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

in reply—A point well made, Madam Deputy Speaker. I would like to thank all those members who have taken part in the debate on the Tax Laws Amendment (2006 Measures No. 5) Bill 2006. I would like to start by addressing some of the concerns that were raised in the second reading amendment moved by the member for Hunter. He raised issues surrounding James Hardie. I say in response that the government strongly believes that James Hardie should honour its obligation to fully compensate asbestos victims in the same way that other companies with asbestos obligations have been willing to meet those responsibilities. None of the other companies that have paid their liabilities in full used a trust or did it through a charitable fund. To exempt the fund from income tax in these circumstances would be inequitable, as this would place the fund in a more favourable tax position relative to other companies with similar compensation liabilities who did the right thing, and it would reward a company that tried to move its assets offshore. Intervention of the kind proposed by the opposition is completely unnecessary. James Hardie has publicly announced that it and the ATO are currently in discussions about how James Hardie can fit within the current tax laws.

The treatment of James Hardie is consistent with the treatment accorded to other corporations that meet their asbestos liabilities claims. James Hardie is not being singled out for special tax treatment. James Hardie, like CSR and BHP Billiton, is a commercial enterprise and its own actions have determined its tax liabilities. Unlike CSR and BHP Billiton, James Hardie has purposefully undertaken a restructure in order to protect its assets. The member for Hunter is dead wrong in his statements that the current tax treatment will penalise victims. In fact, the current tax treatment accorded to the fund does not penalise asbestos victims at all.

It is important to recognise that the tax issues that have been raised will impact only on James Hardie and not on the entitlements of asbestos victims. The decision of the ATO that that fund as proposed is not eligible for charitable status means that the earnings of the fund will be subject to tax. This will not alter the amount of compensation paid to individual victims. It will, though, alter the amount that James Hardie will be required to contribute to the fund to meet the compensation claims. The government believes very strongly that Labor should be encouraging James Hardie to fulfil its obligations to asbestos victims rather than helping James Hardie get preferential tax treatment.

The second issue raised by the member for Hunter was in relation to company loss recoupment rules. I would like to respond as follows. The opposition’s amendment refers to the creation of uncertainty in relation to company loss recoupment rules. In fact, the government has continued to improve certainty for business through changes to the loss recoupment rules which were passed by the parliament in December 2005. The changes made as part of the Tax Laws Amendment (Loss Recoupment Rules and Other Measures) Act 2005 followed a period of lengthy consultation with business groups about ways in which the loss recoupment rules could be improved. Amendments were made to the continuity of ownership test to make it easier for larger companies to trace ultimate ownership of their shares. This provides savings in compliance and administrative costs for large businesses and greater certainty in their ability to legitimately benefit from past losses. These changes were welcomed by businesses, and the government is continuing to consult on the loss recoupment rules and will refine them further if there is a genuine need to do so.

Aside from these specific taxation measures, the government continues to support business through its sound economic management. Corporate profits continue to remain high and business investment has been strong. These measures provide evidence that the government’s policies are working and we will continue to ensure that this remains the case.

The member for Hunter and the member for Blaxland asked a question in relation to who will benefit from the change in the definition of ‘remote’ for FBT purposes. The amendment will benefit those employers in locations isolated from populated areas by a body of water, such as those in tourism related businesses. These changes recognise that it is generally more difficult and inconvenient to travel by water than by land.

This bill is in keeping with the government’s commitment to business to remove unnecessary regulation. The bill makes a number of changes that will reduce compliance costs for Australian taxpayers. Schedule 1 implements a number of fringe benefits tax changes. In particular, it gives effect to two fringe benefits tax recommendations from the report of the task force on reducing the regulatory burdens on business, Rethinking regulation. The first increases the minor benefits exemption threshold from less than $100 to less than $300. This change will reduce compliance and record-keeping costs for businesses that infrequently provide low-value benefits to employees. The bill also increases the reportable fringe benefits threshold from more than $1,000 to more than $2,000. This will reduce compliance costs and keep-record keeping costs low by removing the need for businesses to report fringe benefits for employees who receive no more than $2,000 worth of benefits.

Schedule 1 also increases from $500 to $1,000 the reduction of taxable value that applies to in-house fringe benefits and airline transport fringe benefits. In addition, this schedule extends the definition of ‘remote’ for the purposes of fringe benefits tax concessions where the shortest practicable route involves travel by water. This is in recognition of the special circumstances of employees who work in locations isolated from populated areas by a body of water.

The bill also provides GST concessions to people under the government’s new Military Compensation Scheme. Schedule 2 will ensure that supplies of drugs, medicines and other pharmaceutical items are GST free when supplied as pharmaceutical benefits under the Military Compensation Scheme. In addition, the GST-free car concession is extended to include people whose service in the Defence Force or in any other force of Her Majesty has resulted in them receiving or being eligible to receive the special rate of disability pension under the Military Compensation Scheme.

Schedule 3 represents another instalment of the government’s continuing reform of the personal income tax system. It removes the part-year tax-free threshold for taxpayers who cease to be engaged in full-time education for the first time. Under the current law, taxpayers who cease full-time education for the first time are not eligible for the full tax-free threshold of $6,000. Rather, they are entitled to a reduced tax-free threshold that depends on the number of months that they are not studying, as well as on their income during the time that they are studying. This measure extends the full tax-free threshold of $6,000 to these taxpayers. The amendments simplify the law and indeed reduce compliance costs. I thank all of those members who have participated in this very worthwhile debate and I commend the bill to the House.

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