Coalition senators Ian Macdonald and Cory Bernardi won't support debt tax

Updated

Two Government Senators have revealed they will not support a key budget measure to raise income taxes for the well-off to pay off debt.

Queensland Liberal National Senator Ian Macdonald and South Australian Liberal Senator Cory Bernardi have both told the Senate they cannot support the debt tax.

Senator Macdonald has also threatened not to support Prime Minister Tony Abbott's signature paid parental leave scheme.

Senators have begun debating the tax measure in the final fortnight before the current Senate expires.

Despite the unrest in Government ranks, the debt tax is expected to pass the Senate this week with the support of the major parties, the Greens, and independent Senator Nick Xenophon.

The temporary 2 per cent tax increase on those earning more than $180,000 per year will apply from July 1 this year and is due to cut out on June 30, 2017. It is projected to raise more than $3 billion over four years.

Senator Macdonald says he cannot support the tax hike because he believes it should apply to corporations as well.

"I would have trouble in supporting the bill, not because I don't agree with [the tax increase], but because I don't believe it goes far enough," he told the Senate.

"Why, when Australia needs additional money, [do] they introduce a levy on individual taxpayers but not on corporate taxpayers?"

It is not yet clear if Senator Macdonald will vote against the bill or abstain, and he may not get the chance to cross the floor because Labor's support of the measure means senators do not have to physically divide across the chamber.

"My crossing the floor might be relevant in some occasion ... it wouldn't be today because Labor are actually supporting this," he said.

Finance Minister Mathias Cormann has rejected his concerns about applying the tax increase to companies, saying it would not be practical.

"We wanted all individuals to contribute to the repair of the budget and of course companies ultimately are made up of individuals - individuals which are liable for personal income tax on dividends from those companies," he told the Senate.

"And raising the tax for corporate taxpayers would of course only lower the funds available for further corporate investment."

Cory Bernardi won't cross floor, but wants to note objections

Senator Bernardi says he will not cross the floor over the measure but wants his objections noted.

"There are elements of the budget and the plan that has been put forward that I have a principled disagreement with and this new tax bill is one of those measures that I find myself unable to support," he said.

"It's always a difficulty when you're at odds with your own party.

Sorry, this video has expired Video: Liberal Senators break ranks on debt tax (ABC News)

"I regret that this is my first opportunity to have a conversation about these tax rates with members of my own party."

The SA Liberal said workers in the top tax bracket are already paying too much tax.

"Those people who are working hard, who are in good jobs, in good professions, and are earning substantial amounts of money, are already doing their bit," he said.

Government leader in the Senate, Eric Abetz, says the dissent shows there is a "wide spectrum" of views in the Coalition party room.

But he expects Government MPs to toe the party line if the numbers become tighter in the Senate.

"I have no doubt that Liberal Senators will be determined to ensure a good economic outcome for our country and ultimately that means the budget measures being passed," he told ABC1's Capital Hill program.

Opposition Leader Bill Shorten, whose party famously suffered from internal divisions while in government, has seized on the trouble within Government ranks.

"The division of the Liberal Party is clear for all to see," he said.

"I just wish that these dissenting Senators would stand up for low paid people with the same vigour they're standing up for Australia's top 1 per cent."

Labor and independent Senator Nick Xenophon have indicated they will support the bill, but the Greens say they will try to amend the legislation to make the tax rise permanent.

In the context of the debate about tax increases, Senator Macdonald has also declared his concerns about the Prime Minister's "signature" paid parental leave scheme, which is to be partly funded by a 1.5 per cent tax increase for large companies.

The scheme, which would replace a woman's wage for six months up to a cap of $50,000, was first announced by Mr Abbott in 2010 and has been Coalition policy at the last two elections.

It has faced criticism from within Coalition ranks with some Nationals MPs particularly concerned that the wives of farmers and stay-at-home mothers would not be able to access the payments.

Senator Macdonald says he is in favour of more support for mothers with new babies but he does not believe the current economic conditions are right to introduce it now.

"My inclination is to vote against that measure," he told the Senate.

On one hand Mr Abbott says 'I'm repealing the carbon tax, and on the other hand I'm introducing a new carbon tax - but not only am I introducing a new carbon tax, I'm going to index it.' Palmer United Party leader and Fairfax MP Clive Palmer.

He said he was waiting to see the fine print of the legislation, particularly whether it will support mothers in regional Queensland, many of whom he argued do not work.

"If there is a proposal to just make sure this rather generous scheme doesn't apply only to the capital cities, then I would go along with it," he said.

"Except ... I'm not sure this is the economic scenario that we should be doing this [in].

"We are in a debt crisis; why are we bringing that forward right now?"

Palmer says no 'for sure' to fuel excise increase

The scheme faces defeat in the new Senate anyway, with Labor and key crossbenchers, including from the Palmer United Party, set to vote against it.

Palmer United Party (PUP) leader and Fairfax MP Clive Palmer has also definitively ruled out supporting the Government's move to increase the fuel excise.

The Abbott Government wants the excise to go up on August 1 and index it against the CPI twice a year to raise $2.3 billion towards new roads.

But Mr Palmer has seized on remarks Mr Abbott made to US president Barack Obama last week that the excise hike would act as a carbon price signal.

"We won't be voting for that for sure in the Senate because that's another form of carbon tax," Mr Palmer said.

"On one hand Mr Abbott says 'I'm repealing the carbon tax, and on the other hand I'm introducing a new carbon tax - but not only am I introducing a new carbon tax, I'm going to index it.'

"States like Western Australia and Queensland - people have to travel a lot; they're discriminated against compared to smaller states where they don't have to travel as much."

In Question Time, Mr Palmer asked the Prime Minister whether the excise increase "was really a carbon tax"?

Mr Abbott did not mention the fuel excise in his answer but focussed instead on the repeal of the carbon tax.

"I do look forward to his support for the abolition of the carbon tax when the Senate changes in just a couple of weeks time," the Prime Minister told the MP in Parliament.

"When it comes to the carbon tax, it seems he and I are on precisely the same page."

However, Mr Palmer has put a number of caveats on his support for the repeal of the carbon tax, the last one a demand that power companies be required by law to pass on any savings to consumers.

Topics: tax, family, rural-women, nationals, political-parties, federal-government, australia

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