Shayne Neumann (Blair, Australian Labor Party) Share this | Hansard source

I speak in support of the Tax Laws Amendment (2009 Measures No. 4) Bill 2009. Like the previous speaker, I do not intend to speak for very long in relation to the matter except to say that these reforms are long overdue and welcome. They improve the integrity of the tax system, they make the situation with respect to philanthropy better, they are beneficial to the taxpayer, they provide relief to business and they improve the potentiality for investment in R&D. So they are welcome changes to the tax system.

Once again, they do this by schedule. Schedule seems to be the way in which we deal with taxation amendments. They are important in the circumstances. Anything we can do to reduce the complexity of our tax system to improve its overall effectiveness and operation is a good thing, particularly as nothing infuriates business and individual taxpayers more than dealing with complex tax laws that you can measure by weight rather than by word. So I speak in support of those, and I will go very briefly through the schedules as the previous speaker, the shadow minister, did.

The first schedule overcomes a truly weird situation which resulted in a perverse outcome, as the minister said, with respect to R&D tax offsets. The situation was that the $1 million cap really meant that some companies could keep their expenditure in such a way that they could claim the R&D tax offset, effectively getting a cash payment back in circumstances where the whole purpose of the legislation and the whole purpose of R&D tax deductibility was to ensure that we gave an incentive to companies to invest in R&D.

So the lifting of the expenditure cap from $1 million to $2 million will provide a boost, we believe, to pre-profit companies to invest in research, and I think that is a good thing. It is an interim measure which goes ahead of the introduction of the new R&D tax incentive which operates from 2010 to 2011. In the circumstances, anything we can do to boost investment and boost R&D is a healthy thing for our economy, good for small business, good for big business, good for jobs and good for infrastructure.

Schedule 2 deals with prescribed private funds. These were established in 2001 and were a creation of statute. We have seen about $1.3 billion put into these funds and distributions of over $300 million in that time. PPFs are really a form of ancillary trusts established by companies, by businesses, by families and by individuals who are interested in philanthropy. We really do not have enough of a culture of philanthropy in this country. The Americans seem to put in a great deal of time and effort and have a culture with respect to philanthropic generosity. In our culture we do respond wonderfully well. We saw the floods in north Queensland and we saw the bushfires in Victoria, and Australians came to the party contributing hundreds of millions of dollars when it came to relief for their fellow citizens. When people are injured, when people die, when property is damaged, when communities are devastated, Australians are very quick to provide generous assistance to their fellow Australians. But the idea that a company or a law firm or a business might engage itself in philanthropy is something that is not widely thought of. Some big law firms in this country have a partner or a lawyer who might do some pro bono work, but really we do not see much by way of systematic attempts at charity, at giving back to the community in the public interest.

The PPFs are a good thing and they should be encouraged. We are rebadging them and renaming them with a different title: ‘private ancillary funds’. It involves a change which means they will no longer be prescribed in the legal sense. There is a movement in terms of their administration under the authority of the Commissioner of Taxation. We are giving the Treasurer some power to provide legislative guidelines to maintain them after they are established and we are giving the Commissioner of Taxation some powers to impose some penalties on trustees who might do the wrong thing by way of failure to comply with the guidelines. And, of course, we are giving the commissioner some power to remove and suspend trustees and noncomplying funds. Sadly, with superannuation funds, people sometimes do not ensure compliance. These changes in schedule 2 were announced in the budget of 2008-09, and we are going to provide some legislation which will improve the overall operation and integrity of the PPFs. Anything to encourage philanthropic involvement is a good thing and I warmly welcome this schedule.

Schedule 3 deals with capital gains tax and amends the income tax law to ensure that there is relief from capital gains tax for demutualisation operations. In this country we have many organisations which have undertaken demutualisation. AMP was one. We saw others involved in this process and, according to the explanatory memorandum, there are currently about 70 friendly societies operating in Australia, with about 1.6 million members, and about 24 friendly societies conducting life insurance businesses. So there are a lot of people involved and a lot of organisations involved. We have seen demutualisation of private health insurance, and many Australians would have received a cheque in relation to MBF. I know my wife did when that demutualisation took place.

So what we are doing in relation to this is to effectively ensure that there is relief in the demutualisation process so that those organisations associated with friendly societies are not treated in a disadvantageous way. We want to make sure that they are relieved of capital gains tax in the circumstances. We do not want them to be disadvantaged in any way in relation to that.

Demutualisation is quite a complex problem and challenge for the organisations involved. It is particularly interesting because what it really involves is the participants in a common fund who have contributed to that fund giving up their rights to participate in that fund in the future. It is an interesting phenomenon: people giving up rights. There is nearly always a distribution of any accumulated surplus as a result of the demutualisation, and that is where the cheques go back to the Australian citizenry. We are making sure that CGT relief for members and policyholders of friendly societies is the same as any other institution, such as life insurance and private health insurance organisations. This is a beneficial change. It has been warmly welcomed by key stakeholders in the circumstances. We saw support for the measure during what was an extensive consultation process. It is a worthwhile piece of legislation and amendment.

I will not deal the schedule 5 as it is really quite minor in terms of the maintenance and operation of the tax system. There is very little change there, and it is quite uninteresting in the circumstances. Schedule 4 deals with amending the tax law to ensure loss is transferred to a head company of a consolidated group, or a multiple entry consolidated group, by a joining entity in the circumstances that it is insolvent at the time of joining and can be used by the head company in certain circumstances. These amendments have some benefit to the Australian taxpayers. They ensure that losses, which can be wasted in the joining process and in the lodging of tax returns, are not wasted but are beneficial and that companies will benefit. There is a retrospective aspect to this, and it does affect one taxpayer according to the research that I have undertaken: Transfield Holdings Pty Ltd, which sought the retrospective application of this legislation in the circumstances. The amendments will apply from 1 July 2002, so the retrospectivity of the legislation is quite long.

Overall, these laws improve the efficacy of our tax system, they help taxpayers, they help the operation of our tax system—they improve it and make it easier to understand—they treat taxpayers fairly, they improve the demutualisation process and we hope that they will result in greater research and development by companies and individuals. They also improve the operation of philanthropic trusts and funds. I support the legislation and am happy to speak on it.

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