CONLON: Penny Wong is the Finance Minister, Im sure shes 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 youve 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 weve 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. Weve 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 lets just understand what this change is. This isnt 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 weve said is, look, we want to have the tax benefit really target those who use their cars for work. And thats why were 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, youd only have to do that once every five years for a number of weeks to get the benefit. But, the very generous tax concession thats currently in place, we think its 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, weve been working on this for some time. This is something we have already reformed once and this is an option that weve been considering for some time. And I would make the point the numbers that Ive outlined to you at the start, of the billions of dollars that were putting into the car industry, really this tax change is dwarfed by that assistance. And the only party thats looking to remove that assistance is of course the Coalition whove 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 dont accept that at all. As someone whos been Finance Minister for a few years I can tell you this is an option weve looked at very carefully, that weve considered a number of times. Obviously that doesnt mean just because you look at something carefully that its 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. Youre always going to get push back from areas in the community; what you have to look at is the right policy outcome. Im 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 were 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 its 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 dont think those figures are correct and Ill go back and check but Im pretty sure the Treasurer came out yesterday and said thats not correct. Youve got to look at who were actually affecting. People who use their car a lot are already using the logbook method because thats more tax beneficial for them. So if youre a tradesperson youre not going to be using what we call the statutory formula, because you want to make sure you claim all the tax deduction youre entitled to, and thats fair enough. But theyre 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 dont 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 Ill check the figures but I actually think its the other way round. I think the majority in the area were 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: Weve 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 thats now up to around 75 percent for the Commonwealth fleet in that year. So were building that up and if we really want to improve the fleet purchases people should be talking to Barry OFarrell 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, theyve obviously crunched the numbers. What do you say to that?
WONG: What Id say is we dont differentiate in this between Australian and overseas cars so what this is, is saying if you claim a tax deduction that other people cant claim if you claim a tax deduction for car use for work, then it needs to be for work.
REILLY: But isnt that the problem that you dont differentiate? Shouldnt 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 isnt 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 dont think anyone could suggest this Government isnt a strong supporter of the Australian car industry.
CONLON: So how many fewer Holdens are you projecting will be bought?
WONG: Well that depends on peoples choices about what car they want to use and who they want to
CONLON: Yeah, but that would have to be something youd have to have had a look at because we are talking about currently 2,000 workers at Holden at Elizabeth and youre looking at keeping it going. So you wouldnt want to rip into that scheme unknowingly.
WONG: No, but the point Im making, Keith, is that a tax deduction for some Australians and lets remember only a very certain number of people can get a salary package which includes a vehicle where theyre 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. Thats 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 didnt 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 Ive 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; thats 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 thats 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 doesnt have some controversy associated with it. Thats the nature of it. If you were going to say youre going to get less of a tax concession or were going to spend less on a particular program then were always going to anger some people. But ultimately as a Labor Government weve got to make our priorities and I would suggest to you that its a better thing to make the tax concession more accurate than to do things like hack into health and education which is what weve 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. Its getting to the very nitty gritty time, I think its the end of next week when the job cuts will occur, more than 400 put their hands up. Weve already heard from the Premier, from Jay Weatherill, that things are very serious out there at Holden; hes 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 youre hijacking what youre doing out there?
WONG: Sorry Jane I just dont accept that. I really dont. And I think weve all just got to take a step back. Youre talking to a member of the Government that has provided more assistance to the car industry than any previous Government; thats 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, Im sorry, I dont 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