House of Representatives

Second Reading Speech

Mr Costello (Treasurer)

I move:

That the bill be now read a second time.

The measures contained in this bill will cut personal income tax for all Australian taxpayers.

The tax reductions amount to $21.7 billion over the next four years. This is in addition to the $14.7 billion in tax cuts provided in last year's budget.

From 1 July 2005, the 17 per cent marginal tax rate will be cut to 15 per cent.

The 42 per cent threshold will increase to $63,000 and from 1 July 2006 will increase again to $70,000.

From 1 July 2005, the 47 per cent threshold will increase to $95,000 and from 1 July 2006 will increase again to $125,000.

The reduction in the 17 per cent rate to 15 per cent means that taxpayers who are eligible for the full low income tax offset will not pay tax until their income exceeds $7,567, up from $7,382 currently.

Senior Australians will also benefit. From 1 July 2005, senior Australians who receive the senior Australians tax offset can earn more without paying tax. Single senior Australians will now pay no tax on their annual income up to $21,968 and no tax on equal incomes up to a joint $36,494 for a couple. The Medicare levy threshold for senior Australians will be increased to ensure that they do not pay the Medicare levy until they begin to incur an income tax liability.

The personal income tax cuts will assist low-income earners, boost disposable incomes and improve incentives for all Australian taxpayers to participate in the work force, to invest and to save. This will ensure that over 80 per cent of taxpayers will face a top marginal tax rate of 30 per cent or less.

These personal income tax cuts will further improve the structure of Australia's tax system and increase our international competitiveness. Our strong economy, lifestyle advantages and changes to the top two thresholds will provide incentives to work in Australia. Taxpayers will not reach the highest marginal tax rate until they earn around three times average weekly earnings, with the top marginal rate applying to only three per cent of taxpayers from 2006-07.

If the threshold for the top marginal rate had been indexed to inflation since 1996, on 1 July 2006 it would have stood below $64,000. Under the measures contained in this bill it will stand at $125,000.

This income tax cut is due to take effect on 1 July of this year. In order to ensure that the tax cuts take effect on 1 July this year, this parliament needs to pass legislation. The legislation is the basis for the Commissioner of Taxation to publish the scales which inform employers how much tax they should withhold. Until such time as those new scales are published showing the lesser amounts to be withheld, employees will still have today's tax taken out rather than the reduced tax which would apply after 1 July 2005. For that reason this legislation needs to go through this parliament in good time before 1 July 2005. Any blocking measures by the Australian Labor Party could only be designed to keep from people the tax cut which they deserve on 1 July 2005.

Let me make it clear: the Australian Labor Party will not block this tax cut. This tax cut will go through in the new Senate if it does not go through in the current Senate. The only thing that the Australian Labor Party could be expecting to achieve with their current tactics is to delay a tax cut for all Australian income tax payers. Their opposition will be futile. It will not work. The new Senate will be able to pass this legislation, but the new Senate does not sit until 9 August. The tax cut is due on 1 July. I call on the Australian Labor Party not to stand in the way of tax cuts for every Australian. We know that Labor stand for higher taxes. They are demonstrating that they stand for higher taxes by trying to delay this bill.

This morning the Australian Labor Party is in absolute chaos because of the brilliant Black Adder like tactics of the member for Lilley and the Leader of the Opposition. They have a cunning plan to deny Australians the tax cuts which they deserve. There are members of the Australian Labor Party backbench who know that this is a ridiculous tactic. I call on those members, if they are in the Senate, to at least abstain in relation to this vote and to allow this legislation through before 30 June.

Let us be clear about this - Labor can only delay this tax cut if it has every single one of its senators voting against it in the Senate and combining with other minor parties. If those senators are prepared to join with the government, or at least to abstain from the vote, Australians can have their tax cuts. This government stands for lower income taxes. This government announced a plan for lower income taxes on Tuesday night. This government has fully funded it. This government calls on the opposition to join with it. This government says to the Labor Party, 'Do not stand in the way of tax cuts.' Labor may stand for higher taxes, but this time the stand will be futile. This will go through the new Senate; it ought to go through immediately. I can also indicate, on behalf of the government, that if the Australian Labor Party wants to bring the vote on today, we would be prepared to facilitate that - with no divisions and no delaying tactics. If it wants to bring this bill on today, have a vote and go down on the record as voting against it in the House of Representatives, I make the offer that we would facilitate that if it were done by leave and by agreement. Why? Because Australians want income tax cuts. I commend this bill to the House. The full measures are contained in the exploratory memorandum which I present to the House.

Debate (on motion by Ms Gillard) adjourned.