MONDAY, 31 JULY 2017
SUBJECTS: National security; Labor’s plan for a fairer taxation system; political donations; Middle East
MICHAEL ROWLAND: For more, we're joined in the studio by the Opposition Leader Bill Shorten. Mr Shorten, good morning to Breakfast.
BILL SHORTEN, LEADER OF THE OPPOSITION: Good morning, Michael.
ROWLAND: We will get to trusts in just a moment, but I want to touch on our top story of the day, those terror raids and arrests over the weekend. What does that say to you about the intents and capability of Islamic State in Australia?
SHORTEN: Well, there are people who would do our country harm, I have no doubt about that. What it tells me even more than that is that we owe a debt of gratitude to our security agencies and that debt of gratitude crosses the political divide, in fact, I think crosses all sections of the Australian community. I think our security agencies are as good as any in the world.
ROWLAND: Calls this morning for much tighter security screening at airports. We've seen that stepped up already over the weekend, including subjecting all passengers, domestic passengers in particular to photo ID checks. Would you support that?
SHORTEN: Well, if the threat is of sufficient gravity that that is what the security agencies feel we need to do, well I'm certainly open to that. My party is going to get briefed by the security agencies during the week, we will see the evidence, but my first commitment is to make sure that people can travel safely and if this is viewed as another way of legitimately preventing people who would do this country harm and cause violence, well I think we have to be open to considering it.
ROWLAND: A big weekend for the Labor Party, the conference over the weekend, you announced the family trust crackdown as well.The Government has hit back and hit back pretty hard on the trust crackdown saying it is nothing more than ‘politics dripping with envy’ - that's the words of the Treasurer Scott Morrison - and also they say it is a direct attack on small businesses in Australia. Have you modelled how many small businesses will be affected?
SHORTEN: Well there's a few points in that and I will be very quick. Let me explain what it is we’ve actually said because I don't think Scott Morrison has the faintest clue. What we've said is there a particular mechanism currently available to very wealthy individuals that they are able to get $500,000 from their job, which is a pretty good job, and then they can get $100,000 or $200,000 from passive investments, perhaps they're getting money from properties they own or shares. What they do with this second amount of money, perhaps, for example, you get $500,000 from your income and then you get $200,000 from your other property portfolios and shares, what they do is put this into a trust, this $200,000, and they distribute it to adult beneficiaries, might have the grandparents who then pay the school fees, or you might have kids at university who don't have that income, but the real effect of this is that where you should be paying tax on your $700,000, they're able to slice some of that top amount of money off and you pay a lower marginal rate because the person you give it to doesn't otherwise earn that much money. So this income splitting is just simply a tool which is not available to nurses, teachers, journalists.
ROWLAND: Small businesses.
SHORTEN: Well, most small businesses don't do this.
ROWLAND: But going back to my question, how many will be affected?
SHORTEN: I will go to that but I just want to set it up. See what Morrison and the Government do is they run out of ideas, they haven't got a view other than fighting each other, so we've got to do something about reining in national debt and I don't see how it is fair, in fact it's postively unequal that most people going to work this morning, people perhaps watching ABC24 Breakfast can't split their income.
And so when it comes to small businesses, there's about 3 million plus small businesses. We estimate a very small number will be hit by this and it's not about small business, it is about high net worth individuals who are lucky enough to be able to fly the business class tax system and split income which is not available to millions of the rest of the Australian people going to work.
ROWLAND: When you say small number, 5,000, 10,000, 20,000, have you got the actual -
SHORTEN: We estimate the total number of people affected will be about - and this is all trusts not just small business - will be just north of 300,000 trusts.
ROWLAND: That's right, but that small business issue is it a small number. You must have the number there?
SHORTEN: Well, they will be a portion of it, we suspect, around 200,000 of about 3 million small businesses so I do think that qualifies as a small number.
ROWLAND: That's a lot of businesses though, 200,000.
SHORTEN: Well I tell you what's a lot: $17 billion over the next ten years we will restore which is currently leaking out of the Budget; $17 billion. What is the case, Michael, for allowing a few people to be able to split their income when most can't? Funnily enough, it was John Howard, not normally someone I would quote, back in 1980, stop this income splitting for beneficiaries or lucky kids who are under the age of 18, we are extending it to mature-aged beneficiaries.
Do you know the Tax Institute of Australia has called this a cleverly crafted piece of public policy. I would say to the Government don't throw bricks at this idea merely because we have found a loophole which we want to shut down and I think Mr Turnbull and Mr Morrison would have to explain why do they think it's ok for some Australians to be able to split their income and most Australians can't?
ROWLAND: If you're talking about fairness and fighting inequality, which you say this measure is based on, why are farmers exempt from this trust crackdown?
SHORTEN: Well, I buy the argument and the very fact that you have raised that we've exempted farmers shows that it is not about small business is it, it's just Morrison desperate for a few ideas.
ROWLAND: There are lots of small farmers in Australia though who use trusts?
SHORTEN: Yes, and they are not being touched are they. The point about it is is that farms, of course, have to smooth their income over successive seasons.
The reality is, I believe, that when it comes to farming on the land, which is a hard task, that it's very lumpy when they have the good seasons and when they don't. When commodity prices are up and when they're not, so we think that Australian farmers are in a different category.
For what it's worth, we've also exempted disability trusts, charitable trusts, unit trusts.
What it is is that there has been an explosion in recent years of these discretionary trusts and basically it is a bit of a racket, it's not illegal, absolutely not illegal, and anyone who has done this, it is not breaking any law but what it is that by the use of these particular tax vehicles, people are able to move parts of their income from the top marginal rate right down to the bottom and we think that's not fair.
We've got a more unequal society in Australia than we've seen for many years.
The wages for most Australians are flat lining. You've seen a massive increase in the value of assets, so the very wealthy in Australia are getting wealthier, but everyone else is getting squeezed.
ROWLAND: Moving on, will you pick up Sam Dastyari's call for all political donations to be banned in Australia?
SHORTEN: Well, I welcome Sam putting forward arguments into the public debate and I expect that my Labor team will keep doing that, forming policy, but when it comes to donations, I don't think the taxpayer is ready to foot the bill for all political expenses in Australia, so I still think there is a role for donations, but what I don't think there is a role for, is foreign donations.
So we've said and we have legislation, that inexplicably the conservatives in Australia don't want, to reform foreign donations.
The other thing which we've proposed is that anyone who makes a donation over $1,000 should be public and the donations that are paid should be in real time, so Labor has a good platform of donation reform.
ROWLAND: You don't want a ban on all donations, as you said, you are against foreign donations but the Labor Party therefore has stopped taking any foreign money?
SHORTEN: Yes that's why I've asked.
ROWLAND: So there are no foreign donations coming into the party coffers?
SHORTEN: To the best of my knowledge, that's the case right now and I have asked the party, we have to wean ourselves off foreign donations. There was a recent controversy on Four Corners, an ABC show, and I've formed the view since then that we need to crackdown on donations, even if it's not the law, sometimes the politicians shouldn't wait for the law, we should actually do something which is the right thing, so I've asked the party to wean themselves off foreign donations, even though we're not required to.
When I say we are doing that, the Liberal Party still relies on foreign donations.
They are not taking the principled position we are.
I think it would be great if the Liberal Party and the Labor Party just work together.
ROWLAND: And that's an issue we will put to the Liberal Party as well. Now speaking of donations, the Labor Party bans tobacco donations. Fairfax Media is reporting this morning that the director of a tobacco company, a gentleman by the name of Peter Chen donated $400,000 to both the New South Wales and Federal ALP, seemingly in contravention of that. Did that money come in?
SHORTEN: Well I read the story this morning, I wasn't aware of that. The two donations, one was listed in 2011, and the other in 2013, that was before I was leader of the Labor Party, so before my time.
ROWLAND: But it was after that ban from tobacco companies came in.
SHORTEN: I think it is a serious issue but as I said to you I found out about it this morning and needless to say in between finding out about it this morning I've made some phone calls to the party administration to please explain. We don't take tobacco money, the National Party still do, we don't, we haven't, and even if that's put the Labor Party at a financial disadvantage, I think there is a bigger principle. So we're going to get to the bottom of what happened here a number of years ago.
ROWLAND: And will you hand that money back?
SHORTEN: Well I don't even know what happened yet.
ROWLAND: The Labor Party conference in New South Wales put forward that motion, accepted, that a former Labor Government should accept a state of Palestine. Will you take that up if elected at the next election?
SHORTEN: Labor's policy and my policy at the national level has been to support a two-state solution in the Middle East. I think there is an a legitimate aspiration of the Palestinian people to statehood. I also respect the right of Israel to live behind secure borders. We will certainly look at this policy as we form our policies going forward.
ROWLAND: Okay Bill Shorten, Opposition Leader, thanks very much for joining News Breakfast this morning.
SHORTEN: Great to be on, thank you, Michael.