Michael Keenan (Stirling, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

The Tax Laws Amendment (2008 Measures No. 3) Bill 2008 comprises four schedules. Two of these cover highly technical amendments: these are schedule 1, shareholder and unitholder rights, and schedule 2, restriction on GST refunds and time limits for recovery and refund of indirect tax. Both of these schedules should be referred properly to the Senate Standing Committee on Economics for inquiry. The remaining schedules—schedule 3, income tax treatment of rent assistance to Austudy recipients, and schedule 4, income tax treatment of the carer adjustment payment—are not technical in nature. The opposition supports these schedules. The opposition is concerned about the potential impact of schedule 1 and schedule 2. As I said, we will seek to refer these to the Senate economics committee. Even though we support their intention we are worried about whether or not that intention will be met by the constraints of the drafting. There is some concern within the stakeholder communities about both of those schedules, and it would make sense for those issues to be ventilated appropriately in the Senate economics committee.

Schedule 1 is in response to the 2007 High Court decision that is known as McNeil’s case. The decision effectively reversed the long-held approach to the taxation of rights issues—namely, that in the great majority of cases taxation arose on realisation of the rights not the mere granting of those rights. The decision naturally caused a lot of concern amongst Australia’s corporates and amongst Australia’s tax advisers. I have some commentary here from Taxpayers Australia. I will not go into it but the chamber will get the general idea that they are an organisation, along with other organisations, that were concerned about the implications of this particular High Court decision. Shortly after the judgement in McNeil’s case, the Australian Taxation Office was asked to rule on the taxation implications of proposed rights issues, including a specific issue raised by Hutchinson Telecoms. Again, I have some commentary about the specific issues that were raised within the tax and the legal professions but, in the interests of House efficiency, I will not read it all out. The House can be assured that there was much concern amongst those two communities.

It was against this background of uncertainty that the then minister, the Assistant Treasurer, announced the coalition’s response to McNeil’s case. This occurred in June 2007 when the coalition government announced that it would provide certainty to this type of capital raising and would remove doubts surrounding the potential retroactive application of McNeil’s case. The then minister for revenue and Assistant Treasurer stated:

... Instead, the long-standing position to treat rights issues on capital account will be maintained ...

…            …            …

“These amendments will provide certainty for taxpayers by restoring the taxation treatment of rights issues that existed before the decision of the High Court of Australia in Commissioner of Taxation v McNeil ...

“The bring-forward of a tax liability under McNeil’s case would impose unnecessary compliance costs on companies and their shareholders.”

The amendments will apply from the 2001-02 income year.

I think that is very significant. The measure in this bill copies the start date of 2001-02, which reflects the coalition’s decision to give taxpayers greater certainty to take up new shares and also greater certainty for past years. In relation to this measure in schedule 1 of the bill, I note that shareholders and unitholders will not be assessed on the value of rights to take up new shares or units. Shareholders and unitholders will not have an income tax liability at the time of the grant—instead the stated intent is that the longstanding position to treat rights issues on capital account will be maintained. In relation to tradeable put options the market value of the options will be assessed at the time of the grant. However, stakeholders have questioned whether this legislation actually achieves this policy intent, an intent that is supported by the coalition.

As a result of events we have seen in this chamber, with 22 bills being rushed through, there are obviously significant problems with the drafting. Already the government need to amend bills that have not yet even been debated in the House, which I find extraordinary. There are some concerns about the drafting of this bill. I do not think that is at all surprising given this government’s approach to the legislative process. My office has been contacted by industry groups and taxation experts who were actually approached for comment on the measures contained within this bill. They were given three days, which is really not a particularly satisfactory time frame, to comment on complex tax legislation. Then they found that their comments were completely ignored anyway. In fact, the Taxation Institute of Australia has described the government’s cursory consultation process as a ‘tick the box’ process. The government are just going through the motions, pretending to consult and then ignoring anything that comes out of that consultation. Once again we see this government desperate to be seen to be doing something but not necessarily aware of the consequences of what they do.

Last August the coalition endorsed the recommendations made by the Board of Taxation in its report Improving Australia’s tax consultation system. The board’s recommendation 11 stated:

Government should allow at least a six-week period for external stakeholders to provide input into consultations on significant measures to ensure the community has maximum opportunity to participate ...

Of course with this measure instead of six weeks we have seen three days, even though the Assistant Treasurer at the time was very keen to claim that the new government would do things differently and would actually genuinely consult with stakeholders. Again what we find is this yawning gap between what is said and what actually happens.

Schedule 2 of this bill deals with collection and administration of indirect taxes. The measure within this bill will amend the GST legislation. The amendment concerning refunds of overpaid GST is in response to a Federal Court decision, known as Kap Motors, handed down in February this year. Pursuant to that decision, in some limited situations refunds could be made of overpaid GST without there ever having to be a reimbursement of the GST. The amendment will confirm that refunds of GST will not be made until the person claiming the refund—the person who sold the goods or services—reimburses the corresponding amount to their customers. This is the mechanism enabling entities who actually paid the GST to be reimbursed.

In relation to part 2 of this schedule, I note that there is also a four-year time limit on the Commissioner of Taxation to recover GST wine equalisation tax, luxury car tax and fuel tax credits. The measure will ensure that the four-year limit on the recovery of taxpayers’ liabilities applies irrespective of how those liabilities arose.

Obviously, by the very nature of these measures, they are quite complicated. In this House we do everything to improve the legislative process, and I do not think the government should be afraid of that. Hasty drafting will inevitably lead to the need for urgent amendments. We have already seen that in the House this week. I remind the House again about the minister’s recent need to amend the excise legislation affecting condensate. This happened a matter of just weeks after the bill’s introduction. Apparently, though, the government already thought that bill was ready for introduction. I am aware that the business of the House has been moving quickly today and I do not want to labour these points.

In summary, I think it is appropriate that some of the concerns that have been raised about the first two schedules of this bill have the chance to be aired at the Senate Standing Committee on Economics, even though the intent of those measures is supported by the opposition. As I have said, we do wholeheartedly support schedules 3 and 4 and we have had some conversations with the government about making sure that they can speedily pass through the legislative process. Therefore, I move the following amendment:

That all words after ‘That” be omitted with a view to substituting the following words:While not declining to give the bill a second reading, the House records its concerns at the haste with which this bill is to be dealt with and calls for the bill to be referred to the Senate Standing Committee on Economics for review, which will allow those with practical expertise and interest in these proposals to have an input.

I would like to say to the government that they do not need to fear the legislative process. Parliament is actually an important part of that process. I urge them to stop this arrogant idea that somehow parliament has no contribution to make to the improvement of their legislation. I urge them to give this amendment some consideration.

Finally, and very briefly, if the House will bear with me I want to note that this speech, like a lot of other speeches that have been made by coalition ministers in the economic portfolios, was prepared with the assistance of somebody in my office named Phil Lindsay, who finishes on Friday after 10 years of service to the coalition, firstly to the then Treasurer, Peter Costello. In 1998 he came up here to assist the government with the fundamental tax reform that was taken then. Ever since, he has been advising Treasurers and Assistant Treasurers, and now he is advising he shadow Assistant Treasurer. He has done so with incredible professionalism and his services will be sadly missed, although I am sure that everybody on this side of the House and indeed in the whole parliament will wish him well in his new endeavours.

Peter Slipper (Fisher, Liberal Party) Share this | Link to this | Hansard source

Is the amendment seconded?

Tony Smith (Casey, Liberal Party, Shadow Minister for Education, Apprenticeships and Training) Share this | Link to this | Hansard source

I second the amendment.

David Bradbury (Lindsay, Australian Labor Party) Share this | Link to this | Hansard source

I add my words of congratulations to the member for Stirling’s departing staff member and I acknowledge the work of all staff of members of parliament. I know that they all contribute in a considerable way.

I would like to speak in support of the Tax Laws Amendment (2008 Measures No. 3) Bill 2008. As the member for Stirling indicated, there are four schedules to the bill. The first two of those schedules relate to complex matters of taxation law, the first being one of the most significant decisions that we have seen in recent time: the decision handed down by the High Court in relation to the McNeil case. I think it would be fair to say that the outcome of the McNeil case was something that was greeted with surprise throughout the tax fraternity. The tax treatment of sell-back rights in that particular case was treated by the High Court in a fashion that departed from what was the conventional orthodoxy in relation to tax treatment of rights issues.

This bill, and in particular schedule 1, attempts to restore to the position of the tax law that which was previously considered to be the case, in keeping with that conventional orthodoxy—which is that, where rights issues occur, the gains or losses are not brought to account instantaneously but rather will be recorded and brought to account through the capital gains tax provisions where those particular rights are held on capital account. This bill and this schedule seek to restore that position by ensuring that any of those gains would be treated as non-assessable, non-exempt income and, as result of that and the consequential amendments to the CGT provisions, those particular gains would not be treated as income at the time that the rights are granted but would ultimately be brought to account when a future CGT event occurred and a gain or loss was to be realised.

I think it is a sensible outcome. It is one, I acknowledge, that the member for Stirling and his predecessor from his side, the former Assistant Treasurer, has indicated is the right direction for this parliament to take. It is important that we take that direction with some urgency, because it must be said that there is a degree of uncertainty out there in the marketplace. In particular, there have been strong concerns expressed by many within the industry as to how this is impacting on many arrangements that might otherwise have already been put in place.

I would also like to comment on the issue of consultation because I know the member for Stirling was very critical of the consultation process that has occurred here. I would like to take the opportunity to commend the Assistant Treasurer on the work that he has done in the short time that he has been in that role to try and allow this parliament to move forward towards a much more sensible approach to consultation when it comes to taxation laws. The establishment of the Tax Design Review Panel I think is the first step in that process. I note that the deliberations of that panel will at some future point be reported back to the Assistant Treasurer. I know that, given his long and outstanding commitment to consultation, he will take the findings and recommendations of that panel very seriously, and I am sure we will see him acting on those recommendations.

One point I would like to emphasise in the whole consultation debate—because it is critical not just in relation to this bill but more generally—is that consultation in relation to tax bills will always involve a delicate balancing act. On the one hand, where there is a need for urgent legislative reform and an urgent legislative response—and that is often the case, because sometimes court decisions can open a Pandora’s box of uncertainty in the marketplace—there is a need to act urgently. But on the other hand there is a need to act more cautiously, in particular in consultation with industry professionals and those practitioners that have an interest in ensuring that the legislation that ultimately comes forward is not only workable but delivers on the intent of the parliament. So there is a balancing act and it is important that those competing objectives and interests are taken into account.

In relation to the issue of delay, as someone who previously was a practitioner in the area, I found the area of tax-exempt asset finance and the reforms that had been proposed by the former government quite extraordinary. This was an area which, in so many respects, would have been critical to facilitating and inspiring additional investment in infrastructure, but it was an area where the former government had really dropped the ball when it came to reform.

Chris Bowen (Prospect, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

Five years!

David Bradbury (Lindsay, Australian Labor Party) Share this | Link to this | Hansard source

Five years, indeed, as the Assistant Treasurer has pointed out. It was a long time. I must say it would have had to have been one of the most exposed exposure drafts in the history of this place. It has been a long process. I think it is important that, when governments make announcements in relation to significant changes in the tax law, there is a swift process—albeit a process that does engage in the necessary consultation—by which the original announcement is then translated into laws so that tax practitioners and the marketplace can then arrange their affairs in accordance with those changes.

In relation to the other schedules in this bill, I note that schedule 2 seeks to make a significant reform which will overcome the outcome of the Federal Court decision in relation to that matter. Schedules 3 and 4 are matters that clearly are of a much more pressing and urgent nature in ensuring that the parliament deals with them promptly. I understand that the Assistant Treasurer will be looking to move an amendment to facilitate the progress of those particular elements of the bill so that there will be the opportunity for further consultation on those elements where that may of benefit and committees can go through that process in greater detail.

Schedules 3 and 4 correct anomalies in relation to the treatment of various payments. The intent of schedule 3 is to ensure that the tax treatment of rent assistance that is paid to Austudy recipients is exempt. That is an important change precipitated by the fact that rent assistance had been announced in recent times by the former government, and it is important to ensure that there is consistency in the treatment of those payments with similar payments to people in similar situations, such as Newstart allowance, youth allowance and Abstudy. It is really about ensuring that there is some consistency in the treatment of these matters. Schedule 4, the substance of which is in relation to the carer adjustment payment, seeks to ensure that payments of that nature are considered to be and treated as tax exempt and to bring them into line with other similar payments that would otherwise be treated as being tax exempt so far as the taxation law is concerned.

I am very pleased to support the bill before the House. In particular, I think that it is a matter of some urgency that schedules 3 and 4 be dealt with. But schedules 1 and 2 I think really do evidence this government’s intention to act upon previous announcements made and to ensure that taxpayers have some certainty in proceeding with their affairs, given that the courts have made various decisions that have created uncertainty in these areas.

Chris Bowen (Prospect, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

I take this opportunity to thank both of the honourable members who contributed to this debate on the Tax Laws Amendment (2008 Measures No. 3) Bill 2008the honourable member for Stirling and the honourable member for Lindsay. As I have said before, the honourable member for Lindsay has a great deal of expertise in these matters and I always value his contribution. In relation to the honourable member for Stirling’s contribution, I do have some comments. With respect to the legislative process, the honourable member for Stirling questioned why we would not agree to this going to a Senate committee. Can I indicate that I am more than happy for it to go to a Senate committee, and I do not believe any other position was ever indicated when the government were asked to split this bill. We took the decision very quickly to agree to the request from the opposition. The opposition have indicated they wish to examine two of the schedules, and that is perfectly appropriate. I have no problem with that and I am more than happy to move an amendment splitting two schedules from the other two so that the honourable gentleman opposite can facilitate a Senate inquiry into the first two schedules. This response is in contrast to the approach taken by the previous government when I made similar requests in opposition.

In relation to consultation, can I make it quite clear that I think consultation has not been good enough for a long time. I have made that quite clear in public; I have made that quite clear in several forums. That is why one of the first things I did on becoming Assistant Treasurer was appoint the Wilson review, the Tax Design Review Panel, to ensure that there are fewer delays in the implementation of tax changes and that there is much better consultation early in the process. I have received the Wilson review. The government is preparing its response and it will be released as soon as possible. And that, I think, will make a very serious long-term improvement to the consultation process on tax law in this country.

I have made it clear to the Treasury that my No. 1 priority in the revenue area is to improve taxation law consultation. I have said on a number of occasions that there will be times when consultation needs to be cut short, when it needs to be less than is desirable, and this is one of those times. It is much less than what would be desirable. I would be the first to agree with that. I am more than happy for members opposite to examine the legislation closely in a Senate committee. There are some who argue that this particular schedule should go a lot further—I know that argument—and should not just fix the mischief created in the McNeil case but fix a broader mischief. I accept those arguments.

However, the government has taken a decision to do this now, to fix the particular mischief in the McNeil case, and to take a little longer to assess the broader issues so that this great uncertainty that has been created by the McNeil case is fixed as soon as possible. We have received a significant number of requests from very significant players in the national economy to carry this legislation as a matter of extreme urgency. They have advised the government that the operation of the McNeil case, despite the fact that the government has announced it will retrospectively fix it, is creating some very substantial difficulties for them in their operations. I would encourage the honourable gentleman opposite to ensure that the Senate inquiry, while being full and thorough, is not overly elongated for the sake of those people who are relying on the correction to the McNeil case.

I am a little less clear on the opposition’s concerns on the Capp Motors case, but they have expressed a view that the Senate committee should have a look at it, and I am more than happy to facilitate that. I always, where I am satisfied that the opposition has genuine concerns, am happy to facilitate a full and thorough review. If there are issues that arise out of that review, I am more than happy to take them on board, because we have nothing to fear from a full and proper legislative process. If there are suggestions and amendments that can sensibly be accepted, I indicate that I would accept them. The other two schedules are eminently sensible and I think have the support of both sides of the House. I foreshadow that when we go to the consideration in detail stage I will move an amendment which separates the schedules at the request of the honourable gentleman the member for Stirling.

Patrick Secker (Barker, Liberal Party) Share this | Link to this | Hansard source

The original question was that this bill be now read a second time. To this the honourable member for the Stirling has moved as an amendment that all words after ‘That’ be omitted with a view to substituting other words. The immediate question is that the words proposed to be omitted stand part of the question.

Question agreed to.

Original question agreed to.

Bill read a second time.