PM Transcripts

Transcripts from the Prime Ministers of Australia

Transcript 10654


Photo of Howard, John

Howard, John

Period of Service: 11/03/1996 to 03/12/2007

More information about Howard, John on The National Archive website.

Release Date: 14/08/1998

Release Type: Interview

Transcript ID: 10654



Well, it is an immensely courageous step one I have to say which

has been widely supported by editorial comment right around the

country today, demonstrates again that the electorate takes underestimates

John Howard at their own peril. But he has come to this with some

credit. He has been advocating tax reform for the bulk of his parliamentary

life. Now he holds the reigns and he has put something on the table.

He is on the line in Canberra. Prime Minister, good morning.


Good morning, Alan.


Can we just try, because it is complicated and the purpose of talking

to you is to try and simplify it, we will just start with the simple

things first. The income tax scales, just a comment on that.


Well the best thing about them is that you can now go from $20,000

a year income to $50,000 and that is probably 60 to 70 per cent

of wage and salary earners in Australia without going into a higher

tax bracket. So for that group of people we have effectively abolished

bracket creep and that is a massive reform, it is a big cut in income

tax but for low and middle income earners to be able to increase

your income through overtime, getting a better job, working harder

and know that you won't go into a higher tax bracket until

you hit $50,000 a year is a terrific reform.


Right, put it another way, you are shifting the emphasis from income

tax are you not to indirect tax and you are taking out $13 billion

out of income tax?


Well we are making the whole system more efficient. One of the

dividends of a GST is that you collect more tax because it is harder

to dodge and that enables you to spend the extra money you collect

on giving income tax cuts. The shift that you talk about is not

as marked as some may imagine is a real dividend out of the black

economy and in other areas of efficiency of having a GST and that

is very important for the future debate because others will come

along and say: oh you can have these tax cuts, you can have all

of these changes without a GST. You simply can't because without

a GST you don't get the huge tax savings for business, which

is important for jobs, nor do you get the efficiency gains through

getting money out of the black economy....


I'll come to the GST in a minute, we'll just do that

specifically. Just t he personal things. So income tax, and I say

to our listeners the margins are quite clear, the rates are clear,

check your own position because the tables are everywhere. Let's

go to private health insurance which is a matter of crisis. You

are going to provide a 30 per cent tax rebate on private health

insurance premiums?


Yes we are. That is a huge injection of support into private health

insurance and this is available to everybody. There is no income

test on it.


And that'll start immediately?


That will start in January of next year. It starts 18 months ahead

of the tax package and it will mean that if you have got a policy

of $2,000 a year you will get $600 back from the tax man or you

can get it earlier by going along to the Government office and presenting

the receipt for the payment of the health insurance premium. The

beauty of this is that it is equal to or better than full tax deductibility

for 81 per cent – 81 per cent – of the entire Australian

community. It is a real injection and when you add it to the $915

million extra that the Government put into the public hospitals

last week it means that our credentials in supporting health care

in the Australian community are second to none.


Okay. Right now families, people out there listening to you, there

is mum, dad. Just take mum, dad and three children could we by way

of simplifying it and have one of the children under the age of

five. Now under your family tax initiative that you introduced in

January last year, that has been going for about 18 months, you

provided did you not, you increased the tax-free threshold by $1,000

for each child and by $2,500 for each child under the age of five.

So could we just take our listeners through what this means now.

Firstly, your tax-free threshold for that family has gone up hasn't



Well the tax-free threshold for each child irrespective of age,

under 16, has gone up by an additional $1,000. In other words, we

have doubled it.


Yes, the overall tax-free threshold for the income earner has gone

from $5,400 to $6,000 hasn't it?


The basic threshold has gone from $5,400 to $6,000 then on top

of that you now get $2,000 for each child and on top of that if

it's a single income family, in other words, mum or dad at

home looking after the children you now get an additional $5,000....


For the child under five?


For the child under five you get $5,000. So if you have got a single

income family one child under five your tax-free threshold is $13,000.

And then on top of that for each additional child you can have another

$2,000. So your example, if my calculations are correct, your example

you are up to $17,000.


That's correct.


And then on top of that, that man gets the taxation cuts of which

I spoke of earlier. And you are looking at somebody in the $35,000

to $40,000 a year range and there are a lot of families in Australia

that are living on that with one income and three children and it

is not easy and they will get in the order of $45 to $50 a week

tax cut after the GST out of this deal. And, of course, if they

have got private health insurance they will get the benefit of which

I spoke earlier and also there is built into that $45 to $50 a week

a significant increase in some of the family benefits that they

are also getting.


Yes, and the one final thing on that, just keeping it simple, the

income test because many people out there on low incomes qualify

for a family allowance. You have raised...


That's been liberalised. Instead of it starting to cut out

at $24,000 odd it now starts to cut out at $28,000. And instead

of cutting out at a rate of 50 cents in the dollar the taper rate

has been reduced to 30 cents. It eliminates the poverty traps of

which many of the groups like the Salvation Army and ACOSS have

quite correctly spoken. And very importantly it gives people a greater

incentive to find a job because under some of these arrangements

in the past you could actually be worse off with a job than being

on welfare and there is nothing worse than that.


Absolutely. Childcare, just a quick one there because that affects

a lot of people.


Well for low income families there will be an increase of about

$7.50 a week per child and we are simplifying the payments.


Maximum payment of over $116.


$116 and then extra loading for each additional child. Any suggestion

that we have sort of in any way not fully looked after working parents

is wrong. We have simplified the benefit, we have protected existing

levels and in relation to the lower income people there is an increase

of about $7.50 a week. And, of course, all parents – all parents

– share in the doubling of the tax-free threshold for children

and, of course, the cuts in personal income tax. And bear in mind

if you have got two incomes you get two increases in the tax-free

threshold. Both of you get the benefit of the personal tax cuts.

If you are both earning between $20,000 and $50,000 a year you can

both work as much as you want to extra and up to $50,000 you don't

go into a higher tax bracket. That capacity to move from $20,000

to $50,000 without going into a higher tax bracket will do wonders

for peoples motivation in relation to things like overtime. How

often do you hear somebody say to you: ‘oh it's not worth

working overtime, the taxman takes half of it.' Well the taxman

won't take half of it under these scales.


[Commercial break]

Prime Minister, for those people on benefits and pensions, this

package would increase the maximum rate of all income support payments



Yes it increases them by 4 per cent and that 4 per cent is paid

on the 1st of July 2000 when the plan starts so that

pensioners have the additional money in their pocket as some of

the price rises occur. We have calculated that that amount is well

ahead, at least 1.5 per cent or more ahead of the estimated CPI

increase and we are going to guarantee to pensioners that at all

times their pension will be in real terms 1.5 per cent above any

increase in the CPI. So if the CPI goes up by 3 per cent which

won't but if it does, then we'll make certain that the

continuing increase and the increase is 4.5 per cent so they are

always 1.5 per cent ahead. And they have got that as an extra buffer,

an extra bonus if you like. Now that's....


Plus the cash bonus.


In addition to that anybody who has got investment income and who

is 60 years or more will get a $1,000 untaxed upfront payment. Over

and above that, if you are a self-funded retiree and you have got

an investment income and most of them do you will get another $2,000

if you are of pensionable age. And that is subject to an income

test, it is fully available under $20,000 a year and it phases out

between $20,000 and $30,000. And then on top of that, of course,

for retired people we are going to abolish provisional tax. Say

that again, abolish provisional tax. It's the bane of existence

of a lot of retired people, a lot of farmers, a lot of small business



A lot of people with income outside wages.


Indeed, income outside wages and then also for retired people a

lot of them have shares and under this franking credit system as

it is called, sounds complicated but the company pays the tax at

36 cents and then you get the dividend with the tax paid on it.

But if your tax rate is less than 36 per cent you don't get

the full value of that. And what we are going to do now is arrange

for it to be refunded from the tax department so if there is a tax

of 36 cents paid and you are only paying 20, we'll get the

tax department to send you the 16 per cent, send you a cheque. Now

that will be of enormous assistance to many modest income retired

people. And, of course, also for retired people the private health

insurance rebate will be very beneficial. Many of them have paid

for private health insurance all their lives, they need it, they

feel it gives them security. It's very expensive now. A 30

per cent cheque from the Government to help you pay for it will

be of enormous assistance.


Good on you. Well let's just sum up there what we have tried

to do. And we are not here to start challenging, we are here to

try and seek some explanation. So that's the personal tax scales,

we are talking about pensioners, those without work, we are talking

about health, we are talking about self-funded retirees. Let's

now go to the central component of the package, Prime Minister,

the GST.




Now the revenue from that you say will go to the States. I have

some questions this morning about which taxes it will abolish. I

understand that you have said that conditional upon them getting

the money is that FID goes, debits tax goes, stamp duty goes, stamp

duty on mortgages, on bonds, on leases, bed tax goes. Some asked

me land tax, land tax is not included in it?


No, land tax is not included. But it is a condition of the States

getting the money that they abolish all of the taxes that you have

mentioned and, of course, first and foremost we will abolish all

of the wholesale sales tax which is a Federal indirect tax. But

we will say to the States: you can have the GST revenue in full

provided you get rid of all of these taxes like stamp duty on shares,

stamp duty on business conveyancing, cheques, promissory notes,

bills of exchange....


And on your mortgage.


And on your mortgage. The financial institutions duty, the bank

accounts debit tax, the dreaded bed tax in New South Wales which

is a tax on the Olympic Games in a sense. And that must be removed

by the 1st of July in the year 2000 before the Olympic

Games starts, and the tourist industry will like that. So all of

those taxes have got to go for the States to get the proceeds of

the GST and I think that is a very good arrangement.


Okay, now it won't apply to the export...




...of goods or services consumed outside Australia?


No, it will make Australian exports cheaper to the tune of $4.5

billion a year. See what a lot of people forget is that if you are

in export and you buy a computer and you pay 22 per cent sales tax

on that, now you don't get that back. Whereas under this system

you pay 10 per cent on it, you'll get it back and that means

that your export when it is finally produced is cheaper to the tune

of all the tax that you have recovered. And we calculate that that

will make Australian exports cheaper to the tune of $4.5 billion.

Now at a time when Australia must trade to survive that's a

terrific boost.


Right so the inputs in anything that is exported won't be



That's right and also it is not just exports but it is also

any business operator can get the tax paid on his or her inputs

back. So the gain for business out of this is enormous.


GST credits?


GST credits.


Right now just for business out there listening they have to collect

this stuff. It is collected, as I understand it, every quarter and

they have got up to 21 days following the end of the quarter so

business will have access to that revenue for an average of 66 days?


They will. It's a very big cash flow gain for businesses.

If you have got a turnover of less than $20 million a year, and

that is more than 99 per cent of all businesses in Australia, you

will remit on a quarterly basis if you are a very big company such

as Coles or Woolworths you will remit on a monthly basis. The cash

flow gain from this is huge and as you say small, well $20 million

is not small, but any company with a turnover of less than $20 million

is remitting quarterly, $20 million remitting quarterly will have

the money for an average of 66 days. That will improve their cash

flow position. That will help them in all number of ways.


[Commercial break]

Okay Prime Minister, we chop off the wholesale sales tax and that

is replaced with a GST. Things should be cheaper, the customer out

there is saying how can I be sure the wholesale sales tax is going

to be removed.


Well we are going to give the Australian Competition Commission

additional powers to enforce that with fines of $10 million for

unscrupulous people who try and exploit the change. I can tell the

Australian people that we will leave no stone unturned to make certain

that there is a full passing on of the price benefit of the removal

of the wholesale sales tax. And certainly a lot of items will fall

in price, a family car for example now has a wholesale sales tax

of 22 per cent, under this there will be a GST of 10 per cent so

that car will fall quite significantly in price. Other items, of

course, will go up, we don't deny that. But we calculate that

across the board the price increase will be a one-off 1.9 per cent

and, of course, all of the figures I have used earlier about tax

benefits are after allowing for the price effect of the GST.


Right, now a lot of the big cost in business and in daily life

in trying to make a quid is the cost of fuel. You're providing

a diesel fuel credit for registered business?


We are but before I come to that can I make the general point that

all businesses, whether they use diesel or not will find that there

fuel is, on average, 7 cents a litre cheaper. If you are running

an ordinary suburban business now and you buy petrol you have got

to pay the full bid on it, full excise. Under our plan the excise

will be reduced to accommodate the GST so that it is no dearer at

the pump for any motorist – no dearer at the pump for any motorist

- but the business man will be able to get a refund of the GST component

and that means that petrol for business use will be 7 cents a litre



That's right, if the fuel is used in production....


In business, in production it will be 7 cents a litre cheaper whether

you are in diesel or not. Now on top of that we are going to provide

a special cut in relation to the use of diesel. Diesel fuel will

be...the excise will be 25 cents lower in heavy road transport

and rail and in relation to what is called off-road use, that's

farmers, miners, power generation, things like that, then the diesel

excise will be completely refunded. Completely refunded. That particular

change all up, when you take all of the fuel things into account,

is worth about $3.5 billion. Now what it does is to dramatically

reduce the cost of transporting items around Australia. Now isn't

that sensible with such a big country, particularly if you live

in the outback you need your goods. It costs more to carry them,

you pay more often. By reducing the cost of carrying them we're

helping people in the more remote parts of Australia and we're

recognising that in a big country you should not lose the opportunity

of reducing the cost of fuel.


Prime Minister, just have a breather for one moment if you don't

mind because we've had a bad accident this morning and the

M4 has reopened but the traffic is a shambles...

Prime Minister, just one point to clarify on vehicles, there is

an argument from some because luxury vehicles are taxed at 45 cents

in the dollar. You have now determined that that luxury cars shouldn't

come as cheaply as people imagine. As I understand it will be an

extra tax on cars over $60,000. So if the cost of your car plus

GST reaches $60,000 you'll then pay what?


You'll pay an extra 25% at the retail level, so-called luxury

car tax. The cost of it will still come down but the dollar reduction

will be about the same as a family car just below $60,000. So the

‘Beema' will still be cheaper but it won't be dramatically

cheaper, it will just be ordinarily cheaper, which is fair enough.


Okay. Now let's just do now, in the time that's remaining

Prime Minister, some quick ones from listeners who've asked

some questions. You've said that an average of 66 days the

business will be able to keep the GST revenue and you said that's

a bonus. What if the business goes broke, what cover do you have

for keeping...for claiming your own money?


Well you always get your own inputs back, there's...


You the Government? You the Government, how will you get your.....


Well you'll just have to take a punt like everybody else.

I mean why not. Where there's no money, you can't do anything.


Right. How will this new tax system deal with the cash workers

such as house cleaners, gardeners and the flower seller by the side

of the road? What's to stop them from simply adding the 10%

to existing prices and pocketing the extra.


Well they won't get any of their inputs back unless they get

into the system. See one of the great advantages of a Goods and

Services Tax is that you have an incentive not to cheat because

the only way that you can get the 10% you pay on things you buy

in order to run your business, the only way you can get that back

is to get into the system and to come clean. If you don't do

that you don't get it back and you're worse off.


But in this instance, of course, they're just going to charge

more. There's not anything in the system, they're selling

flowers and they whack the 10% up for the GST and...


Well, yeah, at some stage that fellow will go into a restaurant

and buy a meal won't he?


That's correct.


And he'll have to pay some tax. A

Transcript 10654