Scott Buchholz (Wright, Liberal Party) Share this | Hansard source

I diverted from my speech because I come to this House in the spirit of bipartisanship. On schedule 3, the capital gains tax exemption for compensation and insurance: this schedule provides certainty about the operations of the capital gains tax law, which in itself can be complex. In brief, the schedule confirms the existing administrative treatment of the capital gains tax exemptions relating to life insurance and compensation, providing greater certainty for taxpayers, businesses and superannuation funds. There is a large grey area there and these funds are becoming full of capital, and it is imperative that as a government we provide clear and transparent vehicles of legislation so that there is a clear path, taking away ambiguousness.

The measures in the schedule were announced by Labor in their 2011-12 and 2012-13 budgets. The schedule addresses complexities in the law that affect trustees and beneficiaries where a trustee receives compensation or damages for loss or injury to beneficiaries. The policy intent is that neither the trustee nor the beneficiary should be subject to capital gains tax where compensation is received by the trustee in respect of a claim made for injury suffered by a beneficiary of the trust. That, in itself, is the summary of schedule 3. Similarly, there is a CGT exemption for taxpayers such as trustees who hold life insurance policies and annuity instruments for beneficiaries.

The schedule also clarifies that where the trustee of a superannuation fund holds a total and permanent disability policy for a member, the fund trustee will not be subject to capital gains tax nor be taxed on revenue account. The government is legislating the measures and providing certainty around complex issues of interpretation of the capital gains tax legislation.

The government has consulted widely with stakeholders. Minor amendments were made following consultations to ensure that the legislation achieves its intended purposes—that is, to deliver certainty for taxpayers, businesses and superannuation funds. This measure is estimated to have a small but unquantifiable cost to revenue over the forward estimates period.

Schedule 4 provides certainty for superannuation fund mergers. Again, in my opening commentary, I said that these mergers are taking place in the market as we speak. This measure makes it clear that a tax integrity rule will not be triggered when a member's super benefits are involuntarily transferred from one super fund to another as a result of a merger between two funds which is outside the member's control.

A rule known as the proportioning rule requires the proportion of the tax-free and taxable components of a member's interest in a fund to be retained on transfer of the interest. The super industry has been seeking certainty because applying the proportioning rule in a merger transaction could, in some circumstances, have left some members in a worse tax position than if the merger had not gone ahead. It is not the intention or the will of this government to disadvantage members. The schedule will ensure that the application of the proportioning rule does not disadvantage the interest of the member whose interest is being transferred involuntarily, say on a merger of funds.

The government is getting on with its legislative program. This measure is one of Labor's announced but unenacted measures that was inherited on our coming to government so I see no hurdles. When this bill is put to the House, it should have bipartisan support for the immense amount of good it will do throughout the industry.

Schedule 5 speaks to disclosing tax information relating to proceeds of crime orders. This measure amends the tax law to clarify the Australian Tax Office's ability to share protected taxpayer information with Commonwealth, state and territory law enforcement agencies concerning proceeds of crime orders.

Differences between the Commonwealth's unexplained wealth orders and state and territory unexplained wealth schemes has led to uncertainty for law enforcement agencies about whether they can use protected information shared by the ATO for the purpose of a proceeds of crime order. The most notable example of the differences between state and territory and Commonwealth unexplained wealth orders is where a state or territory law does not require a person to have committed a criminal offence for an order to be made. This measure clarifies that all orders relating to unexplained wealth that may be made under a state or territory law will be included in the definition of a proceeds of crime order, regardless of whether there are differences between the state or territory and Commonwealth schemes.

A person's tax information may be of central importance to investigations, law proceedings and enforcement concerning the proceeds of crime. In most cases, a state or territory law enforcement agency would request protected information from the ATO in order to make a proceeds of crime order. However, the ATO is prevented from sharing a person's tax information with authorised law enforcement agencies in order to support or enforce a proceeds of crime order that already exists. This measure will remove any doubt about the ATO's ability to share protected information, which is the ambiguous area of that bill. The new arrangement will come into place upon royal assent.

In the time remaining to me, on the government's exploration expenditure incentive: the government has delivered on its election commitment to introduce an incentive to undertake exploration for mineral resources. The mining sector has long sought a form of incentive that recognises the long lead times between investment, exploration and production. There are some tax measures we will put in place to assist that sector. Labor introduced the minerals resource rent tax, which failed to produce anything like the levels of revenue Labor predicted in its first year. In the 2012-13 reporting period, the mining tax raised a couple of hundred million dollars, or just five per cent of the amount it was intended to.

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