Kelly O'Dwyer (Higgins, Liberal Party, Minister for Revenue and Financial Services) Share this | Hansard source

Firstly, I would like to congratulate and thank those members who have contributed to this debate, particularly the member for Grey and also the member for O'Connor. Your contributions have been really superb and have outlined the real impact that this bill will have on farming families and farming businesses, which will enable them to be far more flexible in their approach and ensure that they can be viable and thriving businesses.

As the chamber would know, this Corporations Amendment (Professional Standards of Financial Advisers) Bill 2016 amends various taxation laws to improve their flexibility and effectiveness while reducing red tape on individuals, businesses and community organisations. Schedule 1 of this bill will establish a remedial power for the Commissioner of Taxation to allow for a more timely resolution of certain unforeseen or unintended outcomes in the taxation and superannuation laws. The power will help provide greater certainty for taxpayers over their tax affairs while also reducing compliance costs associated with laws that produce anomalous outcomes.

The government believes that this bill strikes a good balance between adding a useful degree of flexibility to the administration of our tax and superannuation laws while providing appropriate safeguards for taxpayers against administrative overreach. Taxpayers are protected from adverse outcomes under this power as it will not apply to a taxpayer where it would produce a less favourable result for them.

In circumstances where applying the less favourable test would create onerous requirements, use of the remedial power may not be appropriate. This power is expected to create benefits for taxpayers that should outweigh any costs associated with learning about how the power may be used.

Certain costs will arise as taxpayers learn and understand the power and how it operates as well as any modifications made as a result of the use of the power. These costs need to be weighed up against the benefits the power will create in terms of resolving unintended and unforeseen outcomes in the tax law and maintaining the tax system.

Conferring on the administration an explicit power to remedy defects in legislation requires a compelling justification. The government appreciates that this policy could appear to bestow a lawmaking power on an unelected official. While ensuring the schedule meets the policy objective, it includes strict and precise safeguards to limit the impact of the power and to maintain the respect for the rule of law.

The power is to be used as a last resort by the commissioner. Before the commissioner can apply the remedial power, he must have interpreted the law, taking into account its purpose, and sought to use his general powers of administration of tax laws in the first instance. In addition, the commissioner can validly exercise the power only where: the modification is not inconsistent with the intended purpose or object of the provision; the commissioner considers the modification to be reasonable, having regard to both the intended purpose or object of the relevant provision and whether the costs of complying with the provisions are disproportionate to achieving the purpose or object; and any impact on the Commonwealth budget would be negligible.

On the last point, the commissioner can create a legislative instrument only where he has been advised by the secretary of the Treasury or the Finance secretary that any budget impact is negligible. If the commissioner acts without this advice, the exercise of the power will be invalid. However, if that advice is for some reason incorrect, the exercise of the power is not invalidated. Importantly, any modification to the operation of the law made by the commissioner using the remedial power cannot have any legal effect until both houses of parliament have had the opportunity to disallow the relevant modification.

While the remedial power would usually have prospective application, any retrospective application must not disadvantage the rights of a taxpayer. Prior to exercising the power, it is expected that the commissioner will undertake consultation. The public would be invited to comment and, in addition, the commissioner would consult with the Board of Taxation, relevant agencies and a technical advisory group with private sector representation. Together, these safeguards provide an assurance that the remedial power will not be exercised in a manner that undermines parliamentary sovereignty, the consistent application of our taxation law regime, the separation of powers, parliamentary control over public resources, or the principle against arbitrary use of power. Three years after the remedial power commences, a ministerial review may be undertaken, and the written report of the review would be tabled before each house of parliament.

Schedule 2 amends the law so that farmers can re-access the benefits of tax averaging 10 income-years after opting out. Approximately 12,000 farmers opt out of income averaging each year. Currently, a farmer who chooses to opt out of income averaging can never re-access the concession. Income from primary production can be volatile, due to factors outside of a farmer's control, such as drought and fluctuating commodity prices. The averaging rules even out a farmer's income tax liability from year to year so that they pay fairer amounts of tax in relation to taxpayers on comparable but steadier incomes. The government heard from stakeholders in consultation that the current averaging rules are inflexible and do not make sufficient allowance for changing business circumstances. A farmer choosing to opt out of income averaging may later realise that choice was not in their best interest. While the tax law should prevent strategic tax minimisation, it should not be overly harsh.

This schedule will ensure farmers eligible for income averaging will be able to regain access after 10 years. This schedule will not disadvantage any farmer, as averaging only recommences when they are eligible for a tax offset. A farmer may always choose to opt out again if it does not suit their circumstances to remain in income averaging. Their choice will be effective for another 10 income years. And this measure forms part of the government's white paper on agricultural competitiveness.

Schedule 3 implements the government's 2015-16 budget measure, allowing public museums and art galleries to acquire cars free of luxury car tax where the car is being acquired for the sole purpose of public display. These amendments to the luxury car tax will provide tax relief only to museums and galleries that have been endorsed by the commissioner as deductible gift recipients. Further, to ensure the integrity of these amendments, if the car is no longer used solely for public display, a luxury car tax liability will arise. Relief from luxury car tax when acquiring a car for public display will remove an existing burden faced by public museums and art galleries.

Schedule 4 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 and removing anomalies and redundant provisions, as well as addressing unintended outcomes. The schedule demonstrates the government's commitment to the care and maintenance of the tax and superannuation laws. Full details of each of these measures are contained in the explanatory memorandum. I therefore commend the bill to the House.

Question agreed to.

Bill read a second time.

Message from the Governor-General recommending appropriation announced.

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