Tony Smith (Casey, Liberal Party, Deputy Chairman , Coalition Policy Development Committee) Share this | Hansard source

I rise on behalf of the coalition to speak on the Tax Laws Amendment (2011 Measures No. 1) Bill 2011. The bill before the House today deals with four areas of taxation law across three schedules. I can state in the outset of my contribution that the coalition will be supporting this bill and, obviously, all of the measures within it. The bill deals with minor changes to taxation law and sensible measures with respect to natural disasters that are regular changes that occur in taxation law whenever our country confronts the sorts of disasters that it has faced in recent months. In that vein, I will first deal with the two distinct parts of schedule 1.

The first part deals with a tax exemption for recipients of disaster income recovery subsidies. This schedule of the bill amends the Income Tax Assessment Act 1997 to ensure that people who were affected by the terrible floods that we saw in Queensland, New South Wales, Victoria—my home state—and other parts of the east coast of Australia from 29 November last year do not have income tax applied to their disaster income recovery subsidy payments. This will mean that the tens of thousands of Australians who were affected by that significant flooding will not have to bear any further impost as a result of the assistance with which they have been provided by the government. It will also mean that fellow Australians in North Queensland who, more recently, have been battered by Cyclone Yasi will also be covered in this respect. Clearly the coalition supports this measure and, with the government, recognises the hardships that so many Australians have experienced and are continuing to experience during this time. This amendment backs up the words of this parliament with actions in taxation law.

Schedule 1 also provides for tax exemption for ex-gratia payments to New Zealand non-protected special category visa holders. It amends the Income Tax Assessment Act 1997 for New Zealanders holding a non-protected special category visa, which is a special category of visa that has been issued since the beginning of 2001. The amendment ensures that ex-gratia payments made to New Zealanders who have been similarly caught up in the major disasters which have struck Australia since 29 November last year also have their Australian government disaster recovery payments exempted from income tax.

As I said at the outset, these changes, which are embodied in schedule 1 of this bill, are very much the sort of mechanical changes made to the tax law whenever we confront a disaster of the sort that we have recently. The last time I can recall having done this was immediately following the devastating Black Saturday fires in Victoria. Similar provisions were moved at that time by the then Assistant Treasurer and now Minister for Immigration and Citizenship, Chris Bowen, with the full support of the coalition.

Schedule 2 deals with a tax exemption for recovery grants for the 2010-11 floods and Cyclone Yasi. During the recent disasters, the Commonwealth government and the various state governments provided recovery grants under the natural disaster relief and recovery arrangements to small business and primary producers directly affected by the flooding and Cyclone Yasi. That measure was strongly supported by the coalition at the time because these payments are absolutely essential—and you would appreciate this fact, Mr Deputy Speaker Slipper, as you represent a Queensland electorate—to helping local communities get back on their feet, to repairing the damage from the disasters they have faced and to making a contribution to that in the best way possible. In government, the coalition offered this support to small business and primary producers at the time of Cyclone Larry, a devastating cyclone which destroyed much of Innisfail in Far North Queensland.

Just as the coalition did then, the government is now looking to make these grants, which are paid under the category C natural disaster relief and recovery arrangements, non-assessable, non-exempt income. This will mean that the small businesses and primary producers will not be affected for income tax purposes by the payment. Treating the income as non-assessable and non-exempt will mean that the grant will be treated as exempt income and that any losses brought forward by a primary producer or small business will not be reduced as a result of the payment of the grant. This is particularly important for the recipients of this payment and, as I have said, it is a move that has strong bipartisan support and mirrors the sort of support and assistance that the coalition itself provided when it was in government during previous disasters.

The final schedule deals with an unrelated matter—and that is the way with these tax law amendment bills, which are regularly before the House. It deals with the First Home Saver Accounts. These accounts originated from the government—in fact, from the Labor Party when they were in opposition, as an election promise ahead of the 2007 election. The accounts were designed—the Australian public was told by the then Rudd opposition and the then Rudd government—to persuade individuals, through tax incentives and government contributions, to save for their first home. They have been in operation since about October 2008—so 2½ years.

In recent Senate estimates hearings it was revealed, I am advised, that only 24,000 people had registered for Labor’s first home saver accounts. That is despite the former minister at the time claiming 730,000 people would be stumbling over themselves to sign up. The take-up rate has turned out to be just under seven per cent—hardly something for the government to be proud of. Indeed, we can assume that the measure in this tax law amendment bill, which seeks to make changes and to introduce some flexibility, is of itself a measure and an admission of the government’s failure of their word prior to the 2007 election and the failure of their intent in this policy.

The first home saver accounts have not worked because of their complexity and restrictiveness when it comes to individuals being able to access their savings. Currently, individuals are not able to access their savings for the purchase of a home unless one of several release conditions has been met, and if the savings are not going towards the purchase of a home then the savings must, under the current rules, go to superannuation or the retirement savings accounts. The government, after three years and more than 2½ years of operation, has now, in this bill, put forward some changes regarding the release conditions. We are told in the explanatory memorandum that the changes will allow the savings in a first home saver account to be paid to a genuine mortgage after the end of the minimum qualifying period should the first home buyer purchase a home in the interim. That would currently be in breach of the existing qualifying conditions.

The changes within the bill state that when a dwelling has been purchased prior to the release conditions being met any interest earned on the savings will be taxed at the concessional rate of 15 per cent and no further contributions can be made to the account. At the end of the release conditions having been met, the savings within the account can be put towards the genuine mortgage. Only time will tell whether the changes in this bill will improve the take-up rate of the first home saver accounts. Given that the take-up rate is bouncing along the ocean floor at the moment, at under seven per cent of what was projected, you could assume that the moves within this bill will have some positive effect, but just how much only time will tell. This change—obviously a recognition by the government of the failure and the incompetence of its policy design—although belated, is better than nothing in this area.

This measure, along with the other three measures contained in the first two schedules, we will support. As I said, the first two schedules are schedules that this parliament always speedily enacts in times of natural disaster. The final unrelated aspect is something that the coalition welcomes as a sign of the government’s belated admission of its policy failure, but we will have to wait and see whether any positive effects flow from it in the way the government now says, after three years, they will.

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