Josh Frydenberg (Kooyong, Liberal Party, Assistant Treasurer) Share this | Hansard source

Let me begin by thanking members who have contributed to this debate. This bill is part of the government's plan to modernise and update Australia's tax and superannuation laws. The bill removes uncertainty from our tax and superannuation laws and removes laws that are ineffective and outdated. It will make our laws more relevant and provide incentives for investment so that Australia can better compete on the global stage. This government, with the release of the tax white paper earlier this year, is demonstrating its ongoing commitment to Australians to modernise our tax laws and make genuine reforms. The amendments today are a step towards that.

Schedule 1 to this bill will abolish First Home Saver Accounts. First Home Saver Accounts have failed to live up to the promises that were made during their introduction. Rather than the $6.5 billion in total combined savings promised by the previous government, at the beginning of last year there were fewer than 50,000 open accounts containing total combined savings of only $540 million, or less than 10 per cent of what was initially predicted. Abolishing First Home Saver Accounts will save more than $130 million over the years to 2017-18. We know that owning a home is an important goal for many people across the country and we know that rising house costs mean this goal seems further and further out of reach every day. But First Home Saver Accounts do not address the underlying reason for rising house costs in Australia, one of which is that the supply of housing is failing to keep up with strong growth in demand. As part of the government's wider deregulation agenda, we are working with state and territory governments to reduce the regulatory barriers currently holding up the supply of housing and construction. This will increase land release for new homes, leading to an improvement in housing affordability for all Australians.

Schedule 2 to this bill will abolish the Dependent Spouse Tax Offset with effect from 1 July 2014. This will make our tax system more equitable and return $320 million to the budget over the years to 2017-18. When the Dependent Spouse Tax Offset was introduced in the early 20th century, its purpose was to provide a concession to taxpayers who maintained a dependent spouse. Our welfare system has developed markedly since then, with a wide range of more tailored support available. With changes in our society, as well as in our economy, this offset is now outdated. Given the support now available through the welfare system, as well as the need to promote workforce participation, this concession is no longer needed and, in the current budget situation, it is simply not sustainable. This measure is an important step towards repairing the budget and it is also part of the government's broader agenda to encourage participation.

Schedule 3 to this bill amends the taxation laws to modernise and improve the integrity of the Offshore Banking Unit regime. This bill includes changes that include key recommendations arising from the 2009 report Australia as a financial centre, also known as the Johnson report, aimed at improving Australia's position as a leading financial services centre. The Offshore Banking Unit reforms will better target the Offshore Banking Unit tax concession by updating the list of eligible activities encouraging genuine mobile financial activities. Alongside these changes, we will also improve the integrity of the regime to ensure that this concession is not subject to abuse. The government believes that this bill strikes an appropriate balance between encouraging Offshore Banking Unit activity and maintaining the integrity of the tax system.

Schedule 4 to this bill adds one organisation to the list of named income tax exempt entities in division 50 of the Income Tax Assessment Act 1997. The new listed entity is Global Infrastructure Hub Ltd. Global Infrastructure Hub Ltd was established to implement the G20's multi-infrastructure agenda. The Australian government, along with several other countries, has pledged a financial contribution to Global Infrastructure Hub Ltd. Without the amendment to the act, the contributions made to Global Infrastructure Hub Ltd would be assessable and would be taxed accordingly. It would be inappropriate for the Australian government to tax assistance provided to Global Infrastructure Hub Ltd under an arrangement agreed to as part of Australia's G20 presidency.

Schedule 5 to this bill extends the specific listings of two entities as deductible gift recipients for a further three years—the Australian Peacekeeping Memorial Project and the National Boer War Memorial Association. Both the Australian Peacekeeping Memorial Project and the National Boer War Memorial Association have fallen short of their fundraising targets. The extension of their deductible gift recipient status will help the listed entities attract public financial support for the activities as taxpayers can claim an income tax deduction for certain gifts to deductible gift recipients.

Schedule 6 to this bill makes a number of amendments across the tax law to provide certainty for taxpayers. These amendments make sure that the law operates as intended by correcting technical or drafting defects, removing anomalies and addressing unintended outcomes. This furthers the government's commitment to restore simplicity and fairness to the Australian tax system. It also demonstrates the government's commitment to the care and maintenance of the tax law. By clarifying the law and repealing unnecessary provisions, these amendments also further the government's deregulation agenda. A number of the amendments relate to the issues lodged on the Tax Issues Entry System, a platform for members of the community to raise issues regarding the care and maintenance of the Australian government's tax and superannuation system. These include ensuring that life insurance companies are not inappropriately liable for franking deficit tax; correcting inconsistent wording in the definition of 'in-house residual fringe benefits'; and updating a diagram intended to provide guidance on when an entity is required to, or may, register for the goods and services tax.

Schedule 6 to this bill also clarifies the operation of other areas of the tax law, including how employee share ownership schemes are intended to be taxed in the context of a demerger. Additional amendments fix a defect in the law preventing the Commissioner of Taxation from revoking access to certain tax concessions due to past periods of non-compliance by the entities seeking to rely on the concessions.

Schedule 7 to the bill amends the income tax laws to implement reforms to the Investment Manager Regime. This bill represents the final stage of changes to give effect to a new regime, as envisioned, which the Johnston report has referred to earlier. The IMR will promote Australia as a financial services centre by encouraging foreign investment in Australia from foreign managed funds that are widely held and encouraging foreign investment through Australian fund managers. The IMR does this by providing greater clarity and certainty regarding the tax treatment of foreign investors including foreign managed funds. These reforms have been carefully designed so that they strike an appropriate balance between encouraging foreign investment and ensuring the integrity of the regime.

Additional parliamentary amendments have been made to schedule 7 to address concerns raised with the Senate Economics Legislation Committee. These changes are intended to clarify the operation of certain provisions to give the funds management industry confidence that they can take advantage of the IMR concession as intended. Full details of each of these measures are contained in the explanatory memorandum.

In conclusion, this bill is very much a part of the government's overall plan to update and modernise our tax system. Our tax system must adapt to the changes that are happening around us. These changes today lay the groundwork for our continued efforts to ensure our tax system is efficient, modern and well targeted. The dialogue we are having with Australians through the tax white paper process is part of our strategy to improve our tax system. An effective and relevant tax system is the foundation of any healthy working economy. Our commerce and industries are more connected internationally today than ever. We are confronted with new business models through the increased use of the internet and business operations which are increasingly borderless and posing challenges for tax systems globally. Our tax system has to evolve to stay current. We must continually adapt to our changing environment and ensure our tax system is one that is sustainable, efficient and relevant. I commend this bill to the House.

Question put.

Bill read a second time.

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