Topics: Superannuation changes; tax reform; budget repair

 

E&OE

 

DAVID SPEERS:

Angus Taylor, welcome to the program.

 

ANGUS TAYLOR:

Thanks for having me, David.

 

DAVID SPEERS:

So is it still your view that a 15 per cent tax rate for people with millions and millions of dollars in their super is totally inappropriate?

 

ANGUS TAYLOR:

Well, it's my view now and it was my view, then, David that when a government or a party makes a cast iron election promise, they should keep it.

 

DAVID SPEERS:

That’s not what I asked. I'm just asking whether it’s still your view that a 15 per cent tax rate for people with millions and millions in super is totally inappropriate?

 

ANGUS TAYLOR:

Well, the context is important. You can't abstract any policy initiative from the context and the context is that the Prime Minister made an unambiguous election commitment to this, and he should keep it. It's as simple as that. Now you go to the merits of the policy. The reality is this policy, it's flawed. In some respects, it's reckless and it will have a far bigger reach, much bigger reach than Labor is pretending here. The indexation is such, or the lack of indexation that younger Australians will …

 

DAVID SPEERS:

We'll come to that. Sorry, sorry Angus Taylor, we’ll come to that. I want to ask you about your concerns about the policy that's been announced. I just want to be clear with viewers though on what I’ve asked. Are you now saying you're fine with people who have millions and millions in super paying only 15 per cent tax on the earnings?

 

ANGUS TAYLOR:

Look David, fairness is one aspect of whether a tax is a good one. But so too is the impact it will have on the economy, the simplicity and implementation of it, whether the government even understands it, and they clearly don't.

 

DAVID SPEERS:

I’m just checking your view though …

 

ANGUS TAYLOR:

The other factor here is …

 

DAVID SPEERS:

You’re fine with this 15 …

 

ANGUS TAYLOR:

Well I’ve given you my view.

 

DAVID SPEERS:

… per cent tax rate on people who have millions and millions in super?

 

ANGUS TAYLOR:

Well, I'm rejecting that proposition. That's not the case. I mean, if you're a younger Australian and I have to respond to your statement there with the facts here, if you're a younger Australian in your 20s now, you're not going to be facing in real terms a $3 million threshold, you're going to be facing something closer to a third of that. A third of that. So many, many more Australians will be affected and impacted by this than the Labor Party has told Australians. I mean this is clearly very, very wrong to say that it's only that half a per cent or whatever. It will be many more than that.

 

DAVID SPEERS:

And I will come to thresholds.

 

ANGUS TAYLOR:

That’s before you even get to defined benefits.

 

DAVID SPEERS:

We'll get to that but I'm just still trying to get a clear answer here. People who have 10, 15, 50 million dollars in super, you think they should only pay 15 per cent on the earnings?

 

ANGUS TAYLOR:

Well, you've got to judge a policy in the context and the context here is bad policy …

 

DAVID SPEERS:

It’s a pretty straightforward question, Angus Taylor.

 

ANGUS TAYLOR:

Well, but I'm answering the question. You're asking me whether I support this policy, I reject it. We will repeal it.

 

DAVID SPEERS:

No, whether you support the existing tax arrangements that require only 15 per cent to be paid on the earnings in huge super accounts.

 

ANGUS TAYLOR:

Yes, of course. I think I've been making that clear. Of course we support the current policy.

 

DAVID SPEERS:

Okay. Thank you. It’s just not what you said in 2016 so I just wanted to clear that up. Let’s talk about the threshold.

 

ANGUS TAYLOR:

Well hang on. Hang on. No David. David, can I pick you up on this? This is a different policy. This is a different policy and it's so important to understand that. This will affect a broad range of Australians through the … we'll talk about indexation and defined benefits, I hope, in a moment. You've got senior ministers who don't understand it and most importantly, it was taken to an election by the Prime Minister, that we weren't going to have a change to taxes on superannuation. Superannuation where people make contributions over their lifetimes without being able to withdraw until they get to the pension stage and so that is a massive breach of trust with the Australian people. That was not the case in 2016.

 

DAVID SPEERS:

Alright. Let's turn to your concern about not indexing this $3 million threshold. That it's going to capture a lot of young people over time. When the Coalition made its superannuation changes in 2016, you lowered the income threshold for people to pay the Division 293 tax from 300 down to 250 grand. You didn't index that. Why are you demanding Labor do something that the Coalition refused to do?

 

ANGUS TAYLOR:

Well, that's about people making contributions. The issue here is that you've got Australians making compulsory contributions, where there's many decades in some cases, in many cases, before they actually get access to that money. And this means …

 

DAVID SPEERS:

But this concern is about indexing and capturing more young people over time …

 

ANGUS TAYLOR:

Yeah, no, no, that’s right. That’s exactly right.

 

DAVID SPEERS:

… not indexing that change in 2016 has captured how many people since then?

 

ANGUS TAYLOR:

Well, hang on. But that's at the contribution stage. This is about how things are being taxed along the way and for a long period of time. So if I'm investing as a 20-year-old, it's going to be close to 50 years before I get access to that money and the way that is treated along the way is hugely important. People have got to be able to trust it. Any change must be extremely cautious and critically, someone of that age is going to be facing a much lower threshold in real terms than the Labor Party has said.

 

DAVID SPEERS:

But hang on, if you're worried about tax thresholds not being indexed and what it might mean in 40 or 50 years, I mean, any government could change this in the future, just like any government can change the income tax thresholds. Are you saying they should all be indexed as well so that 20-year-olds aren't going to be pushed into the top tax bracket in 40 years’ time?

 

ANGUS TAYLOR:

Super is different and here's why super is different, David because the money is being locked away without getting access to it for very long periods of time. So if I'm 20-something and someone is advising me on what tax threshold I'll be facing down the track, the answer is if it's not indexed, it's about a third of what the Labor Party is saying and that's why we've seen analysis coming out this week telling us that many, many more people are going to be captured by this than the Labor Party is saying. Their numbers are rot.

 

DAVID SPEERS:

I'm not sure how that's different to income tax rates though Angus Taylor.

 

ANGUS TAYLOR:

They’re completely, completely wrong.

 

DAVID SPEERS:

I’m not sure why that’s any different to saying …

 

ANGUS TAYLOR:

Well no it is. 

 

DAVID SPEERS:

… you know, everyone’s going to be pushed into a higher tax bracket over time because they're not indexed either.

 

ANGUS TAYLOR:

No but you're missing the point of super. Super is locked away for decades. You don't, you don't get to take it out. You don't get to make choices around it other than where it's invested.

 

DAVID SPEERS:

Pretty sure you don’t get a choice on your income tax either but, anyway. Let’s …

 

ANGUS TAYLOR:

Well, but it’s not locked away, David and this is the critical point about super. It’s why Australians … you know, I've been out and about over the last couple of days. It’s show season here in my electorate and people are very sensitive about superannuation. The reason is, you've got to trust the government on this and actually when a government says they're going to do one thing and does something completely different, when the money is locked away, and I can't get access to it, then it is a very, very significant breach of trust.

 

DAVID SPEERS:

Okay and for the record, do you think income tax rates should be indexed?

 

ANGUS TAYLOR:

Well, I think we should do everything we can to alleviate bracket creep, which is why the stage three tax cuts are so important …

 

DAVID SPEERS:

Why not index those thresholds?

 

ANGUS TAYLOR:

Because, well but let's be clear, if you've got, if you've got a single tax rate across a broad sweep of incomes, which is what the stage three tax cuts do, you have taken away bracket creep for those incomes, that’s the whole point.

 

DAVID SPEERS:

For a while.

 

ANGUS TAYLOR:

That's why the stage three tax cuts are such good policy.

 

DAVID SPEERS:

Okay. So you’re not in favour of indexing income tax though? You’re not in favour of that?

 

ANGUS TAYLOR:

Well, what I'm in favour of is preventing bracket creep, which is the point you're making. That is the effect that you’re talking about.

 

DAVID SPEERS:

Well, the question was indexing. That sounds like a no.

 

ANGUS TAYLOR:

And that’s why the stage three tax cuts, that’s why the stage three tax cuts are so important because they're going to alleviate bracket creep, which we're seeing coming through the national accounts right now.

 

DAVID SPEERS:

Okay. Defined benefits. This is your other concern about what happens to defined benefit schemes of retired politicians, public servants and so on. Did the Coalition include defined benefit schemes in its 2016 superannuation changes?

 

ANGUS TAYLOR:

Yeah, they are included and that has an impact on the transfer balance cap.

 

DAVID SPEERS:

So how did you do that?

 

ANGUS TAYLOR:

Can I just say, well, well, the defined benefit valuation has an impact on the valuation of the transfer balance cap. I mean, that's how they're included. So, look, the important point here is that when Labor announced this, when Labor announced this, they had no idea about how they were going to deal with defined benefits. It was an afterthought, to say, ‘oh we better, we better include it.’ There's 500,000 Commonwealth … people on the Commonwealth defined benefit scheme. That's people like the military, AFP and we know many more on state defined benefits and other defined benefits scheme. They are left in a very uncertain position here but more importantly, some will be dragged in and the numbers that will be affected by this will go up very substantially, I have no doubt when you include the defined benefit scheme in it.

 

DAVID SPEERS:

So are you saying they shouldn't be?

 

ANGUS TAYLOR:

… this is something that Labor hasn't been … Well, I'm just saying that Labor was not able to explain this. They hadn't even considered it. It wasn't part of the announcement and they need to get clear about it. I mean the problem …

 

DAVID SPEERS:

Well, it was part of the announcement. The Prime Minister announced it at the time.

 

ANGUS TAYLOR:

(Laughs) Well, I couldn't find anything in the releases and the Prime Minister mentioned it as an afterthought when he was being questioned on it. So look, the truth of the matter is that this is a policy that senior ministers have been unable to explain. You say that I've only got two problems with it. The unrealised capital gains is probably the biggest issue.

 

DAVID SPEERS:

Okay so let’s talk about that. Okay, so explain to me your issue there.

 

ANGUS TAYLOR:

Well, the issue is very simple, David. This will result in the tax office asking people for cash when there is none. It's an unrealised capital gain and we've got people, including in my electorate, who have farms in self-managed super funds. Farmers are notoriously cash poor. They're always putting the family business, as well as putting every dollar they can back into the business. There's going to be calls on them to find cash. Now, the reality is that that will force sell downs and the broader economic impact of that is something that the government hasn't even begun to consider. These are the people that in regional electorates like mine, create the jobs, drive the investment, create opportunities – not just for themselves – but for people right across these regions and so to disrupt their businesses in this way, I think is something that should be avoided. Now …

 

DAVID SPEERS:

Just for disclosure here, Angus Taylor. Are you in that category yourself?

 

ANGUS TAYLOR:

No, no. No I’m not. But Wayne Swan … Wayne Swan stepped on this landmine with unrealised capital gains back in 2009. The Treasurer was his Deputy Chief of Staff and, of course, that was canned because not just the businesses that were outraged by it but unions were, David. So this is a very retrograde step.

 

DAVID SPEERS:

Alright.

 

ANGUS TAYLOR:

… when capital gains tax is introduced …

 

DAVID SPEERS:

Peter Dutton has announced, well he announced Wednesday morning, the Coalition would repeal this tax change. A couple of hours earlier you were a bit equivocal on that question. What happened here? Did Peter Dutton consult his Shadow Cabinet before making this call or was it a captain's call?

 

ANGUS TAYLOR:

David, my focus, and my focus continues to be on the fact that this is being introduced in this term of Parliament. I mean the idea that this is going to an election is rot. They're going to put this legislation through …

 

DAVID SPEERS:

Sorry, my question was about whether Peter Dutton consulted the Shadow Cabinet before making this commitment.

 

ANGUS TAYLOR:

Well, no, this is important. But no, no, of course we consult. Of course we consult. 

 

DAVID SPEERS:

So he ran this through the Shadow Cabinet in those couple of hours?

 

ANGUS TAYLOR:

The point I am making to you, yes, we decided we were going to oppose this and oppose it we will and repeal it we will.

 

DAVID SPEERS:

No repeal this sorry. Repeal. And you decided that as a Shadow Cabinet?

 

ANGUS TAYLOR:

And repeal it we will. We have made that decision and that decision was made quickly and that's why we were out quickly and that's why we've made a very clear case over the last week about why this is bad policy.

 

DAVID SPEERS:

So he did consult you? He did consult you?

 

ANGUS TAYLOR:

Absolutely.

 

DAVID SPEERS:

Okay.

 

ANGUS TAYLOR:

Absolutely. So the reality of this situation that I was pointing to in those early hours was this will be introduced in this term of Parliament. So the idea that it's going to an election is just rot. It's just absolute rot. It’ll be legislated in this term of Parliament.

 

DAVID SPEERS:

So repealing this will, however, cost the budget now roughly $2 billion a year. It's only a modest change in terms of the overall tax take. But you'll have to presumably either have a bigger deficit or find an offsetting saving elsewhere, right?

 

ANGUS TAYLOR:

Well, a couple of points about that. Number one, it's $900 million over the forwards. Obviously the intention for Labor is to increase the numbers over time. We'll see how much behavioural change there is on this and what it raises in the end and that's with taxes, that’s of course, a very important factor in this. But look, David, you come to costings, we've rejected $45 billion of spending from Labor in recent months through the Parliament. I mean, they're upset about that …

 

DAVID SPEERS:

Well, they’re off-budget funds. I’m asking you about the budget though. We’ve got a structural deficit in the budget. Will you run a bigger deficit to protect these tax breaks or will you find offsetting savings? 

 

ANGUS TAYLOR:

That $45 billion is debt that the government will have to carry.

 

DAVID SPEERS:

But I’m asking you about the budget. The structural budget deficit.

 

ANGUS TAYLOR:

Well, it comes through in the budget papers, David. There's no doubt about that. $45 billion will be there. We'll be able to see it. It's real money, and it has interest costs attached to it as well. So these are very significant expenditures. We've opposed. Labor's making a big deal of it. But it is the right thing to do right now.

 

DAVID SPEERS:

On this, you're saying you’ll repeal this tax break for the top, will you find any offsetting savings?

 

ANGUS TAYLOR:

Well, I'm talking about $45 billion right now …

 

DAVID SPEERS:

So that’s a no in terms of budget savings?

 

ANGUS TAYLOR:

… with interest costs attached to it. Well, David, we will go to the next election with a fully-costed budget and already after less than a year. No. It's an important point. After less than a year of being in Opposition, with differentiated with Labor on $45 billion of additional government debt that we think is not appropriate with interest costs attached to that which will be very significant. On-budget interest costs …

 

DAVID SPEERS:

Okay.

 

ANGUS TAYLOR:

… and so the second thing I'd say though, and this is … no David, this is very important. You need fiscal guardrails if you are going to bring the budget back into balance.

 

DAVID SPEERS:

So what are those guardrails? Let me ask you about that. When it comes to tax, you know, you describe all the tax concessions as a hit list. Does that mean you think the system’s perfect? Nothing should ever be touched on tax?

 

ANGUS TAYLOR:

Well, no, we think the stage three tax cuts need to go into place.

 

DAVID SPEERS:

Mmm. They’re legislated.

 

ANGUS TAYLOR:

We want to see lower taxes for Australians and stronger growth.

 

DAVID SPEERS:

That’s legislated at the moment. Is there any tax concession you would touch?

 

ANGUS TAYLOR:

Well, David, you asked about the fiscal guardrails and the key to this is to have budget balance as an objective in the budget. Labor has taken that out of the budget and then as I said to you last time I was on this program, you need to make sure the economy grows faster than your spending. Now Labor's taken these away as objectives.

 

DAVID SPEERS:

So no further tax reform?

 

ANGUS TAYLOR:

That means they’ve lost all discipline.

 

DAVID SPEERS:

The first thing we will do when we get back into government is to reestablish those fiscal guardrails and the discipline that comes with it for ministers, for bureaucrats and for everybody. That's how you do this. We did it between 2013 and 2016, we’ll do it again. Tax won’t be the focus. It’ll be making sure the economy grows faster than our spending and …

 

DAVID SPEERS:

Right. And spending cuts?

 

ANGUS TAYLOR:

We made that signal … well I said that the economy needs to grow faster than your spending. You can have spending growth but the spending growth has got to be contained to ensure that you have a faster growing economy than your spending and we did that from 2013 to 2019 and it worked.

 

DAVID SPEERS:

Alright, Angus Taylor. We’ll have to leave it there. Thanks so much for joining us.

 

ANGUS TAYLOR:

Good on you. Thanks David.

 

ENDS.