Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Hansard source

Noting that we were given two minutes notice that this bill was being brought on for debate, I rise to speak on the Tax Laws Amendment (2012 Measures No. 6) Bill 2012, which deals with a range of changes to the taxation system which I will go through in some detail.

Schedule 1 deals with changes to native title benefits and seeks to classify such benefits as non-assessable, non-exempt income so that they are not subject to income tax or capital gains tax. The changes within this schedule also allow impacted taxpayers to amend their tax returns in certain circumstances where the amendment period has expired.

The House of Representatives Standing Committee on Economics inquiry into this schedule of the bill found that opinions shared in the inquiry fell into three broad categories. Indigenous organisations generally supported this amendment, as it provides clarity for relevant income and capital gains tax issues. Indigenous groups also called for the scope of the schedule to be broadened in order to include making investment income generated from native title payments tax exempt. Mining groups supported a tax-exempt vehicle for such payments but felt that this schedule could not proceed in its current form as it may encourage substantial up-front payments to individuals at the expense of longer-term intergenerational goals. The third group comprised the government of Western Australia, which stated that tax exempt status for native title benefits was not warranted outside the normal provisions for charitable trusts.

The coalition have expressed the view, through our dissenting report in the House of Representatives Standing Committee on Economics advisory report into this bill, that there may be unintended consequences of this change. In particular, it may encourage large payments to individuals that would be contrary to the long-term development goals for Indigenous policy. This view was also expressed by the Minerals Council of Australia, which stated:

… we are concerned that the proposed native title payment tax treatment may have a range of unintended consequences. Specifically, we consider that those amendments disincentivise investment in intergenerational wealth creation, as tax will be payable on any transfer of monies to future generations or on income earned. It disincentivises the provision of benefits under agreements to Aboriginal people who are resident in an area but who are unrelated to native title determination and it limits the main tax treatment to the defined beneficiaries.

The coalition also raised concerns in relation to principles which are offended by the operation of schedule 1, making compensatory or any other income exempt from tax and violating the key tax principle of horizontal equity. A dollar earned by one person, regardless of how it is earned or from what activity, should be given the same tax treatment as though it were earned by another person.

As set out in the coalition's report to this inquiry, if this income were to be taxable in the hands of an Indigenous recipient, or recipients, it would likely increase the compensation sought by the amount of tax expected to be paid. As such, the incidence of any tax paid would likely be borne by the compensator. As it stands, the changes contained in schedule 1 make no distinction between native title compensation paid to individuals and that paid to groups or their trust funds. If paid to an individual or a number of individuals with possible inside running, the benefits of native title are unlikely to be shared widely or equitably, which does not seem to be in the spirit of the Native Title Act.

Where such compensation payments are paid to a large group, possibly to a community trust or a fund, then the benefits of native title are likely to be shared more widely and even across generations. That would enhance the justification for allowing these payments to be exempt.

Making this distinction would add some complexity and may appear paternalistic—it could be open to that argument—but it is more the spirit of native title compensation in the act that is worthy of further consideration and debate. The coalition calls on the government to reconsider its approach on this policy matter, and it is for those reasons that the coalition will move an amendment to excise this schedule from the bill.

Schedule 2 of the bill seeks to update the list of deductible gift recipients and extends the listing to another three entities. The coalition is not opposed to this schedule.

Schedule 3 of the bill seeks to extend the immediate deductibility of exploration expenditure provided to mining and petroleum energy explorers. This measure was announced by the government as part of the final design of the mining tax, the MRRT—the minerals resource rent tax—and is therefore expenditure linked to a failure. This measure was raised in discussions between the government and the Policy Transition Group. The Policy Transition Group was established specifically to advise the government on the technical design of the mining tax—gee, that went well! The Policy Transition Group did not include this change as a specific recommendation but, rather, made an observation about the anomaly of the inconsistent treatment for geothermal exploration, noting that the issue was outside the parameters of the terms of reference. The measure was specifically linked to the mining tax in the 2012 budget, on pages 28 and 29. So there is no argument that this is part of the mining tax package. The coalition view this measure as having originated within the mining tax process. We will be moving to excise this schedule from the bill on the grounds that we are opposed to the government's mining tax package and we will not support any expenditure that is linked to this failed tax, apart from the increase in the superannuation contribution rate from nine per cent to 12 per cent.

The Treasurer—what a Treasurer!—has linked over $15 billion worth of expenditure to the mining tax, which has now raised $126 million. Now the Treasurer has no money to pay for the $15 billion of expenditure. The Treasurer has been forced to admit the truth about his handcrafted mining tax—which he, the Minister for Resources and Energy and the Prime Minister personally negotiated, to the exclusion of the Treasury. They personally sat in the cabinet room and negotiated with the heads of BHP, Rio and Xstrata, and what did they come up with? A tax that raises hardly any money and $15 billion of expenditure against that. This will be the government's signature high-water mark. I am reluctant to say that, but I cannot believe that in just a few months the government could come up with any further policy initiative on the scale of the mining tax. The mining tax will be the benchmark for incompetent governments. No-one has encapsulated that better than the member for Griffith, who belled the cat earlier this week by identifying that the people that actually negotiated the mining tax were in fact just the Prime Minister and the Treasurer.

It now looks likely that all the commitments made by the Treasurer in relation to the mining tax will be funded by borrowing money. So the government goes out and borrows money to give it to the Australian people or borrows money to hand it out somewhere. It is clearly unsustainable. We have been constantly saying this, reminding the Australian people. The first version of the mining tax, the superprofits tax, was going to destroy the mining industry. The mining industry said it, and they were right. It is going to have a huge impact. Then they dumped Kev and put in the now Prime Minister. She identified that the mining tax was one of the things she was going to fix—and, boy, she fixed it! Not even the Greeks can develop a tax that raises no money! I apologise to any Greeks in the gallery. It is a great country, it is the home of democracy—

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