David Bradbury (Lindsay, Australian Labor Party, Parliamentary Secretary to the Treasurer) Share this | Hansard source

I take this opportunity to thank all those members who contributed to this debate on the Tax Laws Amendment (2011 Measures No. 4) Bill 2011. Schedule 1 of the bill reduces 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 called the GDP adjustment method of working out instalment amounts. The great majority of taxpayers who are required to pay quarterly instalments use this method, including most small businesses plus individual investors and small superannuation funds.

The 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 will provide eligible taxpayers with a smoother transition from the two per cent GDP adjustment factor that the government had 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 a reduction in the small business company tax rate to 29 per cent. Schedule 2 reduces the incentive for families to split income with their children, therefore protecting the integrity and improving the fairness of the income tax system. These amendments will remove 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 and royalties.

Since coming to office the government has increased the value of the low-income tax offset to provide tax relief to low-income workers. Increases in the low-income tax offset have, however, increased the amount of income that can be allocated to children tax free. These increases have been accompanied by increased distributions of income to children, especially from discretionary trusts. The low-income tax offset was never meant to act as a tax minimisation vehicle. Importantly, children will still be able to use the low-income tax offset to reduce tax payable on their income from work. This measure is one of those announced in the budget that will contribute to returning the budget to surplus by 2012-13.

Schedule 3 amends the tax laws to allow the percentage of certain total and permanent disability insurance premiums that is deductible for superannuation funds to be specified in the regulations. This will streamline the process for claiming tax deductions for the cost of TPD insurance provided through superannuation. The regulations containing the prescribed percentages will be developed following consultation with industry. The cost of TPD insurance provided through superannuation is deductible to the extent the policies provide cover, which is consistent with the definition of disability superannuation benefit in the Income Tax Assessment Act 1997. Superannuation funds are required to obtain an actuary's certificate to determine the deductible portion of the premium if broader insurance cover is provided. The amendments in the schedule will reduce costs to superannuation funds in complying with the law by avoiding the need to engage an actuary to determine the deductible portion of premiums in many cases.

The government introduced transitional provisions in 2010 which were designed to allow time for the industry practice of deducting the full cost of broader disability insurance policies to be brought into alignment with the operation of the law. During the transitional period, which covers the income years 2004-05 through to 2010-11, superannuation funds can deduct the cost of broader types of disability insurance cover. These amendments extend this transitional relief to funds that self-insure their liability to provide disability benefits.

Schedule 4 amends the definition of reportable employer superannuation contributions, or RESC. Additional contributions to super that are mandated by an industrial agreement or the rules of a super fund will no longer be considered income when determining a person's eligibility for government financial assistance. It was never the government's intention that such contributions be reportable employer superannuation contributions, so the amendment will be retrospective to July 2009 when the definition of reportable employer superannuation contributions first came into force. The bill deserves the support of the parliament, and I commend the bill to the House.

Question agreed to.

Bill read a second time.

See this speech in context