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

I am happy to refer to the Prime Minister by his title: the Hon. Kevin Rudd, member for Griffith. As I said, this will reduce the burden for small business and is worthy of support. It is a great shame that those opposite do not support schedule 1.

This legislation, as is usual, deals with amendments to the tax legislation by way of schedules. Schedule 2 of the bill deals with investment in forestry managed investment schemes. When I was in private practice as a lawyer I dealt with a number of these types of schemes in the context of marriage break-ups and in the context of other business arrangements. Investors in forestry managed investment schemes can claim an immediate tax deduction for expenditure incurred in the scheme, subject to certain conditions, and that is why people enter into these arrangements. There is a four-year holding rule, which effectively means that, in order to claim and retain the deduction, what is required is that there is not a capital gains tax event which occurs during that four-year period. If, for example, something happens that results in a capital gains tax event emerging, then there are problems with respect to the deduction, and the Commissioner of Taxation disallows it—and the commissioner has no discretion in relation to it. So schedule 2 amends the tax law to protect the deduction of investors in these types of schemes from being denied for reasons which are genuinely outside of the investor’s control. The member for Cowper outlined some of those changes—and I agree with him actually—for example, insolvency or where trees were destroyed by fire, flood or drought.

Schedule 3 deals with managed investment trusts and the capital treatment in taxation of those interests. It amends the tax laws to change the way gains and losses on the disposal of certain investments are treated, and these were announced in the 2009-2010 budget. In effect, the changes in schedule 3 allow an eligible managed investment trust—that is, a person—to irrevocably elect a capital account treatment for gains or losses on the disposal of certain assets from the previous financial year. Investors are entitled to claim the capital gains tax concessions and eligible taxable gains, distributed of course by managed investment trusts. If an eligible managed investment trust does not make an election to have the capital account treatment, then gains or losses and disposal of shares or units are treated as revenue and are therefore taxable. Schedule 3 ensures that tax law will clarify that the distribution or gains on carried interest units in a managed investment trust are treated on the revenue side.

The government announced in the 2009-10 budget that it would amend the tax laws to allow gains or losses on disposal of certain Australian managed investment trusts to be subject to a capital gains tax regime, and that will assist investors—because they will be winners in the circumstances of this legislation. It will allow the eligible managed investment trust to make an irrevocable choice to apply the capital gains provisions as the primary code for assessing gains or losses and disposal of eligible assets—as I said, shares, units or real estate. That will provide certainty, and that is part of the government’s strong efforts to ensure that the Australian market, whether it is in the area of shares or property or managed investments, is attractive to not only Australians but to those eligible non-resident investors as well. We think that is important as we compete with the likes of Singapore, Hong Kong, Tokyo and Beijing.

The other amendments are fairly minor. They deal with the entrepreneur tax offset, which provides eligible taxpayers with a maximum tax offset of 25 per cent on their income tax liability which is attributable to their net small business income for that financial year. The ETO amount phases out over time. It phases out at aggregate turnovers of $50,000, and eligibility ceases when aggregate turnover reaches $75,000. The introduction of an income test here into the eligible criteria ensures that the measures are targeted better for taxpayers’ purposes and provide additional assistance to small businesses.

The final schedule is schedule 5, and that just deals with consolidation and various technical amendments. I will not go through all of those, but they, of course, improve the operation and clarification of certain aspects of tax law and they reduce compliance costs. Those savings arise as the result of amendments relating to the way units, managed trusts and rights to future income are treated. So, while they are not particularly interesting to the average person, they do improve business, they improve the profitability of business and they assist with the certainty of business operations with respect to taxes. Professional and business groups have been consulted on the draft legislation and, contrary to what the member for Cowper said, there has been significant support in industries for what we are doing here. I commend the legislation to the House.

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