Peter Dutton (Dickson, Liberal Party, Minister for Revenue and Assistant Treasurer) Share this | Hansard source

I would like to start by firstly thanking all those members who have taken part in the debate on the Tax Laws Amendment (2005 Measures No. 6) Bill 2005. The first measure in this bill modifies the consolidation loss rules. Industry has expressed concerns to government that, where a joining entity with a relatively small market value joins a much larger consolidated group, the current rounding rules in the consolidation regime could cause the joining entity’s available fraction to be nil. The available fraction is used to regulate the rate that a consolidated group can use for losses of a joining entity. This meant for consolidating groups an available fraction of nil, effectively cancelling the losses of that joining entity. This amendment allows consolidated groups to round the available fraction for a bundle of losses to the first non-zero digit if rounding to three decimal places would result in an available fraction of nil. This is a positive initiative for industry in that it ensures the method for calculating the rate at which the head company of a consolidated group can recoup a joining entity’s losses operates as intended.

On 30 May 2005 in a press release by the previous Minister for Revenue, it was announced that the government would amend income tax law to ensure certain not-for-profit organisations would not be subject to tax on mutual receipts as a result of the Coleambally Federal Court decision. The court’s decision potentially affected between 200,000 and 300,000 not-for-profit entities, including clubs, professional organisations and some friendly societies. The second measure in this bill gives effect to the government’s commitment. By way of background, under the mutuality principle, membership subscriptions and receipts from other mutual dealings with members are not liable for income tax. The court’s decision held that the principle of mutuality could not apply where an organisation is prevented from distributing to members. The government’s amendment today restores the longstanding benefits of the mutuality principle that applied prior to the court’s decision.

The third measure in the bill ensures that the changes made to the child-care benefit work/training/study test announced as part of the government’s Welfare to Work package will not result in taxpayers who work part time losing their eligibility for the child-care tax rebate. To be eligible for the rebate, families must receive the child-care benefit for approved care and meet the child-care benefit work/training/study test. The Welfare to Work package introduces a requirement that a taxpayer must work, train or study for at least 15 hours a week or for 30 hours over two weeks to meet the child-care benefit work/training/study test. Taxpayers will not need to satisfy the new hourly requirements to achieve the child-care tax rebate. Taxpayers will continue to be eligible for the rebate if they receive the child-care benefit for approved care and work, train or study at some time in the week.

The fourth measure in this bill amends the definition of ‘eligible medical expenses’ to exclude solely cosmetic procedures from the medical expenses offset. Specifically, solely cosmetic procedures are excluded from the medical expenses offset under two broad categories—that is, general medical expenses and general dental expenses. The government considers that the medical expenses offset should cater to those taxpayers with significant medical expenses arising out of legitimate medical need. Taxpayers claiming the medical expenses offset in respect of procedures for legitimate medical need—for example, reconstructive surgery or laser vision corrective surgery—will not be affected by this measure. The final measure in the bill amends the list of deductible gift recipients in the Income Tax Assessment 1997. Deductible gift recipient status will assist the listed organisations to attract public support for their activities.

In closing I want to address some of the issues raised in the House earlier tonight by the member for Hunter in relation to his amendment to the motion that the bill be read a second time. I want to address what has, really, become a political stunt for those opposite. I want to put it into perspective and recall some of the detail from Senate estimates hearings at which Senator Sherry was undertaking questioning of Mr Monaghan, from the Serious Compliance Section within the Australian Taxation Office, and Mr D’Ascenzo, the Commissioner of Taxation. This goes to the core of how true the motivation of the Labor Party purports to be but in fact is not. Senator Sherry asked:

... from the ATO’s perspective do the slightly different definitions contained in the Criminal Code and the Income Tax Assessment Act present any practical problems?

Mr Monaghan—We do not believe so. Our view is that the policy intent is reflected in the wording. In terms of our legislation, it is about a tax deduction and whether or not that is allowable. The Crimes Act is about a criminal matter. You might expect there to be more precision in that wording. So we do not believe there is any particular issue in that.

It is important as part of this debate to expose what the Labor Party is about in moving this amendment and to say that a bribe to a foreign official is not a deduction under our taxation laws. Equally, a bribe to a local official is not deductible.

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