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

I move:

That this bill be now read a second time.

This bill implements a package of measures to improve the efficiency and equity of Australia's business tax system by strengthening the integrity and operation of the consolidation regime and removing unintended outcomes.

The consolidation regime was introduced in 2002 and is a fundamental component of Australia's business tax system. There are approximately 12,000 consolidated taxpayers in Australia, including the majority of our largest businesses.

Consolidation allows a wholly-owned corporate group to be treated as a single entity for income tax purposes. A consolidated group generally consists of an Australian resident head company and its wholly owned subsidiaries. This reduces compliance costs for business, removes impediments to the most efficient business structures, and improves the integrity of the tax system. Benefits of tax consolidation for businesses include:

The government's changes, outlined in schedule 1 of this bill, follow recommendations made by the Board of Taxation in its post-implementation reviews of the consolidation regime.

In these reviews, the Board of Taxation identified a number of loopholes that create unintended tax outcomes, often arising when an entity joins or leaves a consolidated group. The government is taking action to address these integrity issues in order to improve the fairness of the business tax system, simplify compliance and ensure the ongoing effectiveness of the consolidation rules.

In particular, the bill improves the integrity and operation of the consolidation regime by:

These measures were announced in the 2013-14, 2014-15 and 2016-17 budgets.

In recognising the complex nature of the consolidation rules, we have consulted extensively on these measures over a number of years, including through the Board of Taxation's post-implementation review. The government has listened carefully to stakeholders to ensure that these changes are well designed and fairly balance the need for additional integrity without unduly burdening business with compliance costs.

These measures, together, will protect the corporate tax base by strengthening the integrity of the consolidation regime. These measures will also provide greater clarity for businesses and provide a level playing field for businesses outside the consolidation regime.

Full details of these measures are contained in the explanatory memorandum.

Debate adjourned.

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