Tony Smith (Casey, Liberal Party, Shadow Assistant Treasurer) Share this | Hansard source

The bill before us, the Tax Laws Amendment (2009 Measures No. 1) Bill 2009, contains three important schedules. The first will amend the Taxation Administration Act 1953 and, in doing so, reduce the PAYG instalment amounts for certain taxpayers by 20 per cent, starting from the December quarter of last year. Schedule 2 contains a number of consequential amendments to the recent changes made to the unclaimed money regime with respect to temporary residents’ superannuation. Schedule 3, the biggest section of the bill, includes a range of amendments relating to income test changes that were announced almost a year ago in the 2008-09 budget.

The coalition parties support the principles underpinning this bill and obviously will be supporting its passage on the whole. We are very concerned about aspects of the definition of ‘reportable employer superannuation contribution’. We are concerned that it will mean the integrity measures that are being introduced will not apply equally to all employees. I will come to that later as I deal with the substance of each schedule.

As I said, schedule 1 implements an announcement on 12 December last year by the Minister for Small Business, Independent Contractors and the Service Economy that the government would, from the December 2008 quarter, reduce the quarterly PAYG instalment by 20 per cent for quarterly taxpayers. The reduction, outlined by the Assistant Treasurer in introducing the bill and announced by the government at the time, will apply to small business entities, individuals, multirate trustees, full self-assessment taxpayers with $2 million or less of instalment income for the previous income year and full self-assessment taxpayers with more than $2 million of instalment income for the previous income year who are eligible to pay an annual PAYG instalment but have chosen not to.

The announcement by the minister for small business last year followed a call by the member for Moncrieff, the shadow minister for small business, independent contractors, tourism and the arts, almost a month earlier, on 20 November 2008. The member for Moncrieff, the shadow minister for small business, Mr Ciobo, called for PAYG relief for small businesses, which were suffering severe cash flow problems. The coalition’s proposal called for the allowable margin of error in PAYG instalment variations to increase from 15 per cent to 30 per cent for the 2008-09 financial year. That proposal would have allowed small businesses themselves to adjust their PAYG instalments to reflect the reduction in turnover that many, of course, are experiencing. This would have direct cash flow benefit for small businesses and would help protect the jobs of Australians employed by small businesses.

We recognise, by talking to small businesses, that they are experiencing severe cash flow problems. It was the member for Moncrieff who first called for PAYG relief. After almost a month the government responded with a different measure but a measure which nonetheless provides PAYG relief for small business. As a consequence, we naturally support that schedule. The member for Moncrieff, the shadow minister for small business, will address the substance of those issues later today during this debate.

Schedule 2 is a non-controversial measure, which the coalition will also support. As I said at the outset, it contains consequential amendments to the recent changes made to the temporary residents unclaimed money regime. It will make the rules governing unclaimed superannuation for Australian residents consistent with the rules governing unclaimed superannuation for temporary residents who have departed Australia. This will reduce the compliance burden on superannuation funds in maintaining two separate regimes and will remove the distinction between maintaining a register for temporary residents and for Australians with unclaimed super.

Schedule 3 contains a number of key changes to income tests for financial assistance programs, many of which were announced in last year’s budget. The coalition of course supports genuine integrity measures to ensure that government assistance is provided to those who are intended to receive it. The coalition, when in government, demonstrated its commitment to maintaining the integrity of income tests by undertaking a range of reforms to income tests, starting in the 1996-97 budget—for example, extending the range of fringe benefits included in the family payment income test and ensuring that income was accurately reflected for determining child support payments.

The schedule amends the methods of income testing in a variety of ways, as I said, with the intent of ensuring only those intended to receive the government benefits actually receive them and that taxpayers are not able to artificially reduce their income to receive benefits they would otherwise be ineligible for. There are two elements to the income testing. These include the items included in assessing income and the income threshold for that test. The schedule makes amendments to the first of these by expanding the definition of items used to determine income. This is outlined in great detail in the bill and in the explanatory memorandum. Nonetheless, I will go through each of them because they are important in a number of regards. The element of income testing goes to ensuring the integrity of those government assistance programs.

As many members pointed out yesterday during the debate on the Commonwealth seniors health card bill as it applies to salary sacrificed contributions into a superannuation fund and superannuation stream income from a tax source, we strongly disagree with that bill. That bill passed this House last night without our support; it was a bill that we strongly opposed. That bill adds amounts that are salary sacrificed into superannuation funds and superannuation stream income from tax sources to the income test for the purposes of the Commonwealth seniors health card. We believe that, when it comes to eligibility for the Commonwealth seniors health card and salary sacrificed superannuation and superannuation from taxed sources, the status quo should remain. We strongly oppose the government’s moves in that area. It is estimated that those measures in the bill that passed this House last night will remove eligibility for the Commonwealth seniors health card from around 22,000 senior Australians. At present, many in that category are under immense pressure. This is a vital concession for just under 300,000 senior Australians. It is available for those who are not receiving a government benefit and are on incomes of under $50,000 for singles and $80,000 for couples, and it provides affordable prescription medicine and health care, and a range of other benefits, to help senior Australians maintain a decent quality of life. The member for Warringah and the shadow minister responsible for that bill outlined in great detail our position on that in the debate that concluded about 12 hours ago in this House.

There are three key parts when it comes to the schedules within this bill. Part 1 changes some income definitions used in the tests. Part 2 changes the reporting requirements for tax purposes. Part 3 changes some of the actual income test to give effect to the changes in part 1. Part 1 introduces definitions for adjustable fringe benefits, reportable superannuation contributions, total net investment loss, rebate income, income from Medicare levy surcharge purposes and, finally, reportable employer superannuation contributions. Starting first with adjusted fringe benefits, this schedule inserts a new definition of the adjusted fringe benefit to replace the existing definition of a reportable fringe benefit. The definition of a reportable fringe benefit used for tax purposes is not suitable for income testing as it does not reflect the cash benefit received by the employees. The Family Assistance Office currently uses an identical definition to the one being introduced by this schedule, and the definition better reflects the fringe benefit received by the employee. So it is consistent with the income definition currently used by the Family Assistance Office. As adjusted fringe benefits will be included in the new definition of rebate income, this new definition will apply to a range of income tests.

Part 1 of the schedule inserts a new definition with respect to reportable superannuation contributions, and that will include salary sacrificed superannuation contributions and reportable employer superannuation contributions. It will ensure that salary sacrificed amounts are included under the income test when determining eligibility for a range of government benefits that would include family tax benefit A, the Medicare levy surcharge and a range of other benefits that taxpayers right across the spectrum are able to claim. It also inserts a new definition of total net investment loss and a related definition for financial investment. At present, net rental property losses are considered when it comes to the calculation on income tests. This new definition will expand that definition to also include losses arising from financial investments. A total net investment loss will include a taxpayer’s losses from financial investments and/or rental property that exceed the income they receive from those sources. Currently, as members will know, a loss from a rental property can be claimed as a tax deduction and is also included in assessing income for determining eligibility for government benefits. While losses from financial benefits can be claimed as a tax deduction at present, unlike rental property losses they are treated differently. This schedule will put those on an equal footing and ensure that Australians who choose to invest in rental property are treated in the same manner as those who choose to invest in financial investments.

Rebate income is another of the new definitions. This definition will consist of the sum of other definitions and include taxable income, adjusted fringe benefits, total net investment loss and reportable superannuation contributions. This single definition will make it easier to amend income tests in what—and I am sure that those following this bill closely would agree—will be a whole range, a plethora, of other legislation that will require consequential changes. Rebate income will be used for determining eligibility for the senior Australians tax offset, the pensioner tax offset and a trustee’s eligibility for an offset.

The definition of income from the Medicare levy surcharge will be used to determine a taxpayer’s liability for the Medicare levy surcharge. It is similar to rebate income, as it is a definition that consists of the sum of other definitions. Like rebate income, the definition will make it easier to amend the income test for the Medicare levy surcharge. This definition will include taxable income, reportable fringe benefits, reportable superannuation contributions and total net investment loss.

Part 1 of this schedule also provides a new definition for reportable employer superannuation contributions—or RESC, being the acronym that was mentioned earlier. At this point I must point out that the Senate Standing Committee on Economics has had a short inquiry into this bill and concerns have been raised during that process by coalition senators in respect of the proposed definition of the reportable employer superannuation contributions. With the concern that that definition may create an unintentional bias, coalition senators recommended that the bill be amended to ensure that equality is provided and that inequality in how these measures apply is removed.

The reportable employer superannuation contribution does not include payments made by an employer to meet the compulsory nine per cent superannuation contribution. It is proposed to include amounts made by employers in addition to that nine per cent. The proposed definition will include payments made by the employer to an employee’s superannuation fund on the reading of the bill where the employee ‘has or has had or might reasonably be expected to have had the capacity to influence the size of the payment or the way the amount is contributed so that his or her assessable income is reduced’.

However, the proposed definition also states that any contributions made by an employer to an employee’s superannuation fund that the employee did not control will not be included in the definition. This includes contributions made by an employer as part of an agreement that has been negotiated by a third party. In the wake of the concerns of the coalition senators and the way the bill is currently constructed, the opposition is extremely concerned that in its current form the bill will include employer superannuation contributions made in addition to the compulsory nine per cent for income tests for one group of employees but not for another. That is on a strict reading of the bill and on the evidence that the coalition senators saw in their inquiry. The integrity measures may well only apply to one group of employees and make employees covered by a union agreement exempt from these integrity measures.

Obviously, if the integrity measures are going to apply with respect to amounts above the nine per cent and the intention of the government is to ensure that additional contributions above the nine per cent are included for income-testing purposes, clearly the intention should be that every employee is on the same footing. It appears, under this bill, that those employees who choose to negotiate their own arrangements will be treated less favourably than those under a union negotiated agreement when it comes to eligibility for government benefits. It raises the spectre of creating a bias towards workplace agreements negotiated by unions over those that are negotiated by employees.

It appears very likely—and the coalition senators were very concerned about this—that the proposal could leave two people receiving precisely the same additional superannuation contribution, who are on precisely the same salary, in different situations when it comes to eligibility for government benefits. That is how it appears on the reading of the bill. To give an example, say an income test for a certain government benefit is $51,000 and there are two employees with a taxable income of 50,000 a year and both of their employers make a 15 per cent superannuation contribution to their superannuation funds. One employee may have reached an agreement with their employer for that and the other employee may have had it determined by a union negotiated agreement. Nevertheless, both employees take home $50,000 and both have had the additional contribution of up to 15 per cent made. On the reading of this bill and on the reading of the report by the coalition senators, one employee will have that additional six per cent above the nine taken into account when it comes to eligibility for government benefits but the other will not. This example illustrates what we believe is a serious inconsistency. Obviously, if these income-testing measures are going to apply—and, of course, at this point in time no additional contributions are taken into account for the purposes of income testing going to the intent of those income tests—and if the purpose at the moment is to take certain benefits that are provided into account, then they should all be taken into account and the testing should be blind to whether an employee has negotiated that agreement or whether a union has negotiated that agreement.

In short, if the coalition’s concerns are right then what this bill would be saying in effect is that there should be an exemption from what the government says all other Australians should be subjected to. So we flag that very serious concern now. I said at the outset that we broadly support the measures to improve the integrity of income testing for government assistance programs and the further protection of the integrity of our tax and transfer system. As I said, this bill does not deal with superannuation issues with respect to the Commonwealth seniors health card. That was dealt with in another bill last night. That bill we believe is a bad approach by the government—and a breach of their election commitments—and we strongly oppose it. I have said with respect to this bill that, whilst those income tests have a number of effects, we are concerned with that inequality in superannuation as it goes to union negotiated agreements, or, in fact more widely than that, agreements negotiated outside an employee’s control, compared to a superannuation contribution negotiated by an employee themselves.

We could of course move an amendment to that effect here in the House, but what I have determined to do is to give very ample notice of it to give the minister the opportunity to consider the comments that have been made and the concerns that have been raised. If, when we get to the Senate, those concerns have not been rectified then we will certainly be moving an amendment in the Senate to try and correct that anomaly and to correct any other unintended consequences that may arise. For the benefit of the House today we raise that concern. The fact that we do not move an amendment today does not in any way suggest that our concern is not real. Rather, in terms of the procedure of the House today on this issue and the technical issues involved in what I admit is a very comprehensive bill, we flag those concerns today, in the wake of those concerns being highlighted by coalition senators, to give the government the opportunity to propose an amendment that may correct that before it gets to the Senate. We will not be opposing this bill when the debate concludes but we certainly flag that serious issue with the minister and await his response.

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