MITCHELL:
(inaudible) with the Federal Treasurer, Peter Costello. Good morning.
TREASURER:
Good morning Neil.
MITCHELL:
Okay, well I have talked with the Premier about the problem with the First Home Buyers'Grant, $7,000 grants going to babies as young as one, can you fix it, will you fix it?
TREASURER:
Oh, it should never have happened.
MITCHELL:
Well, whose fault is it?
TREASURER:
The Victorian Government. This is, we, I read it in the newspaper today, it is the first I have heard of it. And I cannot believe that the Victorian Government legislation has allowed toddlers to get $7,000 grants. It should never have occurred. Now, I see Mr Brumby is going to amend his legislation today, but it should never have occurred, it should never have been allowed under the Victorian Government's legislation.
MITCHELL:
Well, does it need Federal legislation as well? Some in the industry are suggesting to us, the only way to sort it out really is to get all the States and you involved.
TREASURER:
It doesn't require any federal legislation. The Federal Government doesn't have any legislation. The State Governments have legislation that provide terms and conditions for first home owners. When they pay out grants they come to the Commonwealth Government and they say, we have paid out so many grants, we want reimbursement. And they get it. But they are only, and this is the agreement that we have got, they are only supposed to be paying out grants to people who are buying or building a home, and buying or building a home to be used as their principal place of residence. Now a toddler doesn't buy or build a home. And a toddler doesn't have a principal place of residence. I can't believe that they have paid it out.
MITCHELL:
What, is that the only condition you put on the scheme? Is that the only Federal condition?
TREASURER:
Oh no, we have also got conditions that the States and Territories introduce legislation to prevent abuse. So they are supposed to have had a requirement that you are buying the house yourself, it can't be your parents buying you are buying the house yourself. I don't even know how a toddler could sign a contract. I mean, it is unthinkable to me, to buy a house you have got to sign a contract Neil. It is unthinkable to me that a toddler could sign a contract. So, if the person who is buying the house, whose name is on the contract, and the person who is going to live in it. Now a toddler can't live in a house.
MITCHELL:
Okay. But we have got a situation where both Federal and State are involved. The loophole has existed in Victoria. Is it happening in other States as well?
TREASURER:
Well, now I am going to contact the other States and see whether any other State has allowed this situation to happen. I don't believe they would have.
MITCHELL:
It's not entirely beyond your control though is it? I mean there are other aspects, for example, and the Premier raised this, he wants it capped.
TREASURER:
You see, well let's just stick on toddlers because you know, I think what happened in the Herald Sun today, and this is the first I read about it, was the State Government having paid money to toddlers didn't put its hand up and say, we should never have done it, did they? They tried to move it on to...
MITCHELL:
Well, no, no, the Premier said it was immoral, it was immoral for people to be doing this.
TREASURER:
So why did his legislation allow it?
MITCHELL:
Well I guess it is an error. You all make errors don't you?
TREASURER:
Okay, well, if you read the, if you read it carefully, the Victorian Government didn't say, it is our fault we made an error. They tried to suggest that somehow this was caused by the Commonwealth. I just want to leave your listeners under no misapprehension, the Victorian Government enacted legislation and paid these grants and the Commonwealth never knew about it until today. And that is why the Commonwealth will be seeking the Victorian Government to repay to it all of the money that it has paid out to these toddlers.
MITCHELL:
How much is that? We don't know?
TREASURER:
Well, according to the Sun, and it's all I know about it, it looks to me as if there's probably about 5, 8, 12, 17, 27 maybe 30 such grants have been paid.
MITCHELL:
Well okay.
TREASURER:
The other thing I want to...
MITCHELL:
...remain in dollars.
TREASURER:
...Neil is that the Commonwealth Government doesn't know who this paid to. We don't have a list of who gets it. What happens is that the States set up the legislation, the States receive the applications, the States make the payments and after they have made the payments they come to the Commonwealth Government and they ask for a reimbursement.
MITCHELL:
Okay. So you are going to ask for the money back? You are going to make sure the loophole is closed?
TREASURER:
Well, we can't close the loophole, that's in the Victorian Government legislation.
MITCHELL:
Okay, are you...
TREASURER:
We will be asking for the money back. The Victorian Government should never have paid it.
MITCHELL:
Will you accept the point from the Victorian Government that they want to cap such grants to properties, I think it is $500,000? At the moment you have got million dollar properties getting the grant.
TREASURER:
Well look, this is an agreement, this is an agreement between all the States and the Commonwealth. Every State has signed up to this, including Victoria incidentally, that everybody who is buying their first home and living in it, not toddlers, would be eligible for a grant. That can only be changed with unanimous agreement. But that is a separate issue.
MITCHELL:
Okay, so we...
TREASURER:
We were never in agreement to pay this to toddlers.
MITCHELL:
Okay. So that doesn't need unanimous agreement but the reduction of the, the cap does?
TREASURER:
The problem is there was unanimous agreement that you had to be buying the house and living in it. So there was unanimous agreement that toddlers would never get it. Right. And Victoria has allowed it to occur. There was also unanimous agreement that this would un-means tested. That was allowed. And if that is to change then there would have to be unanimous agreement to change it.
MITCHELL:
Would you support a change in that way?
TREASURER:
Look, there are two ways of looking at it. One is, it would increase complexity enormously. Bear this in mind, if you are buying a house for $500,000 you are actually paying $43,000 in GST. The States are still making a big profit, they are getting $43,000 or something like that in GST from those people, plus stamp duty on the land, which is probably what, would it be $60,000 in Victoria? They are probably getting about $100,000 in tax from those people. And those people get a $7,000 grant. That is the other side of the equation that Mr Bracks and Mr Brumby don't tell you. I am just going off the top of my head about what the stamp duty would be on the average, on a $500,000 house. I think it would be, would it be, $60,000 in Victoria? Well, I don't know.
MITCHELL:
I don't know. We will find out. Look the point about the State Government repaying the money, this could get ugly, and if they won't do it, what happens?
TREASURER:
Well they should.
MITCHELL:
Well they should. But this is politics. What if they won't?
TREASURER:
The State Government has come to the Commonwealth and asked us to reimburse them for grants they have given out to toddlers. And toddlers should never have got the grants. And they have been reimbursed.
MITCHELL:
Okay, thank you for speaking with us.
TREASURER:
I have just got those figures by the way.
MITCHELL:
Yep.
TREASURER:
The GST on a house price of $500,000 is $45,000, the stamp duty on a house price is $25,000. So people will be paying in State Government taxes of the vicinity of $70,000 on a $500,000 house. Now they get a $7,000 grant, but they are paying $70,000 in GST and stamp duty to the State Government.
MITCHELL:
You are describing the GST as a State tax.
TREASURER:
Well, the Victorian Government gets every dollar of GST.
MITCHELL:
I know the argument. It is interesting that it was introduced by a Federal Government, that's all.
TREASURER:
Well, if the Victorian Government wants to give the GST back to the Commonwealth, we will gladly accept it.
MITCHELL:
Okay. Now, could I just quickly ask you about something else? This resettlement deal that the Remuneration Tribunal has come up with for Federal politicians who lose their seat. That's a bit red hot isn't it? $16,000 for...
TREASURER:
Well, look, this is, can I just say this has been recommended by an independent tribunal. The Government has not accepted it yet but I wouldn't assume that just because it has been recommended it will be accepted.
MITCHELL:
Well, it's not too often that the Remuneration Tribunal is knocked back?
TREASURER:
Well, as I said, I wouldn't assume. It has been recommended by an independent tribunal. The Government hasn't considered it. And so it is not Government policy.
MITCHELL:
What's your view on it?
TREASURER:
Well look, I don't know that it will make much difference frankly. I don't think it is such a good idea.
MITCHELL:
Thank you very much for speaking to us.
TREASURER:
Thank you.