Alan Cadman (Mitchell, Liberal Party) Share this | Hansard source

This is an omnibus bill. There are four measures in it—some of them are quite complex, some of them are not significant, but, taken as a whole, they are nevertheless important measures. Most notable is the one relating to the distribution of liability for capital gains tax on marriage breakdown. I do not think that the measures will cost a lot, but they seem to be a lot more sensible than the current arrangement. With respect to the current arrangement, the CCH Australian tax master guide 2006 notes:

A compulsory same-asset roll-over happens if a CGT—

that is, capital gains tax—

event involves an individual (the transferor) disposing of an asset to, or creating an asset in, his/her spouse or former spouse (the transferee) because of: (a) a court order under the Family Law Act 1975 or a corresponding foreign law; (b) a court-approved maintenance agreement or a similar agreement under a foreign law; or (c) a court order under the State Territory or for a law relating to an de facto marriage breakdowns ...

The complexity of what courts may order is often in conflict with tax law. These changes will allow the marriage breakdown rollover provisions to apply to situations where the transfer of assets is the result of an out-of-court settlement rather than court orders. The out-of-court settlements contemplated in this measure are arbitral awards and certain written or financial binding agreements. Parliament may note that the measure will make no changes to availability of the rollover relief. Only couples under the Australian Marriage Act or de facto relationships will benefit from this expansion.

Schedule 2 deals with consolidation measures. Under schedule 3, there will be a simplified imputation system relating to New Zealand resident companies. The final schedule relates to capital gains tax and foreign residents. I have to say I find the final measure somewhat perplexing. The comment made on that in the Bills Digest is:

Foreign investors holding shares in Australian companies and interests in certain trusts will gain significant benefits from this measure because these interests are excluded from CGT for foreign residents under the proposed regime. It has been noted that the measure is likely to be successful, providing a good stimulus for merger and acquisitions.

I do not know whether that is an economic goal, a political goal or a tax goal, but the Bills Digest comment lists some of the likely results as being:

• Increased activity by non-residents in Australian unlisted companies and unit trusts, and in interests of 10% or more in Australian listed companies, where the underlying assets do not comprise predominantly Australian real property
• [that] Australia will become a more desirable holding company location
• [that] non-residents will be more likely to structure the carrying on of a business in Australia via an Australian subsidiary entity rather than an Australian branch, and
• An increase in Australian investment by non-residents.

Well, we will see whether or not those things happen.

Speaking on this tax bill, I particularly want to draw the attention of the House tonight to the very good documentation that has been provided by the Australian Chamber of Commerce and Industry in their 2005 publication The Policies of the Australian Chamber of Commerce and Industry, setting out their policies for commerce and industry for the coming 10 years. In the section on taxation, it says that the Australian Chamber of Commerce and Industry is ‘calling for fundamental reform of Australia’s taxation system’ consistent with a number of objectives. I intend to list the objectives for the House, because I think they are significant. The tax system should be equitable; it should contain economic efficiency; it should be adequate to cover the needs of the nation; it should be simple; and it should be transparent so that taxpayers can understand how and when they are paying taxes. It should limit the costs of compliance—they should be minimised; and it should limit evasion and avoidance. They also say there needs to be consistency in the policy, and flexibility in the system so it can respond to economy and social developments, such as demographic changes. The objective under ‘public perception’ is that ‘there should be the widest possible public support for the tax system’. Now, that may seem an impossible objective in the Australian environment, because not too many Aussies are all that rapt about a tax system of any sort, but I think the goal is admirable—a comparatively painless, transparent, open and fair system. Australians realise there need to be provisions for those in need and for Australia’s defence.

The Australian Chamber of Commerce and Industry also says in that publication that, over the past 10 years—in its opinion—there has been a marked improvement in equity, sustainability and efficiency but that there is still a lot more room available for further improvement. In the opinion of the members of the Chamber of Commerce and Industry, comprising employers from a vast array of industries, small and large, right across the nation—and we must not forget that employers are the people who seek to ensure that Australia pays its way in that world—further reform needs to be made for the following reasons:

• improving the efficiency and international competitiveness of the Australian economy;
• continuing Australia’s strong growth and productivity results;
• ensuring Australia can meet long term challenges, particularly demographic changes—

with an ageing population—

• promoting innovation, risk taking …
• encouraging investment in … capital … education and training—

in all fields—

• encouraging skilled migration and the retention of skilled people …
• reducing tax avoidance and evasion.

Given all those nice-sounding words and the proposals and objectives that have been set out—and I think few would disagree with them, no matter what their background—it is interesting to see what the ACCI members say they think are the main problems: first of all, tax compliance costs; next, personal income tax levels; the mess of state government taxation systems and the need to reform those; the limitation placed on Australia by capital gains tax and the discouragement to investment that that imposes; and retirement incomes tax issues. Those are the five areas that members of the Australian Chamber of Commerce and Industry regard as being of most significance to the future of Australia, and I think they are right. I would have to say that, from the experience that I have had in my electorate and from general observations, these are the areas where, with a bit of effort, we can continue to make a fair difference and a fair change.

The chamber members go further and make a number of recommendations in their policies publication as to how we might achieve these. They cover areas such as improving the process for complying with the tax requirements; instead of a complex, protracted system, there should be something that is simpler and fairer. They go into details about the changes they would like to see made in personal income tax. They also comment strongly about the changes that need to made to reform states’ taxation systems, going into detail of bank account debits tax and stamp duties—stamp duties on leases, mortgages, bonds, debentures, marketable securities, non-residential conveyances, credit arrangements, instalment purchase arrangements, rental arrangements, cheques, bills of exchange and promissory notes. Everything under the sun has some type of stamp duty on it in the states of Australia, and that needs to be fixed; there need to be changes.

In New South Wales and Victoria each board of five commissioners levies their calculations on insurance and then the GST goes on that. Then the board of five commissioners’ charges goes over the top of the GST. This is a case of double taxation here, there and everywhere, right throughout the system. The beneficiaries of the GST, as the House rightly knows, are the states of Australia. So great work is necessary in my opinion to reform state taxation. It is really holding Australia back.

As for the capital gains tax, this government has made substantial changes to the capital gains tax and retention of capital and they have been very useful changes. The Australian Chamber of Commerce and Industry says that the changes need to go further. Few would argue with that, but I would point out that this government has made very substantial changes in those areas.

I would like to return to the No. 1 priority that the members of this business organisation have set out: the tax compliance issues and improving the process of accounting for and paying tax. Some of the recommendations are pretty sensible. They suggest that the Inspector-General of Taxation should undertake a survey of the time and money that business actually spends in complying with the tax act. That is a very good place to start, because time wasted on taxation is nonproductive time. It might be productive for the commissioner; it is certainly not productive for Australian business, Australian families and Australian employees. They recommend that the inspector-general, in conjunction with the Australian tax office, should introduce a range of initiatives to assist businesses to identify, understand and implement new and existing taxation requirements so that where changes are made they do not become a hassle.

The trouble that was gone through with the introduction of the goods and services tax to make it better and easier for business was quite amazing. To go out into the business community with members of the Australian tax office and talk to the community about how it was going to work and explaining it to them was a great way to go. It was a terrific time of good relationship between the tax office and Australian businesses. That process ought to be repeated. It would be more successful than the process that is happening at the moment when new measures are introduced. The proposal is that the tax administration impact statement, which the inspector-general should include with all of his assessments, would estimate the compliance costs based on detailed proposals for implementation and administration. The statement would be attached to each new tax proposal. There should be a regular review of those estimates. These are sensible things that could and should be done.

It is not my intention to go right through the whole policy booklet of the Australian Chamber of Commerce and Industry but, Madam Deputy Speaker Bishop, I will leave this last thought with you. I know that this is an area that you understand very well and are very familiar with. We need to make a start on these issues. The government has done a lot on the goals set out by the chamber as far as retirement—where there are substantial changes in the budget—and superannuation go, and the government has made substantial changes to personal income tax. But there are still lingering issues that need to be dealt with and we need to tackle them as soon as possible. We cannot go on as we have been by letting things drift and hoping that the increasing complexity will somehow or other sort itself out and choke itself to death. That has happened recently when we wrote many pages out of the tax act. That is a start only and we need to go further.

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