Chris Bowen (Prospect, Australian Labor Party, Assistant Treasurer) Share this | Hansard source

in reply—I thank the honourable member for Casey and the honourable member for Blair for their contributions. The Tax Laws Amendment (Taxation of Financial Arrangements) Bill 2008 represents an important reform to Australia’s financial taxation system. In fact, it represents a complete rewriting of the taxation of Australia’s financial arrangements. The passage of this bill will enhance efficiency in financial decision making by taxing financial arrangements according to their economic substance rather than their legal form. It will reduce tax distortions to managing financial risk by introducing extensive tax timing and character hedging rules and will reduce compliance costs by increasing the certainty of tax treatment of financial arrangements and by more closely aligning tax and finance accounting outcomes. The TOFA rules will not be applied on a mandatory basis to individual and small business taxpayers except where significant deferral of income is involved.

The bill has benefited from very extensive consultation with industry and professional associations and is much anticipated in the business sector. One of the results of this consultation which has been very extensive over the last 12 months was the government’s decision to implement a soft and hard start date. In the current environment, there are a lot of businesses very keen to get the benefits of the reduction in compliance costs and increased certainty. There are others who, while looking forward to embracing the regime in the longer run, need more time to adjust. This decision was a result of the consultation that was held with the industry and is reflected in the bill before the House.

Passage through the House of Representatives today will be another step forward in the TOFA process, which was first announced by Treasurer Dawkins in 1992. It is good to see the implementation of a budget measure in relation to that process—not a measure from the last budget, or the budget before, but from 1992.

As the member for Casey correctly pointed out to the House, this is a complex bill and it will need close monitoring. There will be reason to monitor its implementation and to make minor amendments as we go. The government fully recognises that and accepts that. There are likely to be finetuning issues that arise, and we stand ready to implement those on a case-by-case and needs basis. But, having had this around since 1992, the government certainly took the view that there was no good reason to delay any further, that those issues really needed to be fleshed out in the implementation and that the time for talk had finished; the time had come to introduce the TOFA legislation. I commend this very important bill to the House.

Question agreed to.

Bill read a second time.

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