Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
SABRA LANE: The remainder of the Federal Government’s corporate tax package may be voted on today. The Coalition is still trying to convince nine crossbench Senators to pass it, given that Labor and the Greens are opposed. Joining us now with the latest is the Finance Minister Senator Mathias Cormann who is also the Government’s Leader in the Senate. Good morning, welcome back to AM.
MATHIAS CORMANN: Good morning. Good to be back.
SABRA LANE: Will you put the remainder of the package to a vote in the Senate today?
MATHIAS CORMANN: It is on the agenda to be considered by the Senate today. The Government does not have the numbers in the Senate, so we are not entirely in control of the time it takes to consider legislation, but certainly it is our intention for the business tax cuts legislation to be dealt with this week. That is very important for working families around Australia because we want working families around Australia to have the best possible opportunity to get a good job, to get a better job, to get better wages. That is why we need to ensure that businesses around Australia can be as competitive as possible.
SABRA LANE: The Financial Review is reporting this morning that a secret Business Council of Australia survey of chief executives found only one in five said that they would use the proceeds of this tax cut to boost wages or employ more people. Four out of five said that the extra proceeds would either be reinvested in the company or go to shareholders. How do you respond to that?
MATHIAS CORMANN: Our very firm view is that if there is more investment and if more jobs are created and there is more competition for workers, whatever businesses want to do, businesses will be forced to pay more. That is the way the market works. The key ingredient for higher and stronger wages growth is more competition for Australian workers. Over the last year more than 420,000 new jobs have been created. Wages growth has started to pick up and that is after we passed our tax cut for businesses with a turnover of up to $50 million. We want wages growth to strengthen more and the best way to do that sustainably in the economy is by making sure that more and more jobs are created, so that businesses have to compete for less excess supply in the labour market.
SABRA LANE: Well that survey though seems to be a damning indictment and plays into what your critics have argued.
MATHIAS CORMANN: I completely disagree. We have always said that what we need to ensure is that businesses across Australia can be more successful and more profitable into the future so they can invest more in their future growth. That is what business is indicating they would do. Businesses which grow, employ more people than they otherwise would. As business employs more people, they will have to pay more in order to secure the services of their workers. The truth is, if business is less successful does anyone really believes that less successful, less profitable businesses will be able to hire more people and pay them more. The truth is if business is less successful and less profitable, they will hire fewer people. As fewer people are hired, there will be higher unemployment queues. As unemployment is higher, the pressure on wages will be less and wages, if anything would actually drop.
SABRA LANE: You still need nine Senate crossbenchers to support it. You are talking with Derryn Hinch and the new Senator, Tim Storer. It is a baptism of fire for Senator Storer, he has been here a week. How is he coping with the pressure?
MATHIAS CORMANN: At the beginning of this fortnight we had three non-Government Senators who indicated that they were supporting our important business tax reforms. As of today, seven non-Government Senators are indicating that they are supporting our reforms and we need nine. We continue to talk to all non-Government Senators. Everyone who is prepared to talk to us we are talking to. We hope that we will be able to persuade the necessary nine to support our reforms.
SABRA LANE: Labor is announcing it is introducing a pensioner guarantee under its excess franking credits crack down, that all pensioners will be protected. That seems to extinguish the Government’s attack here. What is your response?
MATHIAS CORMANN: That is not what Labor is doing. Either Bill Shorten does not understand the effect of his latest backflip or he is deliberately lying to the Australian people. I am reading directly from the policy document, so called, that he rushed out last night and it says and I am quoting “self-managed superannuation funds with at least one pensioner or allowance recipient before 28 March 2018” and this is emphasized “before 28 March 2018 will be exempt from the changes’. That means by definition that if you become a pensioner in a self-managed super fund or an allowance recipient from Thursday this week, you are captured. Bill Shorten has explicitly formalised that he wants to hit pensioners with his tax attack on those Australians who have done the right thing, worked hard, saved hard and have invested in shares through their superannuation fund. He never thought this through properly. He was always going to hit pensioners and self-funded retirees and his bungled backflip from yesterday does not protect pensioners. He continues to hit pensioners. If you become a pensioner from Thursday and have your shares through your self-managed super fund, he will continue to come after you for your savings.
SABRA LANE: Well just on the self-funded retiree point, these are people who do not qualify for the pension, their super contribution were taxed at 15 per cent, not the marginal rate. The nest eggs grow through two generous tax concessions. The withdrawals are tax-free. Some younger taxpayers, the younger generations who cannot afford to buy their first home will be wondering why should I be supporting these people?
MATHIAS CORMANN: They are not supporting those people.
SABRA LANE: Well they are.
MATHIAS CORMANN: That is completely false. If you are on a low income, you pay less tax. If you are on income below the relevant income tax threshold, then right now you get an income tax refund to pay back to you the excess tax that has been paid on your behalf by the company in which you are part owner. It is often said how other countries do not have this system, but other countries do not include the income from dividends in their overall taxable income. The tax arrangements in many other countries are quite different to those in Australia. Dividends and investment income in other countries are taxed at a lower rate quite separate from the overall income. The truth is, this dividend imputation system was put in place to avoid double taxation. It is a very important principle to avoid double taxation. If you do not have a tax liability, if you are on zero per cent tax because of your personal circumstances, then you should not be forced to pay 30 per cent tax on income from your dividends.
SABRA LANE: Minister we are out of time. Thanks for joining AM this morning.
MATHIAS CORMANN: Always good to talk to you.
Senator the Hon Mathias Cormann, Minister for Finance, Perth