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

I thank the members on both sides of the chamber who have taken part in this debate on the Tax Laws Amendment (2006 Measures No. 2) Bill 2006. The bill implements a variety of changes and improvements to the tax laws. Before I go into my summing-up speech proper, I want to address several questions that were raised by the member for Hunter. I understand that, as part of this debate, he asked a question on capital gains tax as it applies to compulsorily acquired acquisitions under schedule 4 and what kind of case the amendments will apply to. The amendments ensure that the capital gains tax compulsory acquisition rules now also apply to cases where a private acquirer such as a mining company compulsorily acquires an asset such as farming land. Rules have always applied to a compulsory acquisition by a government or government authority.

The member for Hunter requested a further example of the Commonwealth overriding state legislation in relation to schedule 6 on superannuation choice. The amendments only override the requirement to make contributions to the fund in state legislation if the employee chooses a fund. The fund nominated in the state legislation would be the default fund for those employees.

Finally, the member for Hunter asked for examples of the application of the discretion in relation to the franking deficit tax. The discretion will give the commissioner some flexibility to alleviate the impact of the franking deficit tax offset reduction. The application of the discretion will depend on the facts of the particular case. The explanatory memorandum gives one example where PAYG instalments are less than expected. The corrections to the EM, which I am circulating today, give some additional guidance on the operation of the discretion.

The first measure in this bill exempts from income tax certain ex gratia lump sum payments made by the Department of Veterans’ Affairs. This will ensure that those who receive the ex gratia payments will receive the full benefit. Eligible personnel are entitled to a lump sum payment of $40,000 or $10,000. The one-off ex gratia lump sum payments are being made to certain F111 aircraft maintenance personnel who experienced a unique working environment in the maintenance of F111 aircraft fuel tanks. The payments are being made in recognition of the difficulties they suffered in the environment in which they worked and will be made regardless of whether there is evidence of any adverse health impacts from that work environment.

The second measure in this bill adds two new organisations to the current list of deductible gift recipients. Deductible gift recipient status will assist those organisations to attract public support for their activities. Gifts greater than $2 made to Playgroup Victoria Inc. and the St Michael’s Church Restoration Fund from 24 February 2006 will be deductible. Gifts to the St Michael’s Church Restoration Fund will have to be made before 24 February 2007 to be deductible.

The third measure implements changes in relation to options to correct unintended consequences from the rewrite of the capital gains tax provisions completed as part of the Tax Law Improvement Project. On 27 May 2005 in a press release by the then Minister for Revenue it was announced that the government would amend the Income Tax Assessment Act 1997 so that the law operates essentially as it did previously under the Income Tax Assessment Act 1936. The kinds of options to which the amended provisions will apply are options exercised on or after 27 May 2005 for granting a lease or easement or for issuing units in a unit trust.

The fourth measure benefits individuals and businesses and allows them to obtain a capital gains tax rollover when an asset is compulsorily acquired. It also includes changes to allow balancing adjustment offset under the uniform capital allowances provisions when a depreciating asset is compulsorily acquired. The changes allow individuals and businesses to defer the taxing point for capital gains tax and uniform capital allowance purposes if a private entity such as a mining company compulsorily acquires an asset. This measure will operate in a way similar to when a government agency compulsorily acquires an asset, as I mentioned before. The amendments apply retrospectively, from 1999.

The next measure in the bill ensures that the reduction of a tax offset in relation to the payment of franking deficit tax applies only if a company has applied directly or indirectly a franked distribution in the relevant income year. In addition, the Commissioner of Taxation will have the discretion to disregard the tax offset reduction if the deficit in the franking account arose because of events outside the company’s control. Under the current income tax law a company is discouraged from passing excessive franking credits to shareholders by having the franking deficit tax offset reduced in certain circumstances. These changes will apply from 1 July 2002, which was when the simplified imputation system commenced.

The sixth measure in this bill allows employers that are constitutional corporations to make compulsory superannuation contributions to funds their employees choose rather than having to make those contributions to a fund that is nominated in a state law. This amendment will allow more employees to choose the fund to which their employer makes compulsory superannuation contributions on their behalf.

Finally, the last measure in this bill implements various technical corrections and amendments and also some general improvements to the law of a minor nature. These corrections and amendments are an important part of the government’s commitment to improving the taxation laws in this country. This bill provides improvements to the operation of the income tax and superannuation laws. For the reasons I outlined above, I commend this bill to the House. I would also like to present corrections to the explanatory memorandum.

Question agreed to.

Bill read a second time.

Ordered that the bill be reported to the House without amendment.

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