.
[Excerpt]
Andrew McKellar:
It was undoubtedly a double standard, and the reaction from small businesses around the country was immediate. But Prime Minister, to your credit, your door was open, you engaged, you listened, and you acted quickly to provide [inaudible] breathing space for small business.
Anthony Albanese:
My door is always open. Andrew did text me last Thursday morning, and by Friday morning we had an announcement.
[End of excerpt]
Sara:
That’s the PM and the head of the Australian Chamber of Commerce and Industry speaking at Parliament House last night.
Treasurer, where are you in that timeline?
Chalmers:
Well, it is true that we stepped in to ensure there was a much longer period for the ATO to consult with the business community and get it right. It is true that we stepped in on Friday, it is true that there were discussions between the government and the business community last Thursday.
We were part of those discussions as well. My office was engaging with the Chamber of Commerce, I have an open door, I’ve met with ACCI in recent weeks, in fact, and we were engaging on these issues as well.
So there were discussions on the Thursday, we did step in on the Friday. There was also work happening on the Wednesday.
Sara:
Who’s we?
Chalmers:
Beg your pardon?
Sara:
Who’s we? ‘We stepped in’.
Chalmers:
The government stepped in. Last week on the Wednesday, I had discussions with the Prime Minister, we agreed that it would be appropriate to find a better way through for small business. We engaged with the business community on the Thursday, as we do frequently on these sorts of issues.
Then Daniel Mulino and I took a proposal to ministers on the Friday morning after I discussed with the Tax Commissioner very early on Friday morning, and by late Friday morning we had stepped in to provide a much longer transition period so the ATO has the time to consult with business and to get this important change right.
Sara:
Was the ATO instructed by the government to have this credit card ban, or did the ATO make this decision and inform you or not inform you that this is what it was doing?
Chalmers:
Well, a couple of things about that. I mean, the Reserve Bank announced the ban in March. Government agencies started working through the implications of that, from in between March and the ban coming into place in October. The Assistant Treasurer and others engaged with government agencies on that.
As I said last week –
Sara:
But was the ATO instructed by the government to ban credit card payments for tax?
Chalmers:
The ban on credit card surcharges was announced by the Reserve Bank in March. The ATO and other agencies worked through the implications for that in between –
Sara:
But the ATO said it wasn’t going to take tax payments via credit card. Was that move, was that an instruction from the government, or is this the ATO making its own decision?
Chalmers:
That was a decision of the ATO.
Sara:
When did you become aware of that?
Chalmers:
In late September, as I said last week, I’ve already said that on the public record. They took that decision late in September. We insisted on a transition period, initially a couple of months, so that there could be some consultation, and you know, a legitimate transition period, and then we stepped in to make that transition period substantially longer because it was clear that more consultation is necessary in order for the ATO to get this right.
Sara:
Let’s look at discretionary trusts. So, the Greens are concerned about an exemption for money paid from trusts to charities, not‑for‑profits and other tax‑exempt entities, including private schools. The party’s economic spokesperson, Nick McKim, says the government should remove that exemption from the legislation. Are you open to that?
Chalmers:
Oh, look, that isn’t something that’s been raised with me directly. I actually just saw that report walking up to have a yack with you in the studio, and so I’ve only seen the report of that, I haven’t had the opportunity to engage directly –
Sara:
What’s your view on it?
Chalmers:
– with the Greens on it. Well, what we’ve tried to do in the legislation, and I want to get to why the legislation’s important in a moment, but on this very specific question we’ve tried to make sure that there are reasonable arrangements for charities, for not‑for‑profits which reflect some of the current arrangements that are in place. There are good reasons for those sorts of exemptions.
This is a very specific sliver of what’s being proposed here. Obviously, the Greens will have the opportunity in the House of Representatives and in the Senate to raise these sorts of issues, but it’s only something that has sort of come on my radar directly reading that report on the ABC in the last few minutes.
Now more broadly, we can’t lose sight of why this reform is really important. Our tax reforms are about cutting taxes for workers, making the housing market fairer for first‑home buyers, but also better aligning the tax treatment of income from work and income from assets, and that’s what this tranche of legislation is all about.
There are legitimate reasons for trusts, but they also allow a small proportion of people to manage their tax in ways that’s not available to most working Australians. And that’s why there’s been 50 years of reviews now recommending that they be reformed.
The use of these trusts, discretionary trusts, has doubled in the last 20 years, but still, more than 95 per cent of people don’t get trust income, and still less than 10 per cent of small businesses would be affected by the changes that we’re proposing today. It doesn’t come in until the middle of 2028. We’re providing a whole range of options for trusts, a restructure, or to elect to lock in distributions to avoid stamp duty. We’ve done a heap of work and consultation, and the legislation we present today is a really important part of the really ambitious tax reforms that were in the Budget.
Sara:
You’re listening to Radio National Breakfast. My guest is the federal Treasurer, Jim Chalmers. Treasurer, the IMF economic outlook forecasts that Australia will have the fifth‑highest inflation rate among advanced economies next year. You’ve repeatedly cited overseas factors for higher prices here, but if it’s overseas factors, why is Australia faring so poorly compared to other nations?
Chalmers:
Well, the World Economic Outlook makes it really clear that inflation’s going up around the world, and the market’s expecting interest rate rises in every major advanced economy.
And so that report that you’re asking me about is overwhelmingly about a very fragile global environment made worse by a war in the Middle East, which is pushing up inflation and weighing on growth here in Australia but around the world as well.
Sara:
But other countries are handling it better when it comes to inflation.
Chalmers:
Well, you need to make the full comparison. If you want to make the Australian comparison with other countries. We’ve got stronger economic growth than all but one of the major advanced economies, we’ve had stronger employment growth, I think, than all of them. We’ve had the lowest average unemployment of any Australian Government in the last 50 years. We’ve got public debt, a sliver of the major advanced economies as a share of their economies.
And so, we do have a lot coming at us from around the world, but we’ve got a lot going for us as well. We know that there’s an inflation challenge in our economy made worse by the war in the Middle East, and we know that a lot of the price pressures that people are under are because we are hostage to developments on the other side of the world. But there’s also a helpful role that we will continue to play managing the budget in the most responsible way we can.
Sara:
With Caucus yesterday, why is the Prime Minister having to reassure your Caucus colleagues to hold their nerve and that things will get better later in the term?
Chalmers:
I think it’s because we understand and acknowledge that people are under pressure right now, and that’s playing out in our politics, it’s playing out in the opinion polls and in other ways, and we don’t dismiss the very real pressures that people are under.
The speech I gave last night was about not dismissing or disregarding people who are under genuine pressure, it’s about not underestimating our political opponents, recognising the pressures that people are under, responding in tangible ways with tax cuts and wage rises and more bulk billing, and also reforming the economy in the interests of working people, and that’s what today’s legislation’s all about.
Sara:
Are you struggling to sell the economic message; are you under pressure from progressives that think you’re not moving fast enough?
Chalmers:
There are always a range of views. When you do a senior job in a government which is governing in difficult times, there will always be a range of views, and I’ve tried to always take the approach that none of us is beyond criticism. Some people would like us to do more, some people would like us to do less. That’s just the reality of a senior job in a government in difficult times, and so I accept that.
I try and take all of the feedback that I get, good, bad or indifferent, on board.
Sara:
Treasurer, thank you for coming in this morning.
Chalmers:
Thanks very much, Sally.