I am delighted to rise to contribute to this debate. My heart was certainly filled with joy after hearing Senator Bragg’s address to the National Press Club today. It was a terrific address, and I encourage everyone to watch it on the ABC.
Senator Whittaker asked why the Coalition raised these questions during Question Time. There are three reasons.
First, the Labor Government introduced a range of tax measures in the Budget that it had explicitly said it would not pursue before the election. Put simply, it broke a promise to the Australian people.
Second, since returning from the winter recess, I have heard from many small businesses across my home state of Queensland. They have told me these tax changes are a real kick in the guts at a time when they are already facing significant pressures. That is why we are asking these questions.
Third, we are seeing a raft of unintended consequences arising from these measures because there was insufficient consultation before they were announced. My good friend Senator Dean Smith highlighted one such consequence: the impact on charities and not-for-profit organisations.
Let me explain. Under the current arrangements, a small business operating through a discretionary trust can distribute income to certain not-for-profit organisations and charities that do not have deductible gift recipient (DGR) status. In these circumstances, the income is not taxed before it reaches the organisation, allowing the charity or not-for-profit to receive the full benefit of the contribution.
However, if distributions from discretionary trusts are taxed at 30 per cent, that will inevitably reduce the amount of money available to many charities and community organisations.
According to charity law specialist Mark Fowler, the impact could be as much as $2.9 billion per year in lost contributions to charities and not-for-profit organisations that do not have DGR status. The organisations affected include human rights groups, charities focused on preventing disadvantage, religious organisations undertaking charitable work, community service groups, cultural organisations and sporting organisations.
And that is before we even consider the administrative burden these changes will create. Many discretionary trusts would be forced to restructure into corporate entities, resulting in additional costs associated with insurance, business registrations, employment arrangements and other compliance requirements. Collectively, those restructuring costs could amount to hundreds of millions of dollars.
These are serious concerns arising from a poorly conceived policy announced in the Labor Government’s Budget.
That is why we are asking these questions, Senator Whittaker, and that is why we will continue to ask them. We will continue to hold the Labor Government to account.
