SENATOR THE HON PENNY WONG
LEADER OF THE GOVERNMENT IN THE SENATE
MINISTER FOR FINANCE AND DEREGULATION
TRANSCRIPT
FIVEAA BREAKFAST WITH KEITH CONLON AND JANE REILLY
CONLON: Penny Wong is the Finance Minister, I’m sure she’s read them, good morning.
WONG: Good morning, how are you?
CONLON: Good. Did you anticipate that there would be a reaction like this?
WONG: I always anticipate a reaction to any savings decisions but you’ve got to do what you think is right. In terms of the car industry I would make a couple of points, if I could Keith. As a Government we’ve put in place a car plan worth $5.4 billion because we do support the auto industry. And in terms of Holden, we granted an additional $275 million out to 2022 to guarantee their continued production and the development of a couple of new models. So we are strong supporters of the car industry.
CONLON: Sure, but you might end up… you may have either deliberately, or by virtue of not seeing it, put a sword in its side. I mean, there are people saying that, Smartsalary for instance which works on leases, 300,000 customer packages are affected. It could end car leasing, and you know car leasing is a vital part of Australian local production.
WONG: Which is one of the reasons why under our Government we have increased the amount of Australian-owned cars in the fleet. We’ve made it much harder to purchase non-Australian owned cars – only if there is no Australian alternative. We are in a much better position, frankly, than a lot of the Coalition states such as Queensland and New South Wales who have a minority of Australian cars in their fleet.
And let’s just understand what this change is. This isn’t a change that affects people like tradespeople or others who use their car primarily for work. They would already use what we call the logbook method, although these days there are apps which can do it for you.
What this affects is people who claim a certain amount of business usage, which is in fact much higher than their actual usage. And what we’ve said is, look, we want to have the tax benefit really target those who use their cars for work. And that’s why we’re saying you can still have what we call the logbook method, you can use a lot of apps that are on the market to do that, you’d only have to do that once every five years for a number of weeks to get the benefit. But, the very generous tax concession that’s currently in place, we think it’s sensible for that to be removed at this time.
CONLON: Did you do the sums? Did you work on it and have a study that would suggest what impact it would have?
WONG: Well, we’ve been working on this for some time. This is something we have already reformed once and this is an option that we’ve been considering for some time. And I would make the point – the numbers that I’ve outlined to you at the start, of the billions of dollars that we’re putting into the car industry, really this tax change is dwarfed by that assistance. And the only party that’s looking to remove that assistance is of course the Coalition who’ve said very clearly they want to cut half a billion dollars out of the assistance before 2015, and refuse to guarantee any assistance beyond. Now that would mean the end of the car industry.
REILLY: Minister, the way this happened – this really smacks of policy on the run. Is this a case of ‘welcome back Mr Rudd’?
WONG: Jane I don’t accept that at all. As someone who’s been Finance Minister for a few years I can tell you this is an option we’ve looked at very carefully, that we’ve considered a number of times. Obviously that doesn’t mean just because you look at something carefully that it’s going to gain universal approval.
I can recall a headline such as ‘class warfare’ when we had the Budget which tightened the means test on a number of benefits and, headlines about the Baby Bonus being removed when the Government did that. You’re always going to get push back from areas in the community; what you have to look at is the right policy outcome. I’m absolutely a supporter of the car industry. A tax benefit to some Australians – which is more generous than their business usage – is not the best way to support the car industry. A much better way is what we’re doing which is providing direct assistance.
CONLON: But that was introduced by Government, it was a way of supporting the industry – to have an automatic deduction, and to have the fleet buys continue. When the Federal Chamber of Automotive Industry says it could spell disaster for the Australian vehicle industry, they are probably looking at things like the fact that 75 percent of the people who are involved in this are on under $100,000. So it’s not a BMW tax, this is a tax that will affect many Australians and particularly those in the car industry. Has that been worked through?
WONG: I don’t think those figures are correct and I’ll go back and check but I’m pretty sure the Treasurer came out yesterday and said that’s not correct. You’ve got to look at who we’re actually affecting. People who use their car a lot are already using the logbook method because that’s more tax beneficial for them. So if you’re a tradesperson you’re not going to be using what we call the statutory formula, because you want to make sure you claim all the tax deduction you’re entitled to, and that’s fair enough. But they’re not affected.
This does affect, generally, people earning over $100,000 who have salary sacrifice or got a package as part of their employment arrangements who don’t use their vehicle primarily for business use and are claiming a tax deduction which is frankly more beneficial than the extent of their business usage. Now I’ll check the figures but I actually think it’s the other way round. I think the majority in the area we’re looking at to change are actually earning over $100,000.
CONLON: What about the impact on the numbers of cars sold? There was an estimate around yesterday that it could affect up to 15,000 Holden sales. Have you got any numbers in your predictions
WONG: We’ve said there would be people who would no longer salary package as a result of this change and I think the Treasurer has already outlined that we think over the next number of years that is a couple of hundred thousand or more, depending on the choices people make.
But, I would make the point that the Government has increased the amount of cars we purchase for the Commonwealth fleet. I think in the last year that’s now up to around 75 percent for the Commonwealth fleet in that year. So we’re building that up and if we really want to improve the fleet purchases people should be talking to Barry O’Farrell and Campbell Newman and Colin Barnett because those governments have got very small numbers of Australian cars in their fleets.
REILLY: Yesterday the National Tax and Accountants’ Association came out and said that these new measures could lead to a 30 per cent drop in demand for Australian-made cars. I mean, they’ve obviously crunched the numbers. What do you say to that?
WONG: What I’d say is we don’t differentiate in this between Australian and overseas cars so what this is, is saying if you claim a tax deduction that other people can’t claim – if you claim a tax deduction for car use for work, then it needs to be for work.
REILLY: But isn’t that the problem that you don’t differentiate? Shouldn’t you be encouraging people to buy Australian cars?
WONG: We do encourage people to buy Australian cars. The question is whether or not a tax deduction for car use that isn’t business related is a sensible way to do that. As I said, $5.4 billion support for the industry, $275 million additional for Holden that we announced earlier this year. I don’t think anyone could suggest this Government isn’t a strong supporter of the Australian car industry.
CONLON: So how many fewer Holden’s are you projecting will be bought?
WONG: Well that depends on people’s choices about what car they want to use and who they want to…
CONLON: Yeah, but that would have to be something you’d have to have had a look at because we are talking about currently 2,000 workers at Holden at Elizabeth and you’re looking at keeping it going. So you wouldn’t want to rip into that scheme unknowingly.
WONG: No, but the point I’m making, Keith, is that a tax deduction for some Australians – and let’s remember only a very certain number of people can get a salary package which includes a vehicle where they’re not using it primarily for work – is not the smart way to support GMH.
CONLON: So why is…
WONG: The smart way of supporting GMH is to do what the Government has done, which is to work with them to provide a very substantial amount of assistance – which Tony Abbott wants to take away – and to provide additional assistance earlier this year. That’s the sensible approach in obviously what is a very tough time for the car sector.
CONLON: The Financial Review today would suggest that former Treasurer Wayne Swan didn’t think that. He previously rejected Treasury advice to adopt this scheme. He believes it would anger business and consumers and cause political damage. Was Wayne Swan right, or are you right?
WONG: Obviously any savings that you take is controversial. But, as the Finance Minister what I’ve got to look at, and what Chris Bowen has to look at as the Treasurer is a couple of things. One, we want a lower carbon price; that’s going to benefit all business and Australians families, so the car industry does get a benefit of a lower carbon price than it would otherwise have had. And I think that’s been lost in this discussion.
CONLON: Well, were you in on the rejection of the scheme by Wayne Swan last time?
WONG: The next point I was going to make is, as someone who has taken quite a lot of savings as Finance Minister, I can tell you I have yet to find a saving to take that doesn’t have some controversy associated with it. That’s the nature of it. If you were going to say you’re going to get less of a tax concession or we’re going to spend less on a particular program then we’re always going to anger some people. But ultimately as a Labor Government we’ve got to make our priorities and I would suggest to you that it’s a better thing to make the tax concession more accurate than to do things like hack into health and education which is what we’ve seen under Campbell Newman in Queensland.
CONLON: Well, were you in on the rejection of the idea last time with Wayne Swan?
WONG: Keith you know I never discuss what happens in Cabinet.
CONLON: I do.
REILLY: Minister, I would just like to ask you about what you think is happening here in South Australia for the hundreds of people that work at Holden. It’s getting to the very nitty gritty time, I think it’s the end of next week when the job cuts will occur, more than 400 put their hands up. We’ve already heard from the Premier, from Jay Weatherill, that things are very serious out there at Holden; he’s talking about making a trip to Detroit to talk to GMH about keeping them here. This will be another reason, decrease in sales will be another reason for them to take Holden away from South Australia. What do you say to the workers at Holden? Do you support them? Or are you just once again, it looks like you’re hijacking what you’re doing out there?
WONG: Sorry Jane I just don’t accept that. I really don’t. And I think we’ve all just got to take a step back. You’re talking to a member of the Government that has provided more assistance to the car industry than any previous Government; that’s provided an additional $275 million to Holden earlier this year; that will continue to work with them and that has a $5.4 billion plan for the industry itself, again, as I said something Tony Abbott wants to cut. And, as the Finance Minister who has increased the purchase by the Commonwealth of Australian-made vehicles. So, I’m sorry, I don’t accept the premise of your question. Of course we support the workers at Holden. Of course we support continued auto manufacturing in Australia, and particularly for me here in South Australia. I understand what an important part of our economy it is.
CONLON: Senator Penny Wong thanks for joining us.
WONG: Good to speak with you.
ENDS
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