Dennis Jensen (Tangney, Liberal Party) Share this | Hansard source

This legislation applies the OECD destination principle, which recommends consumption should be taxed in the destination country of the imported digital products or services. This measure is estimated to be a gain to GST revenue of $350 million over the forward estimates. Simultaneously, the GST system is also often not well adapted to the circumstances of foreign suppliers regarding their dealings with Australian based businesses. Therefore, in many cases, supplies between such entities result in little or no final GST being payable. This results in the current GST settings, which impose unnecessary obligations and compliance costs on foreign suppliers.

Schedule 2 of this bill amends the GST act to better target the way Australia's GST rules apply to cross-border supplies that involve nonresident entities. It seeks to avoid nonresidents being drawn into the Australian GST system unnecessarily, all the while maintaining the integrity of the GST base. Measure 2 is all about reducing inefficiencies and removing red tape to revitalise our tax system so that businesses can just get on with creating jobs and growth. Limiting when GST will apply to supplies involving nonresident businesses accomplishes this intent.

Small and local businesses are important and integral to our economy. These changes mean that certain supplies are no longer connected with the indirect tax zone, or ITZ, or are GST free. Unlike the changes in schedule 1 that bring into the tax base current supplies that are not taxed, this measure does not alter the GST tax base. Rather, the amendments relieve nonresident suppliers of the obligation to account for GST on certain supplies. The measure came from the Board of Taxation's review of the application of GST to cross-border transactions. They recognised that too many nonresidents were being drawn into the GST system on business-to-business transactions where it would make no difference. This places unnecessary compliance costs on nonresidents, leading to embedded taxation for Australian businesses.

This measure improves the balance between ensuring Australia's GST system does not unnecessarily draw in nonresidents and maintaining the existing GST base by updating the test for when an enterprise is carried on in the ITZ so that it is better aligned with key GST concepts and by relieving non-resident suppliers of the obligation to account for GST on certain supplies. This is achieved by shifting the responsibility for identifying and paying a GST liability to the recipient where the recipient is registered for GST and carries on an enterprise in the ITZ, switching off the GST liability for certain supplies between nonresidents, extending the GST-free rules to certain supplies made to nonresidents and removing the GST registration requirements for nonresidents that only make GST-free supplies through an enterprise carried on outside the ITZ.

The amendments reduce compliance costs for GST-registered importers in calculating the value of taxable importations and simplify administration for the Australian Taxation Office. This allows them to focus on their principal job, which is ensuring compliance from those who should be remitting revenue to the Commonwealth. Together these two measures ensure that only those overseas businesses that should be in our GST system are in it and at the same time remove businesses that should not be caught in the system. These GST measures evidently show our government's commitment to improving our tax system, making it more growth-friendly and adapting to the changing times.

In my electorate of Tangney over 90 per cent of businesses are small and local. My job as the elected member is to ensure that small and local businesses in my electorate are looked after. The changes put forward in this bill ensure that local businesses in my area are given a fair go. It allows small and local businesses in Tangney to compete on the same playing field as all cross-border companies.

It is our job as the government to provide equal opportunity for all businesses, whether that is online or on the street corner. As John F Kennedy so eloquently said:

All of us do not have equal talent, but all of us should have an equal opportunity to develop those talents.

Measures 1 and 2 of this bill guarantee that any businesses in my electorate, in Australia and online are given equal opportunity to develop and grow.

Schedule 3 of this bill, although unrelated to the other two matters, is just as important. It takes important steps to improve Australia's taxation laws for primary producers. The changes reform the income tax treatment of farm management deposits by increasing their flexibility. This is an important and vital risk management tool for primary producers. It will aid and assist producers, giving them the ability to become more self-sufficient.

The changes were announced in the Agricultural competitiveness white paper on 4 July 2015 and are the result of extensive stakeholder feedback and consultation. FMDs will help Australian primary producers deal with uneven income between years. This frequently occurs as a result of weather variations, seasonal changes and natural disasters. Events like this are impossible to predict or plan for, in turn making it difficult to prepare financially. FMDs are an excellent example of how the tax system can be designed to fit the purpose and the needs of the taxpayers whom it should ultimately serve. Primary producers are an important and integral part of the Australian economy. They need to be safeguarded.

Farm management deposits assist primary producers with managing their financial risk by allowing them to set aside pretax income from primary production in a special account which can be drawn from in later years. Current restrictions placed on FMDs impair their effectiveness. However, this government is committed to continuously improving our tax system. These amendments double the maximum amount that can be held in FMDs by primary producers from $400,000 to $800,000. This change gives primary producers better flexibility to manage greater income instability with the funds they have set aside for when a downturn occurs.

Schedule 3 also allows primary producers who experience severe drought conditions to withdraw an amount held in an FMD within 12 months of a deposit. Previously, a declaration of exceptional circumstances would also allow for early access. However, this provision was removed when the farm household allowance was introduced, replacing a number of ad hoc forms of income support for primary producers. Now primary producers will be able to determine their eligibility by referring to rainfall data on the Australian Bureau of Agricultural and Resource Economics website at the time of withdrawal rather than waiting on ministerial decision.

We, the government, are determined to improve the tax system for the agricultural sector. We want to strengthen our approach to drought and risk management in order to facilitate more-effective risk management by primary producers. Agriculture is an important and vital part of the Australian economy. It is crucial that our tax system acknowledges this and gives primary producers a system that works for them.

In summary, both the GST amendments and the farm management deposit amendments respond to our changing economy and contemporary business needs. The first GST measure makes sure that overseas businesses pay GST on sales to Australian consumers; the second reduces red tape by removing from the GST system non-resident businesses which should not be brought in. Changes to the farm management deposits also reduce red tape, this time for primary producers, and create greater flexibility to manage their FMDs.

Our world is continually growing and changing. Technology has drastically changed the way our world communicates and operates. Ronald Reagan aptly said:

There are no great limits to growth because there are no limits of human intelligence, imagination, and wonder.

Our economy is growing and changing too. We need a tax system which reflects these real and tangible changes—a system which prepares today for the changes and problems of tomorrow. Our tax system must recognise and acknowledge that there is no great limit.

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