PRESENTER:
We’re joined in the studio by Mr Costello and to speak to him Peter Martin.
JOURNALIST:
Treasurer are you happy with the reaction you’ve received overall?
TREASURER:
Look, I think it’s been a positive reaction and this is something we’ve worked incredibly hard on, took soundings from the whole business community, and I think we’ve been able to accomplish a number of objectives. One is to give Australia a really competitive tax system which will get more investment and more jobs. And the other is to simplify some of the really complex areas, particularly capital gains and give benefits to mum and dad investors.
JOURNALIST:
Are you disappointed with the reaction you had there from miners?
TREASURER:
Well, look, I think once they properly understand tax changes they’ll see this is of enormous benefit. And the point I’ve always made in relation to mining is, not only are there benefits in this package, lower company tax rates, immediate deductibility for over-burdened, but they will get deducitibility on black hole expenditures which they don’t get at the moment. And you’ve got to understand the tax changes as a package. The biggest industry benefit from indirect tax change went to mining. And when you look at the overall tax changes the biggest industry overall winner is the mining industry.
JOURNALIST:
That’s taking this package and the last one into account?
TREASURER:
That’s right.
JOURNALIST:
How can you make everyone happy as you seem to have done and not have the, as you believe you’ve done, and not have the process costing you money?
TREASURER:
Well there are trade-offs. We have a lower company tax rate, but we trade-off that, the tax concession of accelerated depreciation and the pre-payment rule. There are lower capital gains for individuals, but we trade off for that indexation and averaging. Now a lot of these concessions are complicated and probably weren’t used by unsophisticated investors. So what they didn’t know about they’re not losing. But what you do by broadening the income tax base, it’s the same principle, we can lower rates.
JOURNALIST:
One of things you’ve done, figures you’ve accepted, are that you’ll actually make more capital gains tax by cutting the rate. Do you believe that?
TREASURER:
Well this was the result of the work that the Review did and we accept that.
JOURNALIST:
You accept that?
TREASURER:
Yeah, I think there is something in it too. What are people focusing on today? The fact that if you’re an individual, whatever your income tax rate, you’re capital gains tax rate is half. It’s still a progressive capital gains tax, if I may say so.
JOURNALIST:
How can it be progressive if its half? It’s half whatever you’re tax rate is?
TREASURER:
If you’re a low income earner on the 30 per cent rate, you’ll pay tax at 15 per cent on your capital gains. And if you’re a high income earner on the 48 per cent you’ll pay 24.25 on your capital gain. And we have become a nation of shareholders. We’re the second largest share owning nation in the world.
JOURNALIST:
You now want us to become a nation of share traders? For those people who own the Telstra shares now they consider selling them or consider buying more?
TREASURER:
Mum and dad might have picked up some Telstra shares, or they were in the AMP and they’ve got some AMP shares, or they’ve got some National Mutual shares, or maybe they’ve bought a Coles/Myer share so they can get their discount. They’re not sitting at home, by the way, indexing their share price and moving their cost base. But under this system, if they buy shares they know that whatever the gain is the tax on it is quite straight forward and it’s half the current rate.
JOURNALIST:
Who are the people who benefit most from that? There are no tables in those documents to suggest who they are. Are they high income earners?
TREASURER:
Well, I think in numbers it will be the millions of Australians that maybe have a couple of shares. Maybe they’ve bought a holiday house or a caravan or something like that. They will be beneficiaries. One of the problems we’ve had, by the way, on this capital gains tax is, because it is so complex at the moment, I have great doubts whether people are complying with it. I doubt that there are mums and dads sitting down trying to work out what their assets are that aren’t personal use asset, and then indexing them to the cost base, and then averaging them on disposal, and them reporting them on their income tax return. So what we’re doing is we’re getting out of all of that complexity. And in return, no complexity, halving the rate.
JOURNALIST:
Now why should someone who earns money from trading shares, buying property, buying art, pay tax at half the rate of someone who makes their money by being a teacher, a nurse, a policeman?
TREASURER:
Well, well, they don’t. You’ve got to be pretty careful here. If you get to the point where you’re a share trader or an art dealer, then your buying and selling is an income activity. You get to that point where it’s income and it’s under the normal rule. But, it’s the kind of person that has the one-off investment and the one-off type capital gain and they hold it for more than 12 months. Well, I think, actually, it’s a good savings policy and it’s a major simplification.
JOURNALIST:
Will it be seen, do you fear, by Labor, by the Democrats as a mean to smuggle in further tax cuts for high wealth Australians.
TREASURER:
Well, we’re not in the business of tax cuts for high wealth Australians. We’ve set up the high wealth individuals project, which has been targetting high wealth individuals with intelligence work for a very long period of time. And if I may say so, these are not people that are paying income taxes. When you’re targetting the high wealth individuals you’re into much more sophisticated stuff than that. The international activity and the rest of it, which we have been clamping down on very severely and intend to keep doing.
JOURNALIST:
Are you concerned though, that Labor will see it that way, that Labor and the Democrats will see it that way. That people on high incomes are the people most likely to benefit from what you’re doing?
TREASURER:
Well, the point I make to Labor and the Democrats is this. They have the opportunity, particularly Labor, to make themselves relevant again. And I think this has been warmly received by business. And the Labor Party could say, well we will endorse a sensible report in the national interest, and they could say to the business community, this is evidence that Labor is prepared to work constructively. I don’t think if they take the opportunistic role and say, ‘we’re going to oppose everything’, I don’t think they’re going to get many votes. Because for much of Australia this is complicated issues that they find hard to understand in the first place. And for those that do, or come in to the business tax system, the businesses, they’ve warmly welcomed the report. So, why polarise, why look for the vote here and there, when I think they have the opportunity to re-cast themselves? I actually thought they were looking a bit more positive yesterday and I would encourage them to continue.
JOURNALIST:
You’ll be having a meeting, I imagine, as soon as you can with Mr Crean and Mr Beazley?
TREASURER:
Well, it’s up to them isn’t it. I’ve been a Shadow Treasurer and in these complicated business areas, the general approach we took was that if there had been proper consultation, you don’t have the resources in Opposition to second guess it, and we generally gave it bi-partisan support.
JOURNALIST:
Treasurer, thank you.
TREASURER:
Thanks.