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

in reply—Can I start by thanking those members who have taken part in the debate on the Tax Laws Amendment (2006 Measures No. 7) Bill 2006. In particular, can I thank those who have provided some comment or input on the measures that are actually contained within the bill. I am happy to address some of those concerns now.

Firstly, I wanted to address some of the concerns raised by the member for Prospect. The member for Prospect commented that the ALP may seek to refer this bill to a Senate committee for consideration. I want to make the point very clearly to him and to the House that the government actually offered to refer the bill to such a committee. I am not sure how the handover went when he took up his current position; I am not sure if he is in the same faction as Joel Fitzgibbon or not. I do not know what happened, but the decision from the ALP at the time, along with the other minor parties, was that this bill did not need to be referred to a Senate committee. He has put himself forward as the bright star of the ALP and come up with this wonderful revelation that it should be sent to a Senate committee; well, the government has offered it. The ALP rejected it, so if they are now reproposing that then that is for the ALP. But one has to wonder: is it merely a political stunt, or is the real reason that the ALP are still at a complete loss on these matters of taxation and generally running the economy, as they were in the late eighties and early nineties?

The government cannot now agree to the referral of this bill at such a late stage. The government does not want to delay businesses from accessing the benefits, and if the ALP are serious about their support of business, as they are currently saying they are, then I would have thought it would be in their best interests not to pursue this political agenda to the cost of business.

The member for Prospect has raised concerns that the government announced an increase of the net asset value threshold from $5 million to $6 million. That has not been included in the bill and does not apply from 1 July 2006, similar to the amendments in schedule 1. To that, I say these amendments are in response to the Board of Taxation’s recommendations coming out of the review of the small business CGT concessions, and these amendments apply from 1 July 2006. The government is separately introducing a new small business framework. The framework will align the small business thresholds throughout the income tax law. Due to the significance of this reform, the relevant changes will commence as announced on 1 July 2007 to allow sufficient time for the new framework to undergo appropriate consideration and consultation.

The member for Prospect was also concerned that the government did not consult on the amendments to interest withholding tax contained in schedule 2. Of course, again, that is not true. The government in fact consulted widely with a number of industry parties and stakeholders before the measure was introduced. The government also appointed an independent consultant. I note for the benefit of members that the government is not reversing its reforms to this area of law but is simply ensuring that the law reflects the parliament’s intent. These amendments correct an inadvertent error of short duration and would not be expected to cause any detriment to Australian companies who access offshore capital.

What should be noted as part of this debate is that this government cannot be accused of not consulting with business, engaging with business or engaging with the stakeholders on these policies that we propose. In fact, the feedback that I get as I move around the country talking to businesses both big and small—and I am sure the same message is being conveyed to my shadow minister opposite—is that this government is operating its consultative process as well as we ever have. If there are issues that arise in relation to bills, we will continue to consult and make appropriate amendments where we need to. But the government is serious about consulting, and we will continue to embark on that path. We are not going to be pushed to one side by a political agenda run by a Labor Party desperate to make itself relevant to the business community.

While supporting these amendments, the member for Prospect noted in relation to the statutory cap on the effective life of tractors and harvesters that these amendments are inconsistent with agreed Ralph recommendations. The government continues to support the Ralph recommendations on effective life, but as noted by the member this is an exceptional circumstance which required acknowledgement of the dire circumstances faced by our farmers, who around the country are encountering the worst drought in our country’s history. This government is committed to continuing its assistance to people in the bush, and the member for New England, who is here to contribute to this debate, would be the first to acknowledge, surely, that this government has provided exceptional circumstance assistance to farmers in a time of exceptional need. When you compare it to the states, you see it is an appalling situation that the states have put themselves in. They have deserted farmers in their hour of need at a time when the Australian federal government is providing phenomenal support to people who are very worthy of it.

The measure in relation to capital protected borrowings drew more whingeing from the member for Prospect about how long it has taken to implement an announced measure. But this is at the same time that he says that we should be consulting more. The opposition cannot have both short consultation times and long consultation times. They cannot have measures introduced tomorrow that require lengthy consultations. That needs to be a message that is sent to Labor and to the business community, when we have Labor running around saying that they will consult but saying at the same time that they will introduce legislation the next day. Both cannot happen. One has to give way. Although we are committed to introducing legislation in a timely fashion, we are committed to consulting with business to make sure that we provide the best outcomes not just to business but to consumers and to stakeholders in this portfolio and to make sure that we as a government continue to manage the Australian economy well so that the prosperous times in this country continue to roll.

This bill makes a number of important changes that will assist small business. The changes will support primary producers and will improve certainty for taxpayers. Firstly, the bill amends the capital gains tax concessions for small businesses to increase the availability of these concessions and reduce the compliance costs of small business. The amendments are in response to the recommendations of the Board of Taxation and will improve the operation of the small business CGT concessions by making changes to the maximum net asset value test, the active asset test, the 15-year exemption, the retirement exemption, the small business rollover and how the concessions apply to partnerships.

The bill also clarifies the interest withholding tax exemptions by more closely specifying the types of financial instruments the parliament intended to be eligible for the exemption. These amendments will reduce uncertainty for taxpayers and the tax office by confirming the policy intent in relation to dead interest. The intent, though, is broadly that Australian business should not face a greater cost of capital due to interest withholding tax. I repeat my statement that the government is committed to continuing our process of consultation on this aspect of the bill and other aspects, both those that are before the House at the moment and those that are under consideration by government. We will continue to make amendments where we need to. We will continue to listen to business. We will continue to act in the best interest of the nation and of our economy. Today, we recommit ourselves to doing that.

The bill also gives effect to the government’s 2006-07 budget announcement that it will enhance philanthropy by streamlining the integrity arrangements and reducing the compliance burdens that apply to deductible gift recipients or DGRs. The gift fund requirement for certain DGRs will be removed and the consolidation of multiple gift funds will be allowed for others. However, all DGRs will be required to maintain adequate records to show that the deductible public donations they receive are used appropriately and indeed how they are used. The amendments also align the integrity arrangements across all DGRs by allowing the Commissioner of Taxation to review whether an entity listed in the law continues to be eligible to receive deductible gifts, in the same way that the commissioner can review the eligibility of those entities that require the commissioner’s endorsement. Additionally, the bill amends the list of deductible gift recipients in the Income Tax Assessment Act 1997 by extending the time period for which four particular entities can receive tax deductible donations. Extending the deductible gift recipient status will assist those organisations to continue to attract public support for their activities.

The Howard government is committed to helping Australian farmers struggling under this drought. This bill makes two important changes to the tax law to help farmers. The bill preserves the depreciation rate that applies to tractors and harvesters used in the primary production sector. With the drought affecting farmers and their families across Australia, the last thing that they need is a change in the tax treatment of their valuable farm equipment. That is why the government has implemented a statutory cap which will mean no change to the income tax treatment on harvesters and tractors. The government is also amending the Farm Management Deposits scheme to increase the non-primary production income threshold from $50,000 to $65,000 and the total deposit limit from $300,000 to $400,000. Increasing these thresholds will assist primary producers to cope in this time of hardship.

This bill will provide certainty as to the tax treatment of capital protected borrowings. Under a typical capital protected product the investor is protected from a fall in the price of the shares, as the loan facility includes a capital protection feature that gives the investor the right to transfer the shares back to the lender for the amount outstanding on the loan. The full Federal Court of Australia ruled that the component of interest applicable to the cost of the capital protection feature is deductible when paid. The amendments will ensure that part of the expense on a capital protected product attributed to the cost of the capital protection feature is not interest and is not deductible where this cost is capital in nature. The measure restores the general principle underpinning the current law: that any revenue loss or outgoing in producing assessable income is deductible, while a capital loss or outgoing is not deductible. The measure also ensures that all borrowers who utilise a capital protection feature are treated in the same way for taxation purposes, whether or not the capital protection feature is purchased separately or included within so-called interest on the loan.

I recommend this bill to the House.

Question agreed to.

Bill read a second time.

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