On 6 December 2018, the Senate referred the Lower Tax Bill 2018 (the
bill) to the Senate Economics Legislation Committee (the committee) for inquiry
and report by 2 April 2019.
On 29 November 2018, the bill was introduced in the Senate by former
Senator David Leyonhjelm.
The bill seeks to reduce annual Commonwealth Government taxation by almost half
by abolishing various taxes and reducing the rates of other taxes. The bill
seeks to significantly reduce personal income tax and fringe benefits tax and
abolish the Medicare levy. It also seeks to significantly reduce corporate
income tax and abolish import duties, tobacco duties, alcohol duties and wine
equalisation tax, fuel duties and luxury car tax, the passenger movement charge
and the major bank levy.
Overview of the bill
The Explanatory Memorandum (EM) outlines the overarching rationale for
the measures in the bill, which are intended to reduce Commonwealth Government
taxation by nearly 50 per cent, as follows:
Tax should be kept to a minimum as it involves using coercion
to take someone's property. Accordingly, government spending funded by taxation
should be limited to the provision of 'non-excludable' services like national
defence and the regulation of air quality. Access to the benefits of
'non-excludable' services cannot be confined to those who would pay for such
services voluntarily. As such, the private sector is not well suited to provide
The EM includes a Parliamentary Budget Office (PBO) costing of the proposed
tax changes proposed in the bill.
The PBO costing notes:
The proposal would decrease the fiscal balance and the
underlying cash balance by $622,760 million over the 2018–19 Budget forward
estimates period. The fiscal balance impact reflects a decrease in revenue of
$661,000 million and a decrease in expenses of $38,240 million over this period.
In his second reading speech, former Senator Leyonhjelm expressed the
Such a large tax reduction is also responsible, provided it
is coupled with an even greater reduction in Commonwealth Government spending,
so that the Commonwealth Government's budget and balance sheet are repaired.
The bill contains one schedule comprising three parts.
Schedule 1, part 1
Schedule 1, part 1 seeks to abolish a range of duties and taxes—including:
import duties; tobacco duties; alcohol duties and wine equalisation tax; fuel
duties and luxury car tax; the passenger movement charge; and the major bank
levy—by repealing the following Acts:
A New Tax System (Luxury Car Tax) Act 1999
A New Tax System (Luxury Car Tax Imposition—Customs) 6 Act
A New Tax System (Luxury Car Tax Imposition—Excise) Act 10
A New Tax System (Luxury Car Tax Imposition—General) 14 Act 1999
A New Tax System (Wine Equalisation Tax) Act 1999
A New Tax System (Wine Equalisation Tax Imposition—1 Customs)
A New Tax System (Wine Equalisation Tax Imposition—5 Excise)
A New Tax System (Wine Equalisation Tax Imposition—9 General)
Customs Tariff Act 1995
Customs Tariff (Anti-Dumping) Act 1975
Excise Act 1901
Excise Tariff Act 1921
Fuel Tax Act 2006
Major Bank Levy Act 2017
Passenger Movement Charge Act 1978
Petroleum Excise (Prices) Act 1987
Product Stewardship (Oil) Act 2000
Tradex Duty Imposition (Customs) Act 1999
Tradex Duty Imposition (Excise) Act 1999
Tradex Duty Imposition (General) Act 1999
Tradex Scheme Act 1999
Treasury Laws Amendment (Personal Income Tax Plan) Act 2018
Schedule 1, part 2
Schedule 1, part 2 seeks to amend the Income Tax Assessment Act 1936
and the Income Tax Assessment Act 1997 to abolish the low income tax
offset and low and middle income tax offset.
Part 2 also seeks to amend the Income Tax Rates Act 1986 to reduce
the company tax rate to 20 per cent for companies of all sizes and raise the
tax free threshold for personal income tax, for both residents and working
holiday makers, from $18,200 to $40,000.
Finally, part 2 seeks to amend the Medicare Levy Act 1986 to
effectively abolish the Medicare Levy by reducing the amount payable to 0 per
cent, regardless of income.
Schedule 1, part 3
The schedule 1, part 3 seeks to amend the Fringe Benefits Tax Act
1986 to reduce the fringe benefits tax rate from 47 per cent to
20 per cent.
The Senate Standing Committee for the Scrutiny of Bills made no comment in
relation to the bill.
The Parliamentary Joint Committee on Human Rights deferred consideration of the
Conduct of the inquiry
The committee advertised the inquiry on its website and wrote to
relevant stakeholders and other interested parties inviting submissions. The
committee received five submissions which are listed at Appendix 1.
The committee appreciates the efforts of all stakeholders who
contributed to the inquiry.
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