Tony Windsor (New England, Independent) Share this | Hansard source

I move:

That this House:

(1)

recognises the hardship faced by families who face significant losses with the withdrawal of water rights;

(2)

acknowledges that a similar problem confronts those whose livelihood is threatened by government imposed changes in the use of forest resources;

(3)

acknowledges that compensation is being made in recognition of the loss of property rights caused by such policies;

(4)

recognises that any benefit such compensation confers will be substantially negated unless the government changes its stated policy of treating such compensation as income and taxing it accordingly; and

(5)

calls for the introduction and passage without delay of amendments to the Income Tax Assessment Act to correct this anomaly.

This is a very important motion. I am pleased that the Parliamentary Secretary to the Prime Minister is here, but I am disappointed he is not speaking. To relate some history to this issue, back in 1995 the Council of Australian Governments in the competition policy arrangements agreed on two essential ingredients to water reform, one being the recognition of compensable property rights and the other being the establishment of a trading market in water entitlements. Eleven years later there has been very little movement, although the parliamentary secretary may relate to some movement in the trading market between the states.

At that meeting of COAG there was agreement between the Commonwealth and the states that competition payments would be made only if certain aspects of water reform were reached. Since then, $4.6 billion of Commonwealth money has been handed to the states, with very little movement by the states, who have constitutional responsibility for water, in recognising the property right issue or until recently even the trading market issue. The property right issue has become paramount in the minds of water entitlement holders and of other land users and farmers around the nation.

The issue relates to the compensation arrangements that have been put in place for the six ground water valleys across New South Wales—a compensation payment of $150 million made up of three sections: the state, the Commonwealth and the irrigators from within those valleys—and relates specifically to the taxation treatment of that compensation. The Australian Taxation Office is treating the compensation arrangements, $50 million of which is from the Commonwealth government, as income in the year of receipt and not as capital whereas the irrigators and accountants et cetera would regard the removal of the water entitlement as a capital loss to gain sustainability in the ground water system. The Namoi Catchment Management Authority has:

... applauded the National Water Initiative for endeavouring to achieve good natural resource outcomes, however good 21st Century NRM—

natural resource management—

policy is fraying at the edges because it is aligned with a Dickensian taxation policy.

It goes on to say that the Australian Taxation Office ruling is ‘academically bankrupt’. I commend Mr Bruce Brown for his comments on the taxation policy. Namoi Water’s John Clements has adopted a double-barrelled approach: one is to attempt to get the Commonwealth to change its tax treatment of the compensation arrangements and the other is to get the New South Wales government in this case to change the deed of offer from adjustment arrangements to compensation.

The Prime Minister has responded on both occasions I have written to him. I alluded to some of the exit packages that have been compensated when government has put forward some compensation arrangements. But the glaring inconsistency is that there is no consistency in the way adjustment or compensation packages are treated by the tax office, and the Catchment Management Authority has commented that we really need to bring some consistency into the way these things are treated. For instance, the contract for the Brigalow exit package, which is a New South Wales scheme, specifically states ‘exit’—and the Prime Minister, in one of his letters, said that exit packages, whether they be dairy or sugar, are treated differently from water adjustment packages—but, as far as the tax office is concerned, it is being treated as income in the year of receipt. Six valleys are affected. I am disappointed that the members for Gwydir, Parkes and Riverina will not be speaking on this issue, but the members for O’Connor and Mallee will be—and they were both members of the House of Representatives inquiry into rural water supplies and I am sure they would recognise the recommendations for compensation payment and taxation treatment. I call for an amendment to the Income Tax Assessment Act. I think there should be a very simple one-line adjustment to change the circumstances whereby compensation is being taxed at the Commonwealth level—not only for ground water users but very specifically for other land users in the future. (Time expired)

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