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

The Tax Laws Amendment (2009 Measures No. 4) Bill 2009 was introduced into the House on 25 June this year and contains various technical aspects amending the taxation law. I say at the outset that the coalition will be supporting the passage of this bill through the House and through the Senate when it arrives there. I will go through each of the schedules in some detail.

Schedule 1 will increase the research and development expenditure cap for the R&D tax offset from $1 million to $2 million. The R&D tax offset allows eligible entities to receive a tax credit rather than a deduction for expenditure relating to R&D activities. This R&D tax offset was introduced by the former coalition government to assist innovative small businesses that do not benefit from the R&D tax concession, especially those that are in a tax loss position. The former coalition government recognised the cash flow difficulties of small businesses undertaking R&D, especially during the initial start-up and growth phases. The introduction of the R&D tax offset is an example of the coalition’s understanding of small business and the unique issues they face. I note that the amendments in this bill that increase the cap are only an interim measure for the 2009-10 income year. The government committed in the budget to introducing a new R&D tax incentive regime from 1 July of next year to replace the current system. On behalf of the coalition, I look forward to working with the government to ensure that the new regime is available for Australian businesses from 1 July 2010.

Schedule 2 of the bill will provide increased regulatory control of prescribed private funds to the Australian Taxation Office. The changes will effectively mean that such funds will be treated similarly to other fundraising organisations known as public ancillary funds. To reflect these changes in schedule 2, prescribed private funds will be renamed as private ancillary funds. The schedule also includes provisions for the Treasurer to issue guidelines governing the creation and regulation of these funds. The schedule also introduces a range of administrative penalties that may be applied to enforce those new guidelines. Many in the not-for-profit industry have been concerned that changes to the mandatory distribution rate may severely affect the ongoing nature of these funds. This schedule does not deal with the mandatory distribution rate; the rules regarding that will be contained within guidelines to be introduced into parliament by the Treasurer later in the year. We note here on this side of the House that Treasury, on behalf of the government, undertook consultation on draft guidelines in July of this year, and we encourage the government to listen very carefully to industry concerns and suggestions to avoid these funds having any of the problems that can arise when a government does not undertake that consultation process properly. I say that because there have been a range of budget measures—employee share schemes come to mind—where the government has monumentally mangled the implementation of technical policy issues.

Schedule 3 provides capital gains tax relief to members of friendly societies when a friendly society demutualises. It will ensure that friendly societies are treated in the same way as stand-alone private health insurers or life insurers should they decide to demutualise. For members of friendly societies that demutualise into a for-profit entity, this means they will not be liable for capital gains tax if they receive shares. The schedule also makes amendments to ensure that those who receive cash through demutualisation are treated in exactly the same way as those who receive shares and immediately sell them. This schedule ensures that members of friendly societies are treated in exactly the same way as members of stand-alone private health insurers or stand-alone life insurers, as I said earlier.

Schedule 4 makes a retrospective change to the consolidation regime from the beginning of the consolidation regime from 1 July 2002. It allows for losses to be transferred within a consolidated group from an insolvent joining entity to the head company under certain circumstances. The amendments will allow the head company to use the tax loss to reduce a net forgiven amount derived under the commercial debt forgiveness rules, reduce any capital allowance that has been adjusted using the limited recourse debt rules or reduce any capital gain in the situation where a capital gains tax event L5 occurs when the joining entity then leaves the consolidated group.

Finally, schedule 5—as is often the case with tax law amendment bills, the final schedule in this bill—makes a number of minor changes to the existing tax law to ensure its intended operation. It also amends the fringe benefits tax law to ensure that donations made to deductible gift recipients through salary sacrifice arrangements do not result in an FBT liability. On behalf of the coalition, I commend the bill to the House and reiterate that it will have our support through this House and through the Senate.

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