27 July 2017
Transcript - #2017022, 2017

Interview with Jon Faine, Mornings with Jon Faine

SUBJECTS: family trusts, tax integrity, superannuation reform package, banking reform

JON FAINE:

Kelly O’Dwyer is a senior minister in the Turnbull Coalition Federal Government. She’s Minister for Revenue and Financial Services and works with Scott Morrison on keeping the treasury portfolio afloat. Ms O’Dwyer good morning to you.

KELLY O’DWYER:

Good morning Jon.

JON FAINE:

Inequality, Bill Shorten says, is the most important issue. It seems it’s thinly disguised class war according to some of your colleagues. Why would it be class war to deal with something that’s at the very core of opportunity for Australians?

KELLY O’DWYER:

Well because of course the pretence is completely false and that has been called out by every economist particularly Professor Roger Wilkins of the Melbourne Institute of Applied Economics and Social Research – he said this notion that inequality in Australia is at a 75 year high is just not correct. In fact if you were to use the figures that the Labor Opposition is relying upon as being a demonstration of inequality, you’d have to say that during the Hawke and Keating years that was in fact the apex of inequality. Now sure, people are finding it difficult right now, but the Labor Party is simply using this as an example of wanting to tax people even more. They talk about millionaires…

JON FAINE:

Well some people, but not others.

KELLY O’DWYER:

Well they talk about the fact that they want to tax millionaires but when you actually look at what it is that they are proposing, and we are yet to see the full details of what they are proposing…

JON FAINE:

Well you’ll see it this weekend, we have to be patient.

KELLY O’DWYER:

But when we hear about what it is they’re proposing it’s clear that they’re talking about ordinary Australians, people on incomes of – average incomes – of around about $80,000.

JON FAINE:

That’s not what Mr Shorten said yesterday Ms O’Dwyer, he in fact talked about people who spend $1 million on tax planning and deduct $1 million for accountancy fees, that’s not your ordinary Australian.

KELLY O’DWYER:

Certainly that isn’t your ordinary Australian but you have to look at not just what he says, but what the implications of his policy will in fact be. We hear a lot about the fact that the Labor Party wants to clamp down on for instance on trusts, now a lot of ordinary people do use trusts, they’re legitimate tools…

JON FAINE:

No they don’t, I’m sorry they don’t.

KELLY O’DWYER:

Well a lot of people do…

JON FAINE:

What do you mean by ordinary people then?

KELLY O’DWYER:

People on the land, people like farmers for instance who have trust arrangements to be able to protect their assets. There are a number of people who use trusts, people for instance who have been involved…

JON FAINE:

High wealth individuals, otherwise it’s not worth the accounting fees.

KELLY O’DWYER:

Well, hang on a second, there are philanthropic trusts, there are charitable trusts…

JON FAINE:

That’s not what anyone’s talking about, we’re talking about family trusts for tax planning…

KELLY O’DWYER:

There are people who have received…

JON FAINE:

Everyone knows that – let’s not confuse it…

KELLY O’DWYER:

…workers compensation payments that have been in a trust or disability trust. Well we don’t know, this is the point Jon, we don’t know exactly who it is that the Labor Party is going to attack here and given their past record where they want to hike taxes more and more on everyday Australians, it’s pretty clear that they are using a thinly vailed excuse in order to be able to do that. It will damage our economy if the Labor Party continue to hike personal income taxes and also company taxes on small and medium sized enterprises.

JON FAINE:

You announced a clamp down on people making deductions within negatively geared investment properties to reduce the amount of money people are claiming. That’s the effect – that’s like a tax reform that means more ordinary Australians are going to pay more tax.

KELLY O’DWYER:

We’ve never said that you shouldn’t have integrity in your tax system – it’s the complete opposite. We have been assiduously working to ensure that we have integrity in our taxation system, that everyone is paying the right amount of tax. That goes for multinational companies, we have brought in laws to make sure that in today’s day and age when companies don’t have to be physically located in Australia but are actually making a lot of money in Australia, that they are in fact paying tax. Now we’re doing that through changes like the Multinational Anti-Avoidance laws – taxes by the way and integrity measures that were opposed by the Labor Party at the time – we have seen as a result of that more than $4 billion returned to our coffers as a result of those changes.

JON FAINE:

Ok. Can we just tackle this head on? The upper-middle class in Australia have to pay more tax. Don’t they? Isn’t that part of dealing of what is structurally wrong with our economy? In same way, the upper-middle class are the ones who take advantage of, for instance, negative gearing, to price their own kids’ generation out of the market.

KELLY O’DWYER:

Well you talk about the upper-middle class, let me say this.

JON FAINE:

I’m talking about you and me. I’m talking about a lot of the people who are listening to this radio station. I think it’s the elephant in the corner of the room quite frankly minister. We, those of us who have done pretty well throughout our entire adult working life, we have to pay more tax.

KELLY O’DWYER:

Well, let me say this: the people you are talking about already pay a lot of tax. Mr Shorten seems to be completely unaware that the top 5 per cent of tax payers are paying a third of all income tax in this country. And the top 50 per cent, are paying for 90 per cent. So you talk about are people paying their fair share: well let me tell you that they are. The people who are working hard every day out there are working hard, not only for themselves, but also for the Government, because we have one of the most progressive taxation systems in the world, which means the more you earn, the more tax you actually pay. Now Bill Shorten seems to think he can hike taxes more and more on people who are on average incomes. The truth is that people on $80,000 are not millionaires, they are often supporting their family, people like policemen, emergency service workers. These are the people who are finding it increasingly more and more difficult. And yet Bill Shorten’s solution is to hike on them to pay for huge debt and deficits that he put in place during the time the Labor Party was last in government.

JON FAINE:

Alright, well it’s going to be an interesting couple of weeks. The Labor party making major announcements, according to Mr Shorten he wouldn’t announce it yesterday when he was here, but he said he will be on the weekend. We have to be patient, let’s see what they come up with. To shift ground to another issue. Ian Narev yesterday, speaking on behalf of the banking industry; the boss of the Commonwealth bank said that the banks are being criticised in a way that is now damaging to them and that’s damaging for the economy and he says it’s just political opportunism for people to take pot-shots at banks. Do you think he was talking about you?

KELLY O’DWYER:

No I don’t think he was talking about us because, unlike the Labor Party who have got a Royal Commission in search of something to inquire about…

JON FAINE:

No you put up the tax on banks…

 KELLY O’DWYER:

Well, let me just say that in response to that and let me just give you a bit more context around those comments. We have put in place a bank levy. We have put that in place for the banks because the banks, unlike every other industry, have got an implicit guarantee from the Government. We have put in place a small measure that is ring-fenced around the banks to have them pay for, what is in effect, an implicit guarantee that they get from government and the Australian people more broadly if there was to be a failure. Now it’s completely incorrect to say it’s a super profits tax – it isn’t. It’s completely incorrect to say that we should have state governments imposing these sorts of taxes – they shouldn’t, because they don’t imply this implicit guarantee. The Government has very carefully, very surgically imposed a very sensible and reasonable tax on the banks for the benefit that they receive. Now when it comes to other changes in the banking sector, we know that there have been some scandals and the banks cannot deny this. There have been some poor behaviours and we have had review, after review, after review, that has actually revealed some of these bad practices. The banks themselves have acknowledged this, that they need to improve and they have put in place some measures already to do that. But we have also said that we have a responsibility as a government to make sure that we have got the right regulatory frameworks in place to make sure that these scandals don’t happen again. And I might just point out that some of the biggest scandals that have happened in the financial industry, Trio Capital, Great Southern, Storm Financial, they happened in the years after the GFC and under the former Labor Government. Now I’m not saying it’s caused by them but I am saying that it’s interesting that they’ve just discovered this idea of a Royal Commission only now and I can see why some people would say that it is, in fact, simply political.

JON FAINE:

OK now just finally Minister, you yesterday were speaking to a superannuation industry conference, you accused them of being tricky, saying they don’t justify the value of their existence, in particular to younger Australians. What are you going to do about it, if indeed you think they’re tricky, but you don’t think we need a Royal Commission into financial services, well what’s the alternative?

KELLY O’DWYER:

Well you’re slightly mischaracterising what I actually said yesterday…

JON FAINE:

Well I’m trying to simplify it…

KELLY O’DWYER:

I think you’re oversimplifying it, Jon. What I actually said yesterday was that when it comes to particularly young people being able to opt-out of the default insurance arrangements that they are forced into when they are forced into a superannuation fund offered through an enterprise bargaining agreement or a workplace determination, it’s very hard to switch it off. And for young people who actually, for the most part, don’t have assets, don’t have dependents, it can make a very, very significant difference for their ultimate retirement income. A lot of their retirement income can be eaten up in fees and charges. In fact, some of them have seen it disappear altogether.

JON FAINE:

So if there’s rip-offs going on, you’re the minister, you’re in charge…

KELLY O’DWYER:

So I’ll tell you what we’re doing. We announced that instead of allowing the funds to force people to get out their pen and paper in order to switch this stuff off, we’re going to make it easier. We’re going to allow people to switch it off by telephoning – we’re in a modern age now – by getting online and turning it off so that they’ve got more power and control over their superannuation and their retirement income. After all, it’s their deferred wages that are being set aside. It’s their money and we ought to protect it. We have announced some sweeping measures now, which give APRA, the regulator, more power to intervene where funds are not acting in members’ best interests. We’re making it more transparent and more accountable, which, at the end of the day, will benefit every Australian who’s got money in super.

JON FAINE:

And it seems fairly clear this is going to be the battleground for the next Federal election. Just finally, it seems that there’s as many as a dozen members of federal parliament, Ms O’Dwyer, whose eligibility to be in the parliament at all under Section 44 is still under a cloud. Why shouldn’t anyone born overseas provide full documentation immediately to verify that they are indeed eligible and they don’t have dual citizenship?

KELLY O’DWYER:

Well, Jon, I agree it’s important to clear this up and we have a very important part of our Constitution…

JON FAINE:

But why shouldn’t every single Member of Parliament over whom there is a cloud, and there are about 20 of them, why shouldn’t they be required immediately to clarify it so this doesn’t continue on the drip? Just show us the documents, resolve it once and for all, and let’s sort it out.

KELLY O’DWYER:

Well I’m clearly not the Minister who’s got responsibility for this but let me say this…

JON FAINE:

No but you’re a senior minister in the Government and I’m talking to you today…

KELLY O’DWYER:

I agree with you Jon that we need to have confidence that every elected official is properly elected and that they are there validly. It is very important for our democracy to ensure that so I agree with you.

JON FAINE:

So just saying I’m eligible and yes I did surrender my dual loyalty or whatever, is not good enough. Show us the documents and whether it’s Penny Wong or Tony Abbott or Malcolm Roberts or any of the others. Just put the documents on the table, we can see them.

KELLY O’DWYER:

Well I’m very confident that the relevant ministers are actually looking at how we can have confidence that every single person who is elected is properly and validly elected and I’m sure that that is uppermost most of their minds right now and I’m sure, Jon, you’ll get them on your program to talk about it.

JON FAINE:

Well most of them are declining so thank you though very much, Kelly O’Dwyer, who did not decline today, Minister for Revenue and Financial Services in the Turnbull Coalition Government.