SUBJECTS: Labors Fairer Tax System for all Australians.
SABRA LANE, PRESENTER: The Shadow Treasurer, Chris Bowen, joins me now on the line. Mr Bowen, youve estimated that this will raise $4 billion, will you release the detailed costings on the policy to detail exactly what will be raised over four years and ten?
CHRIS BOWEN, SHADOW TREASURER: Well good morning Sabra, and I heard the Prime Minister claim there was no detail just then, he might not be aware we issued a ten-page factsheet yesterday, perhaps he might want to familiarise himself with this, and we've released far more detail than the Government normally releases with their policy announcements Sabra, so I think the Prime Minister needs to get up to date with what we've actually done. And this is actually quite a simple policy Sabra, at its heart. In 1980, Treasurer Howard in the Fraser Government was concerned about distributions from trusts to minors, and so he put a tax on distributions to minors at the prevailing top marginal tax rate. And what we're effectively doing is extending that to all distributions, but not at the top marginal tax rate, but at 30 per cent, which we think is a fairer and better measure in this instance. So this has been the result of 12 months of hard work by us in terms of developing this policy, and if the Prime Minister was fair dinkum he would actually take the time to read through the policy documents we released before jumping to conclusions about its impact.
LANE: Under the crackdown you've protected farmers, deceased estates as well as charity and disability trusts, but exactly who or what type of person are you targeting in this crackdown?
BOWEN: Well as I said Sabra we've released a policy which deals with discretionary trusts, but exempting those trusts that you've mentioned, disability trusts, charitable trusts, testamentary trusts and farm trusts. The policy that we released will impact on 318,000 trusts, and this is, as I said, a sensible and important extension of the existing regime. This has been a problem in the system for years...
LANE: That's a point you made in the first answer, but who are you targeting here? Many of these trusts will belong to small businesses, will they not?
BOWEN: No, actually, of those 318,000 trusts, 200,000 are self-identifying as 'industry-related' but in many of those instances they will be doctors, accountants, lawyers - are not the sort of small businesses that many people would imagine. The vast majority of small businesses, remembering there are 3.2 million small businesses in Australia, actually don't use trusts. But those businesses that do of course can continue for the legitimate purposes that they engage in trusts for, primarily asset protection and succession planning. And anybody who's running or working in a small business and taking a wage is totally unaffected by this. The only people who are affected are people who receive a distribution who aren't actually involved in the business, but receive a distribution and in the case of many high-income earners, this is directly designed to be, to minimise tax. Now they're complying with the law, they're not doing anything wrong, but it's our job to update the law, and to make sure that our tax system is fair.Now Sabra, trusts are not available to your average PAYG worker. And the changes we announced yesterday, in great detail, will not affect 98 per cent of Australian taxpayers.
LANE: The small businesses say that they feel they are being targeted. Peter Strong from COSBOA points out that the ALP wants to impose a higher tax rate on higher income earners to pay for the NDIS, an effective tax rate of 49 per cent, plus you add in the unwinding of the cuts to the company tax rate, not all small businesses actually get that but some of them do, the reimposition of Sunday penalty rates which largely affect small businesses, throw in these changes and it sounds like Labor doesn't like small business.
BOWEN: Not at all Sabra, and I understand Peter and COSBOA have different views about penalty rates to us. We respect their views and I'm sure they respect ours. We think it's bad for the economy to provide a wage cut to 700,000 Australians, and unfair. But also, a drag on growth as an impact on demand. As I said this is a policy which is not targeting small business at all. This is a policy that we announced yesterday which targets tax minimisation and high-income splitting in a way which is not available, frankly, to most small businesses. I mean most small businesses wouldn't make enough to benefit from this income splitting. But I think most small businesses would look at this and say well if people are distributing to university students or their spouses or their parents and asking their parents to use that money on perhaps something else for the family, that is just an artificial mechanism to reduce your tax, and when one part of the economy can use an artificial mechanism to reduce their tax, that puts more pressure on the rest of the economy, including small business.
LANE: The Government points out this tax measure combined with Labor's other tax policies will push the tax-to-GDP ratio above the Government's cap of 23.9 per cent, that it would hurt growth and cost jobs. How do you respond?
BOWEN: Well again I heard the Prime Minister saying this policy will do nothing for growth. Well he might want to explain how his policy of increasing tax on any Australian who earns more than $21,000 might increase economic growth. He might want to explain how his policies to, that he's engaged in over the years for further cuts to family payments might enhance growth. We have a well-developed economic policy and of course we have much more to say. We see growth as a holistic question. We see no choice between fairness and growth. We see them as being entirely keeping with each other. We also think that our plans on the NBN, on infrastructure, on a step change on economic engagement with Asia, on vocational education and training in which we've outlined a range of very good policies, all contribute to higher growth for Australia.
LANE: Mr Bowen is this the extent of your tax policies or will you seek to change other areas like the fuel tax credit scheme?
BOWEN: Well we have no plans for that, but Sabra one thing we could not be accused of, people might like our policies or not like them, or perhaps more accurately like some and not others, but there is no way that this Opposition could be accused of being a small target strategy. We are announcing, we have announced in good time, way before any Opposition in recent history, before the election, our detailed policies for scrutiny and for examination, and we'll continue to do so.
LANE: Mr Bowen, thanks for joining AM this morning.
BOWEN: Nice talking to you Sabra.
