Taxation Laws Amendment and Income Tax Rates (Temporary Flood Reconstruction Levy) Bills

Ms BIRD (Cunningham) (12.21 pm)—I rise today to support the Tax Laws Amendment (Temporary Flood Reconstruction Levy) Bill 2011 and the Income Tax Rates Amendment (Temporary Flood Reconstruction Levy) Bill 2011. I imagine everybody in this House was both shocked and awed, as I was, by the events that occurred over the New Year period and in particular the devastating impact that those floods had on the people of Queensland. There would be very few of us who did not feel our hearts go out to the people in those very traumatic and extraordinary circumstances. Certainly it took those in my own area of the Illawarra back to the floods that we experienced in 1998, when there was significant damage to property but not the loss of life that we sadly saw in the Queensland circumstances.

These particular circumstances, of course, confront the government with a decision on how it will undertake its responsibilities in responding to those flood circumstances and, more importantly, assist with the reconstruction effort. That is why we have these bills before us today. Clearly the bills are intended to impose a temporary flood recovery levy on Australian and foreign resident individual taxpayers. It is a progressive form of taxation. It applies to those with taxable incomes of $50,001 or more in the 2011-12 income year only. The levy will be applied at the rate of 0.5 per cent of taxable income for those earning between $50,001 and $100,000 in 2011-12. Of course, being a progressive tax, it will then apply at a rate of one per cent for those earning a taxable income of $100,001 or more in 2011-12.

The bills make provision for commonsense exemptions from the levy for people who were affected by the natural disaster. This will be a legislative instrument. This instrument will provide an exemption from the levy for people who received an Australian government disaster recovery payment for a natural disaster in 2010-11 and for people who met the Australian government disaster recovery payment criteria for a disaster in an NDRRA area in 2010-11.

This will mean, in effect, that about 50 per cent of all taxpayers will not be required to pay anything because they are under the limit. More than 60 per cent of people will pay less than $1 a week and about 70 per cent will play less than $2 a week.

I had some conversations with people in my local area when this temporary flood levy was first announced. One issue people raised with me was the fact that they had made personal donations to the Premier’s Flood Appeal and also to the classic organisations that support communities in areas such as this. The important thing was to indicate o those people that when we make those personal donations —as I myself and many of us do—they go towards supporting and helping families in a crisis situation; they go towards the purchase of replacement clothing, replacement household goods and money to live on. The intention of giving that donation is that it goes directly to that sort of support, whereas the levy and the government’s responsibilities are around reconstruction efforts and putting back in place the infrastructure that allows communities to recover.

When I asked charities in my electorate how best we could help, their advice to me was to encourage people to donate money, not goods. Because of the nature of the disaster the transport infrastructure is no longer in place and they said that moving items around would be a problem. It is really important that the infrastructure be rebuilt for these communities to get back to some normality. That is the role that the government takes on and that is what the levy moneys are utilised for. So it is quite a different task to that which people undertake when they make a personal donation.

These bills will have a financial impact of about $1.8 billion over the forward estimates period— 2011-12 to 2014-15. This, of course, takes into account that some taxpayers are exempted from paying the levy. We recognise that the size of the recent flood events is quite unprecedented and the impacts are significantly greater than we have ever seen before. At the time of putting these bills together, the estimate was somewhere around $5.6 billion. That, of course, is a significant responsibility to be taken on in rebuilding that infrastructure. The government put a package together to address that. It is a balanced package.

Every dollar the levy raises will be balanced by $2 in savings and cuts to programs more broadly. It is a balance between finding savings within the budget and also having a one-off levy. This recognises the significant and unprecedented level of these events and the responsibilities that they bring to the government. It is a one-off levy for one year. It is not an unprecedented circumstance as a levy. Certainly we have seen numerous levies. Under the Howard government we saw numerous one-off levies introduced for specific purposes. This is, I think, is a sensible way to address this particular problem.

The point should be made that, whilst the flood impact is devastating, we have to make sure that we retain an ongoing fiscal responsibility because of the importance of a balanced budget not only for our economic wellbeing but also for longer term economic growth and opportunities in our communities, including in the communities that have been affected by these events over the January period.

We are obviously going to see a growing demand, particularly as the minerals industry continues to expand, for infrastructure growth in order to deal with the growth in the economy. In order to keep those pressures balanced within the economy more broadly it is important that the government continues to sustain a balanced budget approach. So, in these circumstances, the view has been taken that the best way to achieve both the immediate requirements of the government to meet its commitments for reconstruction and the longer term requirements that the budget stays in balance and inflationary pressures are kept off the economy, including those created by real future growth in some of the main areas of our economy, is to deal with costs as they arise and to manage them in the budget cycle.

That is why this approach has been taken.

I think it is a sensible approach that balances the immediate responsibilities of the government with our longer term solid foundations for managed growth into the future. It is an important challenge; it is a critical challenge. Nobody can predict to any significant degree of accuracy the sorts of events that we saw unfold with the flooding disasters. I think it is incumbent upon governments to respond in as practical way but also with as long term a view as they can. That is what these bills are seeking to do.

That is what this fiscal response to our responsibilities is seeking to do. The government will of course be involved in funding the infrastructure being put back in place through the reconstruction authorities, so I am confident that that will be carried out in an exemplary and efficient manner.

I want to take a few moments to also touch on a broader issue that has been raised in relation to the flood reconstruction efforts. I want to put on the record in this place that I have had some conversations with people in my community and with people more broadly who have emailed me on the issue of our overseas aid program and the view that it should in some way be curtailed, or frozen for a while, or cut—people use different terms—in order to meet our commitments to our fellow Australians in flood affected areas. I was a bit disappointed that one of my colleagues in this House, the member for Hume, made that call publicly.

I was contacted by the local ABC for a response for it. I have said to people that, at the end of the day, I think that as a nation we have no problem meeting our financial commitments to each other and our financial commitments to those most in need in the international community. They are not in competition. And I think it is unhelpful, to say the least, for people to argue that there is a competition between these things.

There has been much discussion about the importance of our overseas aid. I work with many church communities in my area around programs such as the Survive Past Five program to make sure that children in developing parts of the world actually live to the age of five. Beyond the compassion and, I would think, the common humanity of many people—and I would hope most in this House—to see support for the most desperate and needy, and particularly children, in the rest of the world, there is also a really hardnosed pragmatic importance to what we do with our international aid program. That is about the fact, which I alluded to in my contribution in this House to the debate on the Afghanistan war effort, that there is a transformative and important role for education in making the world a more peaceful and harmonised place to live in for all people. Many of the things that we do with our aid program in targeting health and wellbeing, women and the education of children have hard-nosed economic and peace benefits for us as a nation.

In particular, it was very saddening that many of the comments targeted the program that was implemented under the Howard government of funding schools in Indonesia as an important and, if you like, ‘soft’ approach to addressing the issue of terrorism in our region. I think that initiative is a commendable one.

I am sure that when the government under John Howard introduced that program they saw it not only as a compassionate move and of value in delivering education to those children but also as a hard-nosed sensible approach to addressing terrorism in our region.

That has not changed. There is no doubt that, while you can legitimise it away in any debating format you want, the underlying tone of the comments was: we are giving money to Indonesians at the expense of our own people. It was whistling at the least attractive aspects of our personalities, and I think it is always very sad to see that. My view, and I said this straight to people from my local area who spoke to me, is: we can do both, we should do both and we should not be pitting one against the other. I really was particularly saddened that that aspect had come out in the debate.

I think there is always room to argue how you fund things. There have been some contributions across the chamber in this debate which pragmatically argued about how best to fund things. That is legitimate.

But I would hope that we do not see a return to the pitting of principles against each other, which is unnecessary, unhelpful and does not progress this place and its reputation at all. I just wanted to add those comments in supporting these bills before the House and indicate that I think the government has taken a sensible approach in this.