Julie Owens (Parramatta, Australian Labor Party) Share this | Hansard source

I am pleased to speak on the Tax Laws Amendment (2011 Measures No. 1) Bill 2011. I realised when I was preparing for this speech this morning that I have a serious personality flaw: I have had a secret fondness for tax laws amendment bills since I was first elected in 2004. They are generally known in-house as TLABs and we do at least a dozen or so of them every year. Unlike many bills in this House which deal with large policy areas, and if it is an important policy area it will have a bill of its own, TLABs tend to pull a whole range of items together in one bill. They are sometimes quite quirky ones that deal with a whole range of things. They are more about governance than government. They deal with the detail of making things happen and implementation.

This TLAB is quite a small one in that it only deals with three matters, but they are quite different. Schedules 1 and 2 of the bill deal with the detail of the implementation of support the government provided for people who were victims of the recent floods and Cyclone Yasi. They do what perhaps every person in Australia would expect them to do, which is essentially to make those payments exempt from income tax. When I first saw a bill like this it was after the fires in Victoria and it did exactly the same thing. It ensured that payments made to people to help them get through some very bad times and get back on their feet were not later considered as taxable income.

Schedule 1 makes the Newstart-like income subsidies that were paid in the early days to victims of floods and Cyclone Yasi exempt from income tax. The income recovery subsidy provided financial assistance to employees, small business owners and farmers who had experienced a loss of income as a direct consequence of the flooding that commenced on 29 November last year. Those subsidy payments were only claimed between 10 January and 28 February inclusive, so they were well and truly payments made during the worst of times and got people who had lost income through those worst days. As I said, schedule 1 makes sure that those payments are exempt from income tax.

Schedule 2 deals with the clean-up and recovery grants to small businesses and primary producers under the natural disaster relief and recovery arrangements. Payments were made to businesses and primary producers directly affected by the flooding and this schedule makes those payments non-assessable non-exempt income. That is slightly different from schedule 1 because if we did not make these grants exempt those payments would interact with other aspects of tax law. What we would find is that if a taxpayer brought losses forward from a previous year those payments would have to be used to reduce those losses first. This makes sure that payments made to those businesses and primary producers under those circumstances are completely separate from any assessment by the tax office. They are both very good little pieces of detail that needed to be dealt with and they are the kinds of details that are usually incorporated in these TLABs.

Schedule 3 is something that I am very pleased to see. It relates to the First Home Saver Accounts. The First Home Saver Accounts were introduced back in October 2008 in what was a very important announcement at the time. They provided another option for predominantly young people saving for their first home. The First Home Saver Accounts, once set up, brought with them a contribution of 17 per cent from the government on the first $5,500 of individual contributions made each year. That meant that an individual who made a contribution of $5,500—and that is indexed—to the First Home Saver Account was eligible for a contribution of $935.

The scheme was capped; there was a limit of $80,000 on the overall account balance. Once an individual reached that balance, they could not make any more contributions of their own but government contributions and earnings continued to flow into that account. Individuals who were members of a couple were able to pool their first home saver accounts and withdrawals were tax-free when used to purchase their first home.

Last month a young man in my electorate came to see me. He had opened one of these first home saver accounts. He freely admitted that he had not read all of the detail when he went into it and he was surprised to find that, when he wanted to buy a house early, he was not able to use the money from his first home saver account for that. It was not so much that his circumstances had changed; it was that he really did not understand what agreement he had made when he went into it.

It is quite reasonable that there are conditions on these accounts where the taxpayer is contributing 17 per cent to assist you to buy your first home. It is reasonable that you cannot, for example, withdraw that money halfway through and go off on a holiday. It is quite reasonable that the money, particularly the taxpayer contribution, be allowed only for the purpose which was given, which is to buy a home. But, under the current regulations, if a dwelling is purchased before these conditions are met, the home saver account must be closed and the money in the account must be paid to the individual holder’s superannuation or retirement savings account. The money in this young man’s account would have had to have been rolled over into his superannuation, so he would not have been able to use it to help pay off his mortgage. He, of course, started the first home saver account because that was what he wanted to do with his own part of the money.

This amendment to the scheme is really very good. It essentially allows the money in a first home saver account to be paid to a genuine mortgage at the end of the minimum qualified period should the account holder purchase a dwelling in the interim. It means that, if this young man in my electorate buys a house before the minimum period is over, he will at the end of the period be able to transfer his money, the government contribution and whatever earnings there have been on that account to his mortgage. So it is a good outcome for him as a young man and a very good outcome for the government and for taxpayers in general, because we all realise that any time a young person, particularly a person in their 20s or 30s, starts accumulating assets through the purchase of their first home we all benefit because of the increased financial security of families in their later years. So what is good for a young person who is buying a home is eventually good for us all.

I commend the bill to the House. There are three important schedules. Two relate to ensuring that payments given to victims of the floods and Cyclone Yasi are tax-exempt. The third one increases the flexibility for young home buyers who are making use of the first home saver accounts.

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