Australian PM Does Deal With Opposition Over Flood Tax

Mary Swire, Tax-News.com, Hong Kong

22 February 2011

Australian Prime Minister Julia Gillard has welcomed announcements from the Australian Greens and from Independent Andrew Wilkie, the Member for Denison, that they would be voting for the Government’s legislation on the flood levy. The levy will go towards the multi-billion package to rebuild bridges, roads, rail lines and schools that have been damaged by the recent natural disasters.

Following discussions with the Greens, the Government agreed to return the previously announced saving of AUD60m to the Solar Flagships program over the period to June 30, 2015. The Government also agreed to re-phase AUD40m into the period to June 30, 2015 that was previously allocated to the period beyond June 30, 2015.

The Solar Flagships program is part of the Australian Government’s AUD5bn Clean Energy Initiative to support the development of commercial solar technologies. The timing of actual expenditure will be determined by project requirements following the outcome of the merit based competitive selection process.

The Government expects to announce the outcome of Round 1 of the Solar Flagships program in mid-2011, and has agreed to continue to engage with solar industry stakeholders as the design of Round 2 of the program is developed.

A statement from the Greens said: “Today’s agreement gives the Australian solar thermal and PV industries a real chance to flourish and start replacing our old dirty coal fired power plants. For the first time, the government has acknowledged the role of feed-in tariffs in accepting the Greens' proposal for a solar industry roundtable.

“The Greens and the solar industry have long argued for well-designed programs such as feed-in tariffs and loan guarantees to really drive the construction of baseload solar power plants. The solar industry was never properly consulted on the design of the Solar Flagships program, which has suffered from delays and poor implementation”.

Following discussions with Mr Wilkie, the Government will continue to support the promotion of excellence in university teaching through the provision of AUD50m in project and award funding over the forward estimates. Funding for the grants and awards that were previously provided by ALTC will be administered by DEEWR from January 1, 2012.

The deal struck between Mr Wilkie and the Gillard Government means that the higher education sector will not be stripped of the grants and awards program currently administered by the Australian Learning and Teaching Council.

“My support for the flood levy has always hinged on the future of both the Solar Flagships Program, which was yesterday secured, and higher education grants and awards,” Mr Wilkie said.

“Australia’s universities are among the best in the world and we can not afford to let those standards slip. I took my objections to cutting higher education funding directly to Prime Minister Julia Gillard and fought hard in the interests of university staff and students.”

Mr Wilkie said he remained concerned that the flood levy is motivated more by the politics of returning the budget to surplus before the next election than good financial management.

“Like many eminent economists, I would have preferred the deficit to be run out another 12 months,” Mr Wilkie said. “However I am mindful the government would have simply cut more programs if I had voted the levy down.”

The National Rental Affordability Scheme (NRAS) was another issued raised with the Government in discussions over the flood levy. In response, the Government confirmed that the National Rental Affordability Scheme (NRAS) will not lapse in 2014-15. The scheme is being capped at 35,000 homes in the years up to 2014-15, consistent with current industry tracking.

Over a longer timeframe, the scheme will continue to operate to deliver at least the 50,000 homes provisioned for under the original program.

“From day one, the Greens have said that there are alternatives to taking the axe to solar, housing affordability and other important programs, such as delaying tax cuts for big business or returning to the original mining tax policy that we now know would have delivered another AUD60bn in revenue over the next 10 years”, the Greens said.

The net impact of these negotiations on the budget is AUD150m, made up of AUD100m for the Solar Flagships Program and AUD50m for teaching and learning grants. This will be offset in the upcoming Federal Budget in May.

Recommended