Bill Shorten (Maribyrnong, Australian Labor Party, Assistant Treasurer) Share this | Hansard source

I move:

That this bill be now read a second time.

This bill amends various taxation laws to implement a range of improvements to Australia's tax laws.

Schedule 1 reduces the quarterly income tax instalments for the 2011-12 income year for those taxpayers whose instalments are adjusted for previous years' gross domestic product growth. This is referred to as the GDP adjustment method of working out instalment amounts.

The great majority of taxpayers required to pay quarterly instalments use this method, including most small businesses and individual investors such as self-funded retirees.

These amendments reduce the GDP adjustment factor for the 2011-12 income year from the default, which would be eight per cent, to four per cent. This delivers small businesses and the other taxpayers using the GDP adjustment method a $700 million cash flow benefit in the 2011-12 income year.

This provides eligible taxpayers with a smoother transition from the two per cent GDP adjustment factor that the government applied for the 2009-10 and 2010-11 income years as the economy recovered from the global financial crisis.

This measure is part of the government's package of measures to improve the cash flow of small businesses and simplify their tax affairs. Those measures include the instant asset write-off for any asset costing less than $5,000, an immediate deduction of up to $5,000 for motor vehicles and reducing the small business company tax rate to 29 per cent. The government will have more to say on these measures when the legislation for them is introduced.

Schedule 2 removes the ability of children under 18 years of age to use the low income tax offset to offset tax due on their unearned income, such as dividends, interest, rent, royalties and other income from property.

The government has taken important steps to reduce taxes on low-income earners by doubling the low income tax offset from $750 to $1,500. This delivers a benefit to taxpayers earning up to $67,500.

But increases in the low-income tax offset have doubled the amount of non-work income that can be allocated to children tax-free. There is evidence that 200,000 distributions from trusts have increased in line with the increased low-income tax offset, to take advantage of the opportunity to minimise tax by allocating income to children.

The low-income tax offset was never meant to act as a tax minimisation vehicle.

This measure reduces the incentive for families to split income with their children—protecting the integrity and improving the fairness of the income tax system.

Children will still benefit from the full low-income tax offset for their income from working.

Double orphans and children with disabilities will also be fully protected under this change.

The government sees trusts as a legitimate business tool and remains committed to clarifying, updating and rewriting Australia's trust law. This will greatly assist the 660,000 trusts in Australia.

Meanwhile, the Liberal-National coalition remain bitterly divided over the opposition's tax policy in relation to trusts, one minute they want to tax family, small business and farm trusts as companies, the next minute they have changed their mind and are arguing whether it was opposition policy in the first place.

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