Damian Hale (Solomon, Australian Labor Party) Share this | Hansard source

I rise today to make my contribution to this debate on the Tax Laws Amendment (Election Commitments No. 1) Bill 2008, the Income Tax (Managed Investment Trust Transitional) Bill 2008 and the Income Tax (Managed Investment Trust Withholding Tax) Bill 2008. On the night of the budget the Treasurer outlined clearly to the people of Australia that this budget has been designed to meet the somewhat big challenges that we face. He went on to say:

It is a Budget that strengthens Australia’s economic foundations, and delivers for working families under pressure.

It was paramount that this budget be:

… the responsible Budget our nation needs at this time of international turbulence, and—

inflationary pressures—

at home.

A Budget carefully designed to fight inflation, and ensure we meet the uncertainties of the future from a position of strength.

We have the highest inflation in 16 years, and those opposite still do not acknowledge that. They still do not acknowledge that this is a problem. It is amazing that the member for Bowman singled out comments made by the member for Charlton. The member for Bowman just said that the government should take advice from Treasury. That is an amazing thing to say because the former government would not listen to advice on inflation. They would not listen to advice from the Reserve Bank on spending.

This legislation is very important. As part of its commitment to establish Australia as a regional financial hub, the Rudd government has acted to dramati-cally improve the competitiveness of Australia’s managed funds industry. This legislation will substantially reduce the level of withholding tax from a non-final rate of 30 per cent to a final rate of 7.5 per cent on certain distributions from Australia’s managed investment trusts to foreign-resident investors. These arrangements will make Australia’s withholding tax rate one of the most competitive in the world and provide a significant boost to Australia’s ability to compete globally. They will ensure that Australia’s property trusts are well placed to attract foreign investment now and into the future. This will provide a major boost to Australia’s goal of becoming a financial hub of the Asia-Pacific region and goes beyond the commitment made during the election.

This bill is extremely important for the people of Solomon, the people I represent. It is vitally important because of our ideal geographical proximity to these markets. As I said in my first speech about the people of Darwin and Palmerston, Solomon is home to people from all corners of the globe, and this diversity has shaped our part of the world for the better. People of 80 or more different nationalities live in my electorate. The influence that Territorians of Chinese origin have had in Darwin and Palmerston is profound. With a history in the Territory stretching back over 100 years, one has only to take a walk around Darwin or visit any of the many markets to understand how this presence has enriched Darwin and Palmerston. I had the pleasure of having the Prime Minister at the Rapid Creek markets on Sunday and his reception was something akin to that of a rock star. We had one protester and probably about 1,000 or more people turn up just to see him. It is through encouraging and fostering relationships that we maintain and build on our business community.

The Solomon business community is a perfect example of fostering and building business relationships. At any business function in Darwin there is truly a multicultural mix of individuals—people of Chinese, Greek, Italian and Indonesian backgrounds, to name but a few—and the creative juices often flow when trying to cater for a function. This type of coming together of the business community and building on existing relationships and forging new partnerships is how we can improve the managed funds sector and our place in the financial world.

Australia is internationally recognised as one of the major markets for managed funds. The Australian funds managed industry manages more than $1.4 trillion in assets. The industry is expected to continue its strong growth, with assets under management estimated to exceed $2.5 trillion by 2015. The Australian property sector is a key part of this industry. In spite of Australia’s strong regulatory regime and reputation for funds management, less than three per cent of industry fees are derived from exports—that is, from foreign residents investing in Australia’s managed funds. Industry has advised that this is in part due to the existing non-final withholding tax rate predominantly applying to rental income and capital gains from taxable Australian properties, which is higher on average than withholding rates imposed by other countries. In order to improve the industry’s export ability, the government is introducing a new withholding tax regime. The new withholding tax regime will apply to fund payments that are distri-butions of Australia’s source net income, other than dividends, interest and royalties, of Australian managed investment trusts to foreign residents. It will cover distributions made directly from the managed funds to foreign residents, as well as distributions made through other intermediaries. Distribution of dividends, interest and royalties will continue to be covered by the existing final withholding tax arrangements. However, to support the integrity of the arrangements, and in keeping with the government’s commitments to minimise international tax evasion and avoidance, the nature of the new withholding tax regime will vary depending on whether the foreign investor is resident in a jurisdiction with which Australia has effective exchange of information arrangements on tax matters. Residents of these jurisdictions will be subject to a 22.5 per cent non-final withholding tax for fund payments of the first income year, a 15 per cent final withholding tax fund for payments of the second income year and a 7.5 per cent withholding tax for fund payments of the third and later income years.

For the first income year, as an interim measure, investors resident in the exchange of information jurisdictions will be eligible to claim a deduction for expenses relating to fund payments. The net amount will be subject to tax at a new rate of 22.5 per cent. The list of jurisdictions with which Australia has an effective exchange of information will be outlined in the regulations. Residents of other jurisdictions where we do not have an effective exchange of information will be subject to a 30 per cent final withholding tax, with effect for fund payments in the first income year. Restricting the reduced withholding rate to countries with which Australia has exchange of information agreements will ensure that the reduced rate is not abused. It will also encourage foreign jurisdictions to enter into information exchange agreements with Australia—an encouragement for them to get on board.

Australia may never be a London or a New York, but we can be an Asian financial hub if we make the most of our advantages and get serious about reforming uncompetitive and complex tax and regulatory rules. Doing this will ensure that Australia becomes a world leader in financial services into the future. It shows we are serious about combating international tax evasion and avoidance. As I have highlighted previously, Darwin is ideally located to be in the front line of the push to a major boost to Australia’s goal of becoming a financial hub in the Asia-Pacific region. This budget, unlike the previous government’s budget, provides a strong emphasis on Northern Australia, on business and on the role we play as a nation in boosting Australia’s goal of becoming a financial hub in the Asia-Pacific region.

It was quite interesting on Sunday that the Prime Minister did meet with 35 or so local businessmen in a casual environment in Parliament House in Darwin, and the interaction of ideas was amazing. The Prime Minister spent an hour with these people and they really did appreciate his interest in the north of our country. It is about his third visit since becoming Prime Minister and, from my point of view, I hope that he pulls in on his way back from Asia on all occasions. He is very well received by the business community up there. This is the first Labor budget in 12 years and the Prime Minister and the Treasurer have delivered for the people of Solomon in this budget. This budget will be good for families and this bill is good for business.

Schedule 2 to this bill amends the Income Tax Assessment Act 1997 to exempt from income tax the Prime Minister’s Literary Awards. On 22 February 2008 the Minister for the Environment, Heritage and the Arts called for entries for the inaugural Prime Minister’s Literary Awards and announced that these awards would be tax exempt. This amendment ensures that no income tax is payable on the Prime Minister’s Literary Awards. The 2008 Prime Minister’s Literary Awards are a new initiative that will be held annually. The Prime Minister’s Literary Awards are a way of celebrating the contribution of Australian literature to the nation’s cultural and intellectual life. This measure will ensure that the prize is tax free. We cannot really expect the winner of an award not to receive the full benefit of the award. The Prime Minister’s Literary Awards provide an annual cash prize of $100,000 in each of the two literary award categories, for a published fiction book and for a published non-fiction book—fantastic awards that recognise the importance of literature to the nation’s cultural and intellectual life, an importance I know only too well.

Both my parents and my sister are teachers, a combined teaching experience of over 80 years. It has not always been good for me, particularly growing up, when as a young fella I might have wanted to slack off a bit on my school work. I was always kept in line and it was not always easy for me to break away to go and have a kick of the football. I was able to at times, but I certainly grew up in a household that greatly valued education. I think we need to recognise the contribution that people make to education and they should not be taxed for that contribution.

It is really important that we receive a good education, and this award recognises the importance of writing and encourages people to engage in the craft of writing. Books are an integral part of our society; they are the legacy that authors leave to the world. This schedule needs to be passed to ensure the winners of the Prime Minister’s Literary Awards are not financially disadvantaged for winning the award. And as I have said, the new managed investment arrangements will dramatically improve the competitiveness of the Australian managed investment trusts and also emphasise our government’s commitment to combating international tax evasion and avoidance. I commend this bill to the House.

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