Television Interview, Sky Politics Now

Subjects: Tax reform, CGT, AUKUS

TOM CONNELL [HOST]: All the talk today in Parliament is around the various tax changes Labor is trying to get passed through the Parliament. Joining me live now, Assistant Defence Minister Peter Khalil. Thank you for your time. Does it feel as though you've lost the narrative on this a bit?

PETER KHALIL [ASSISTANT MINISTER]: I wouldn't characterise it like that, Tom. I think the Senate obviously is looking at the legislation. It's before the Senate now, and the changes that we've put through in the budget are designed to help 75,000 Australians realise their dream of home ownership. And we've also got a new round of tax cuts for more than 13.3 million Australians who are going to receive that tax cut. So, that's good for Australians, it's good for the majority of Australians, and I think that's the most important thing.

CONNELL: Will you be hurt if – obviously there's always multiple factors to the housing market – but if there's a significant downturn at the same time as these changes have been announced. Is that going to hurt your argument? Whether that's fair or not, is that going to hurt?

KHALIL: Well, I mean, the auction rates, the clearance rates we've been seeing, they've been cooling off for a period of time now. 

CONNELL: They've really dropped off now.

KHALIL: And that's been happening consistently. And look, I mean, I can speak for my electorate. People are very encouraged by that because that means that they'll be able to get into the housing market now. I mean, the prices were going up uncontrollably and some of the tax changes were designed to actually address some of the exacerbating effects of the tax system on that, and that's what we're achieving. And look, politics and democracy is messy, but we go through a process with the Senate and hopefully we get a good result.

CONNELL. So, people in your electorate that might have just scraped in on the Government 5 per cent deposit scheme and might be sitting on negative equity, they're saying, good on you, Peter?

KHALIL: There's a lot of people that have been very positive in their feedback around the changes. I know there's been a fair bit of noise in the media and a fair bit of noise from lots of different stakeholders. But, you know, some of the polling, I think, demonstrated too, that people are pretty comfortable and supportive of the changes, particularly for making the housing market more accessible.

CONNELL: For voters that are telling you they are concerned, what are their concerns about it?

KHALIL: Well, people we talk to, small businesses and so on. There's been issues raised by businesses. And I think the changes that were made last week by the PM and the Treasurer went to those. And now some 2.7 million businesses will not be impacted by the CGT, and that's about 98 per cent of all businesses that won't be impacted. And remember, the discount on the CGT is still there. It's just going back to an indexation model. So, I think there have been good adjustments and addressed some of the issues that were raised by businesses. There's a fair bit of misinformation, too. It's like, as I said, 98 per cent of businesses are not going to be affected by these changes…

CONNELL: What do you mean, not affected by them?

KHALIL: Well, because the change, the adjustments that were made, ensure that 2.7 million businesses will not be affected by the – not be paying that, as it was.

CONNELL: There’s a CGT discount you can get as a small business. The threshold was $2 million. It's now up to $10 million.

KHALIL: That's right. So, some of those changes go to addressing that and that's where you get the vast majority. But you can also get indexation. You can choose. There is a complicated tax system…

CONNELL: I understand, but if you sell the business, there's a few different ways. There would also be businesses that, prior to this budget, got the existing CGT discount, plus that one you were talking about, with turnovers of less than $2 million. That's not 2 per cent, is it? There'd be quite a few businesses in that category.

KHALIL: Well, the figures that I've seen from Treasury figures and so on, is that with the adjustments that were announced as well, the vast majority of businesses will be better off. And I would say this, the businesses that I talk to, the small businesses that I talk to, we're doing everything we can to support those small business. In fact, parts of the budget included a $3.8 billion range of measures that help small business. Around the instant asset write off. 

CONNELL: Is the sector better off, from all the budget changes?

KHALIL: Well, I would say that businesses are better off. Like, if you look at…

CONNELL: What's the actual evidence?

KHALIL: Well, the evidence will play out once these changes are made.

CONNELL: Well where’s the measurement? Here are all the changes. This is up, this is down, here's the sector.

KHALIL: Well, I think. 

CONNELL: So just the vibe? 

KHALIL: It's not the vibe. Dennis Denuto. It is a point here that these reforms are important because they are making changes that where the market has been, you know, you know, affected by the way the discount was put in after 1999, it's going back to an indexation. There are changes that have been made in the budget that will be beneficial for businesses and for many small businesses in the country they will be better off.

CONNELL: I read your AUKUS Op Ed - I should get a Google alert just so I get all the stuff you write.

KHALIL: Did you fall asleep when you were reading it?

CONNELL: No, not at all.

KHALIL: Good.

CONNELL: I had a coffee just before.

KHALIL: You had a coffee. Okay.

CONNELL. So, you said that there are realities of AUKUS Pillar I, which is the submarine aspect. Costs mean real tradeoffs in other capabilities and platforms. So, what are the tradeoffs? What's not going ahead?

KHALIL: Every time you make a decision around Defence spending, you're making decisions around prioritisation. What is it that we need for our men and women in uniform?

CONNELL: What are we not getting because of AUKUS Pillar I?

KHALIL: Well, this is the thing we've made decisions around what is important for the ADF, for the current and the future force structure. And we're seeing a huge transition. I'll come back to subs in a moment. But for example, in Army there's a huge change in the way that army is being configured. They're much more littoral force, maneuverable force almost if you think like Marines being able to have that capability and that skill set. Now in the past we have for example relied very heavily on Special Forces for expeditionary operations and so on. That is changing now as well. Where we're giving army that. That baseline skill set and the equipment and the kit that they need to be able to do what they're doing. That includes that maritime level of skills. So, with subs, for example, they're very important investment in making sure that we can contribute to that deterrent effect in the region and protect our national interests. I mean in the maritime. We're a maritime country, Tom. Being able to protect our national interests in the maritime domain is critically important for our way of effectively.

CONNELL: You drew on your days of driving a Holden Torana. So, you say conventional subs are like Toranas of the sea.

KHALIL: Great car, by the way.

CONNELL: Yes. Hearing the wind rushing through your hair, you said you thrashed it for a couple of years.

KHALIL: I did thrash it for a couple years.

CONNELL: Kept all your demerit points, did you?

KHALIL: I might have got a few speeding fines when I was younger.

CONNELL: Alright. But here's this. So, yes, maybe nuclear are the best of the best. What about a future world where subs are getting detected? We've got quantum sensors, we've got satellites that might be able to pick up tiny changes in temperature. This is a risk isn’t it?

KHALIL: I'll answer your question like this. Most of the countries in the region, and particularly major powers, continuing on and introducing nuclear powered submarines. Why is that the case? I've heard all the arguments and I've seen the evidence based around some of the sensors and all that. The fact though, that technology is nowhere near the ability or the capability of submarines, even the extrapolation and the way that we are advancing with the ability of those submarines to do what they're doing, they are different than diesel electric submarines on a very fundamental point. That is their way all subs. 

CONNELL: So, let me ask.

KHALIL: Just get this point across because it’s important. Nuclear powered submarines can stay underwater for far longer than a diesel electric submarine, which gives us greater reach and capacity and capability to protect our interest.

CONNELL: When it comes to spending as a percent of Defence, is anyone as all in on nuclear subs as Australia?

KHALIL: Well, the South Koreans have just announced they're doing some of their own nuclear powered submarines. We've got obviously the US and other allies are doing and if you look at the Defence budget, over the period of the program it is 0.15 per cent of GDP, the submarines before that. So, in a broader context, people need to understand too, we are investing a lot in Defence. We're spending tens of billions of dollars on drones, on missile capability, on future technologies, in AI and quantum computing. Submarines are a big part of that as well.

CONNELL: Got to leave it there until the next Op Ed. Peter Khalil, thank you.

KHALIL: Thank you.

ENDS