Sussan Ley (Farrer, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

I am pleased to talk on the Tax Laws Amendment (Foreign Source Income Deferral) Bill (No. 1) 2010. This bill concerns the foreign investment fund measures of the Income Tax Assessment Act. The FIF measures, as they are called, are one of three components of the accruals taxation system, which has as its broad objective to tax Australian residents on an accruals basis on their share of income derived by certain foreign entities—income which has not been comparably taxed in an offshore jurisdiction. The three parts of the accruals taxation system are the controlled foreign company, or CFC, rules; the transferor trust measure; and the foreign investment fund measures about which this bill is concerned.

The FIF measures are designed to counter tax avoidance opportunities that remained after the earlier introduction of the controlled foreign company and transferor trust measures. So they were the third measure implemented. The FIF measures apply where a foreign company or trust, though not controlled by Australian residents, is an attractive investment vehicle because it allows for the accumulation of income offshore in low-tax or tax-free countries, thereby allowing the investor to minimise or to defer payment of Australian tax.

The FIF measures also apply to Australian residents who have invested offshore in life bonds or life policies that have an investment component. So these measures apply to Australian residents who have an interest in a foreign company or trust at the end of a year of income and those who held a foreign life assurance policy at any time in the income year. There are a large number of exceptions to the foreign investment fund measures. That describes the measures in general.

Turning to this bill in particular, it implements changes to the FIF rules and the deemed present entitlement rules. These changes were announced by the government in the 2009-10 budget on 12 May 2009. I should note that the legislation before the House follows on from initiatives of the previous coalition government and therefore explain at the outset that we see this as entirely noncontroversial. The existing attribution rules which apply were introduced in 1992 and were based on the rules developed in the 1960s by the United States of America. The former coalition government recognised that those rules had become outdated and that the global economy had significantly changed since those rules were introduced.

The former coalition government announced on 10 October 2006 that the Board of Taxation would conduct a review of the attribution rules. The terms of reference for the review were: to identify ways to reduce the complexity and compliance costs associated with the current foreign source income anti-tax-deferral regimes, including whether the regimes can be collapsed into a single regime; and to examine whether the anti-tax-deferral regimes strike an appropriate balance between effectively countering deferral and unnecessarily inhibiting Australians from competing in the global economy. In September 2008 the board provided its report to the current government. On 12 May 2009 the then Assistant Treasurer announced a number of changes to the tax law in response to the Board of Taxation’s review. This bill implements some of the changes announced at that time.

The amendments in this bill are based on the recommendations made by the Board of Taxation to reduce compliance costs for affected taxpayers. The bill abolishes the foreign investment fund rules and the deemed present entitlement rules contained within the Income Tax Assessment Act 1936 and is largely consistent with the operation of the tax law prior to the introduction of the FIF and deemed present entitlement rules in 1992.

The amendments in this bill will mean that resident taxpayers who are beneficiaries holding interests in foreign trusts will apply the normal trust tax rules that are contained in division 6 and the transferor trust provisions in division 6AAA. The Board of Taxation argued that the abolition of the foreign investment fund rules would significantly reduce compliance costs for Australian managed funds and would enhance global competitiveness and attractiveness to foreign investors. The Board of Taxation argued that their recommended changes would also significantly reduce compliance costs for Australian companies and superannuation funds. They are clearly important initiatives.

As I said, the coalition initiated this piece of legislation and we therefore support it. We recognise the good work that the Board of Taxation does. We think there is actually scope for it to do more and to involve itself in some of the difficult aspects of tax law and tax provisions that the tax office and the profession deal with on a day-to-day basis. I commend this bill to the House.

Bernie Ripoll (Oxley, Australian Labor Party) Share this | Link to this | Hansard source

I too rise to speak on the Tax Laws Amendment (Foreign Source Income Deferral) Bill (No. 1) 2010. At the outset I want to congratulate the Assistant Treasurer and also the Treasury and the Board of Taxation for the work they have done in this area. This amendment bill does a range of things. In particular it amends the Income Tax Assessment Act 1936 to repeal the foreign investment fund, FIF, and the deemed present entitlement, DPE, rules. The schedule also makes consequential amendments to the Income Tax Assessment Act and the Superannuation Industry (Supervision) Act 1993 that are required as a result of the changes in the foreign investment fund and the deemed present entitlement rules.

The repeal of the FIF and the DPE rules were announced, in the 2009-10 budget, as part of a wider reform program that we have taken on in terms of Australia’s foreign source income and anti-tax-deferral attribution rules. The wider program has been initiated by the government since 2007 to ensure that we have the appropriate regulations and rules in place to protect consumers but at the same time, very importantly, ensure we do not have unjustifiable avoidance by a range of people of taxation responsibilities in this country. We are ensuring through these good reforms that people pay the appropriate amounts—their fair contribution—to the tax system and on behalf of all taxpayers. We are certainly trying to make sure that, while we do that, we do not put in place specific burdens or compliance costs or extra hurdles for small business. It is important to get that balance right. We acknowledge that in a whole range of areas. It is not limited to this particular amendment bill, although it is certainly an important element of it. You will see it in a whole range of reviews, from the Henry review in terms of general taxation right across the board to what Jeremy Cooper is doing in terms of superannuation.

Mr Cooper is due to report by the end of this month. There are some significant changes, amendments and reforms that can come out of that review. I look forward very much to that report being handed to government on 30 June because of the significant contribution that superannuation makes in this country and the very important role it will continue to have in the future—and I might speak a little more about that in relation to this specific bill before us in a moment. The changes in this bill will mean a modernising of Australia’s financial services sector, looking specifically at the issues of foreign income sources and how to most appropriately deal with income that is received by Australian residents and nonresidents from any foreign source they have.

It is also important to note that while these changes are of a technical nature they are quite significant. They form part of some major steps that we are taking as a government to modernise our internal systems and to make sure that Australia remains competitive on a global platform. We need to remain competitive after these sorts of changes. We need to continue the good work to ensure that Australia becomes a financial services hub.

I want to take the opportunity to congratulate Mark Johnson on his review and the government on its response. There is great potential growth in the financial services sector in the future of this country. We will export our widely regarded skills and expertise in these areas. The Johnson review covered a whole range of opportunities for Australia in the future. It has been a big part of my interest and the work that I have been doing in chairing the Parliamentary Joint Committee on Corporations and Financial Services. We need to ensure that any of the reforms that we make and any of the changes that come about have a focus on Australia being a financial services hub. We need to be an exporter in the areas in which we are very strong. We are well regarded internationally in terms of our capacity and skills. In fact, Australia rates about fifth largest in terms of funds under management in the world. We are recognised for the capacity that we have, our expertise, our good corporate governance and our ability to deliver in all of these areas. We ought to take the opportunity and convert it into a stronger and larger export market.

To do those things, you need to take reform right across a particular sector and not reform just one area. That is what we are doing with the bill that we have in front of us. What these reforms will deliver is significant compliance change and cost savings. They will also simplify what is a complex set of rules, rules which normally stream across a range of particular acts. It is important to get those right, and we have done that here. The changes will consolidate two acts in particular, one from 1936 and one from 1997—the income tax acts. These changes will bring us a significant step closer to consolidating those two acts.

Over time—as is the nature of things—communities, industries and sectors have changed. This has led to a whole range of inefficiencies, unforseen consequences and other problems that were not part of the debate at the time of the inception of those particular acts. What that means is that the operation of the attribution regime has become highly inefficient. In the light of that rising global interaction—it is a very different global market—and technological chance, an extensive range of exemptions now apply. Those exemptions operate to accommodate a range of those changes. But exemptions are not the best method or the most appropriate way to solve these problems. Those exemptions set up a compliance cost burden on people who operate in this area, particularly on people who manage funds. It is a disadvantage to Australian fund managers. For some time there have been discussions about what those disadvantages mean. They involve not just extra cost but the loss of business for Australian fund managers.

From a government perspective, there is always concern about making sure that people pay their fair share of taxation. You always need to review specific areas to make sure that people are making their obligations. A foreign investment fund relates to either a foreign trust or a foreign company. They can be foreign investment funds or foreign life assurance policies as well. They were designed in the first instance to reduce tax. We want to reduce tax avoidance opportunities for Australian residents who accumulate passive income in offshore investment funds over which they have no control. They are often in low-tax regimes or even tax-free countries. There needs to be a balance. People should be able to legitimately use specific funds or other mechanisms but should not use them to deliberately and unjustifiably reduce their tax liability in Australia or defer their tax liability without any justification.

These changes will apply to a taxpayer who was an Australian resident any time in a particular income year and who had either an interest in a foreign investment fund at the end of that income year or at any other time during that income year or an interest in a foreign life assurance policy at any time during that income year. However, instead of the usual income year period, a taxpayer may elect a different time period. That needs to be understood in context. While in Australia we have a financial year spanning 1 July to 30 June, it is the case in other jurisdictions—other countries—that different periods apply. Some use a calendar year; others use other time periods. So we need to take that into account in the way that we formulate our rules and the measures that we put in place.

In these anti rollup fund measures, we have specifically replaced the foreign investment fund rules and targeted the most abusive of deferral cases, such as accumulation funds located in low-tax jurisdictions that reinvest low-risk returns. The anti rollup rule is scheduled to be introduced into parliament later this year. I look forward to its introduction and its support by the opposition. I know that the review of this area, which started in October 2006, was taken on board by the previous government. We are supportive of that review. The Board of Taxation took on that review and also released a positions paper and several other issues papers on these matters.

Finally, in 2008, the board released its report to the Assistant Treasurer and Minister for Competition Policy and Consumer Affairs, under the Rudd government, and we have acted upon that. We have taken that advice, we have gone through the consultation process and we have taken on board what is some good regulatory change. The board recommended that the Foreign Investment Fund provisions be repealed and replaced with specific anti-roll-up fund measures, which targeted very specifically accumulation funds that reinvest interest-like returns. It also recommended that closely held fixed trusts should also be brought into the controlled foreign company rules, the CFC rules, and that the deemed present entitlement rules should also be repealed. They are the two main elements of this amendment.

What the board’s recommendations demonstrate is the desire for us to increase our attractiveness as a financial services hub. We need to do that in a range of ways. Tax-withholding interest, for example, is one. We want to make sure that we look attractive as an investment destination, encourage Australian businesses to be more productive and competitive, and reduce compliance costs for managed funds, industry and other investors. This is a massive opportunity for Australia. This is an area where we can make enormous change in the future and really grow what is a vibrant high-employing sector in Australia—the financial services sector.

It is good to note that in the short 2½ years that this government has been in power we have taken on board many reviews in this area. While some outside may think these reviews are in some way independent—and they all are absolutely independent—they are also strategically linked. We can look at the work my committee, the Parliamentary Joint Committee on Corporations and Financial Services, has done, the extensive work that Henry has done through the independent tax review, the work that is being done by Jeremy Cooper on superannuation or, just as importantly, the work being done by Mark Johnson on Australia as a financial services hub. If you take all of those together and look at the very strategic financial services path that this government is setting for Australia, you can actually make sense of all of these. It is important to get them right.

There is one more report that I have not mentioned, which probably ties all these in together really well, and that is the Intergenerational report. Significantly, the reports states that by 2050—in a mere 40 years time—Australia will have twice as many 65-year-olds as we have today. Frighteningly, depending on which way you look at it, there will be four times as many 85-year-olds—we will be living longer. It is also important to note that today there are five people in the workforce for every person aged over 65 years of age, but by 2050 the number of people in the workforce aged over 65 will only be 2.7. If governments today do not take heed of those warnings, then we are being derelict in our responsibilities to the people of Australia. If you take that information and look at the reform agenda that this government has put in place—fiscal responsibility, balancing budgets, sustaining health budgets into the future and making sure you do not just govern for the present but also govern for the future—then you can start seeing the link between those significant reviews we have done, some of the reforms we have already put into place and ensuring that we have the appropriate regulation in place. There should be not too much or too little but just the right amount you need to get the job done properly. You should reduce the compliance costs on small business—those regulatory burdens.

Craig Emerson (Rankin, Australian Labor Party, Minister Assisting the Finance Minister on Deregulation) Share this | Link to this | Hansard source

Hear, hear!

Bernie Ripoll (Oxley, Australian Labor Party) Share this | Link to this | Hansard source

I congratulate the Minister for Competition Policy and Consumer Affairs, who is in the House here, for the work he has been doing in reducing the compliance costs and burdens for small business. They are the backbone of Australia—there is no question of that. Whether it is corner shop type small businesses, small manufacturing businesses, Australian fund managers or people working in the financial services sector, if we can reduce their compliance costs, reduce their burdens, give them more opportunities to export their skills and services and provide mechanisms to put downward pressure on costs and fees—to make it more affordable for ordinary Australians—then I think we are on the right track. That is exactly what we have been doing. That is exactly what our agenda is. When people question how all of these things link, that is the explanation I give them about what our agenda is and where specifically we are trying to head into the future.

The amendment we have put forward today is one of a number of amendments that I have spoken on this week. This week is an important week—it is the last week of the sitting before we go to the winter break. It is good to see that the government has had the capacity to deal with these very important reforms. I know some of these reforms may not seem too sexy to some members of parliament or even ordinary members of the community who may not be quite aware of the importance of some of these technical changes, but these amendments very much will form part of ensuring Australia’s future sustainability in a whole range of areas, such as the way we are managing budgets and ensuring that we can maintain health budgets into the future. I do not know how many members of parliament have understood just how much the underlying costs of health actually represent. If the federal government does not do something today, by 2026 the complete budgets of every state and territory in this country will be consumed by health spending alone. I think it is an important point to note because you need to make decisions today that will have a massive impact into the future, and that is exactly what we are setting about doing. We are doing that through a whole range of different methods: increasing people’s retirement security by increasing compulsory superannuation contributions from nine per cent to 12 per cent, looking at better forms of taxation through a resource tax to make sure that all Australians share the wealth of this country and sharing in the potential that exists there today through better taxation methods.

In summing up, I thank the House for the opportunity to say some words on the amendments of this bill. While on their own these amendments may not seem that important, they certainly are to the people they affect. The legislation is an important part of Australia’s strategic direction into the future, to make sure we have the right balance. I think we have that, and I commend the bill to the House.

Sid Sidebottom (Braddon, Australian Labor Party) Share this | Link to this | Hansard source

Thank you for your contribution. I now call and recognise the member for Herbert and would remind everyone that this is the member for Herbert’s valedictory speech and that we do not take points of order, particularly on relevance.

Christopher Pyne (Sturt, Liberal Party, Shadow Minister for Education, Apprenticeships and Training) Share this | Link to this | Hansard source

2020?

Andrew Southcott (Boothby, Liberal Party, Shadow Parliamentary Secretary for Regional Health Services, Health and Wellbeing) Share this | Link to this | Hansard source

Aim high!

Tony Zappia (Makin, Australian Labor Party) Share this | Link to this | Hansard source

I begin by acknowledging the service to this House of the member for Herbert, and extend my best wishes to him and his family for their future.

I rise to speak on the Tax Laws Amendment (Foreign Source Income Deferral) Bill (No. 1) 2010. Schedule 1 of the bill amends the Income Tax Assessment Act 1936 to repeal the foreign investment fund and deemed present entitlement rules. The schedule also makes consequential amendments to the Income Tax Assessment Act 1936, the Income Tax Assessment Act 1997 and the Superannuation Industry (Supervision) Act 1993 that are required as a result of the foreign investment fund and deemed present entitlement rules. 

In the 2009-10 budget, the government announced significant reforms to Australia’s foreign source income attribution rules. In summary, the reforms mean that the controlled foreign companies rules and the transferor trust rules will be retained and modernised while the foreign investment fund rules and the deemed present entitlement rules will be repealed. The repeal of the foreign investment fund rules has been welcomed by the management fund sector as they contend that the foreign investment fund regime imposes significant costs and an uncompetitive tax burden on Australian fund managers. The reforms advance the government’s commitment to secure Australia’s place as a leading financial services centre in the region and more generally to improve the competitiveness of Australian businesses competing offshore—in fact, it is in respect of that matter that I address my comments on this bill.

The comparative stability of Australia’s financial institutions has become abundantly clear in the fallout from the global financial crisis, when we saw the domino effect of the collapse of one financial institution after another. Of course, that stability was very much increased by the Rudd government’s swift and decisive action to guarantee both bank deposits and bank wholesale lending. The performance of Australia’s financial institutions attracted the praise of international commentators and has been held up as a model at G20 meetings. Worldwide, there are fewer than 10 AA-rated banks and, of those, four are here in Australia. We now have the opportunity to build on that financial strength and stability. We know that in recent years the Asian and South-East Asian regions have emerged as regions of strong economic growth, and we saw that again in reports in the media only this morning. A well-regulated financial institution sector in Australia therefore provides Australia with a unique opportunity to build a leading financial services sector for the region.

The accumulation of superannuation funds over the last two decades has clearly contributed to the growth and strength of Australia’s financial sector. Compulsory superannuation was introduced in 1986, when an agreement between government, the ACTU and industry ensured that, under industrial awards, workers were required to have three per cent of their wages paid as superannuation contributions. In 1987 the assets of superannuation funds totalled $41 billion. By 2007 this amount had grown to $1.1 trillion, and it is expected that by the year 2035 this amount will grow to around $5.3 trillion.

The government’s commitment to increase superannuation contributions from nine per cent to 12 per cent over the next decade as part of the measures associated with the resource super profits tax will significantly add to the balance of superannuation funds available for investment. That in turn will lead to an even stronger financial sector, with more funds for reinvestment in Australia and further employment growth in the financial sector and in other sectors were those funds are invested. The Australian financial services sector has seen very strong employment growth in recent decades. The sector currently employs around 400,000 Australians, which is an increase of around 80,000 jobs in just 15 years.

I said earlier that Australian-based investment managers currently manage $1.1 trillion in assets on behalf of domestic Australian investors. As the Minister for Financial Services, Superannuation and Corporate Law has previously stated in this House, these same Australian-based fund managers only manage $53 billion worth of overseas investments. This means that in the global economy less than five per cent of funds managed by our domestic fund managers are sourced from overseas.

On 26 September 2008 the government announced the establishment of the Australian Financial Centre Forum, headed by Mark Johnson AO, to recommend ways that Australia could take advantage of its opportunity to become a leading financial services centre. The Australian Financial Centre Forum reported to the government, and on 11 May 2010 the government announced its response, which provided in-principle or direct support for nearly all of the 19 recommendations of the report. The Minister for Financial Services, Superannuation and Corporate Law made a statement in the House only some days ago that those recommendations include:

the introduction of an investment manager regime, providing greater certainty around the tax treatment of foreign funds managed by Australian investment managers;

the establishment of an online regulatory gateway, providing domestic and international investors with a one-stop shop for basic information about the Australian market; and

the development of an Asia region funds passport, which would involve a multilateral framework to enable a complying retail investment fund in a country that signs up to the passport framework to offer its products in each of the other signatory countries.

The announcement made by the minister two weeks ago will have been welcomed by the finance sector throughout this country. The announcement went to the heart of an opportunity that this country has ahead of it to establish a major industry—or at least an additional aspect to a major industry—in this country. It is not often that this country is in a position to compete with the rest of the world in a range of sectors. In most cases, we in fact find ourselves somewhat disadvantaged because of either our distance from the rest of the world or other competing pressures that seem to enable other countries to undercut our industries. I refer particularly to the manufacturing sector in this country. It may not be the case that we have seen a decline in that sector over the years, but it is certainly the case that we have seen many of our manufacturing industries relocate offshore.

With the finance sector, however, it is entirely different. It is different because the financial industry does not have to be specifically located in a particular country. It operates on the basis of technology that is available to the world today and from which you can establish a major industry wherever you want in the world. Australia has demonstrated that it has the capability, the stability and the security of our financial sector to become a financial services sector for the rest of the Asia and we should grasp that opportunity. We know from what we have seen in recent years that it will be the Asian area where we see growth occur most rapidly. We know that China has been a country of rapid growth, but we also know that several other Asian countries equally withstood the global economic downturn and withstood it well. We know that those same countries are in a prime position to continue to grow and, as they do, they will also look not only to increasing their relationship with Australia but also to working with countries that have stability within.

The financial services sector has certainly been rocked by the global financial crisis of the last couple of years. We saw that the financial hubs, whether in New York or in London, were very much rocked to the point where there would have to be without question a continuing degree of uncertainty as to whether they are the best places for governments and private enterprise to continue dealing with. I believe the global financial crisis presents Australia with a terrific opportunity to ensure that Australia builds on stability and security and does develop itself as a financial centre for the Asian region.

As part of its package of reforms for the financial services sector, the Rudd government is committing $25 million to establish a regional centre for financial system regulation and innovation. The sector in Australia has been stable and secure, but we can always do better. The establishment of a $25 million regional centre for financial system regulation and innovation is something we should all embrace. Our financial regulatory system in Australia was a key part of ensuring that our financial systems in this country remained stable and secure during the financial downturn across the world. The regulatory system can always be improved. It can always be made better, it can always be streamlined and made easier for the finance sector members to operate within.

We should also never lose sight of the fact that, no matter what industry we are in, we do compete with the rest of the world and, therefore, we need to constantly be innovative in what we do. The establishment of this centre is going to be critical in providing the innovation that is required by the sector as a whole to ensure that it does remain competitive and to ensure that it is able to provide the financial services that we are hoping will come to this country if it becomes a centre for financial services in the Asian region.

I understand that the centre will provide tertiary education and training for financial regulators from Australia and the Asia-Pacific region. I said a moment ago that it is the Asia-Pacific region that I believe will be at the heart of global economic growth in the years ahead. I was pleased to hear the Prime Minister announce only yesterday the new deals that have been signed between Australia and the Chinese government with a number of the mining companies in this country. I have to say that certainly flies in the face of those who are opposed to the resource super profits tax and those who have been suggesting that that tax will drive investment away from this country. Clearly that is not the case, and we saw that with the signing of those multibillion dollar agreements with the Chinese government only yesterday. It will be in respect of other trade matters as well that the establishment of a financial hub here in Australia will benefit the Australian economy and the Australian people.

One of the benefits of having a financial services centre in Australia and the increase of superannuation funds that will accumulate over the years is that this in turn provides the Australian people with a source of revenue that can be used to reinvest in this country. I expect that much of that reinvestment may well be back into the resources sector from which we have heard criticisms of the increase in superannuation from nine to 12 per cent. They will be one of the beneficiaries, because they cannot claim that the resource super profits tax is affecting the superannuation funds of millions of Australians without acknowledging that it is the superannuation funds of millions of Australians that are contributing to their very investments and to the very development of resources.

The Australian government recognises that regulation and innovation of financial markets cannot be separate issues; they must keep pace with one another. A moment ago I was speaking about the establishment of the Centre for International Finance and Regulation here in Australia. That in itself will create additional employment in this country, but it will also ensure that in the future we are not likely to see the kinds of crises and problems that were encountered by governments across the world as a result of the global financial crisis, where governments were consistently being asked to bail out the financial services sectors within their own countries. Better regulations, better training and innovation, which all go hand in hand, will ensure a much stronger sector.

We see announcements being made today by the new British government about how they are going to have to tighten expenditure across so many sectors in order to try and get their budget back in the black. You can contrast that with what happened here in Australia—stable banks, secure banks, a government that acted quickly and a debt and deficit regime that is much lower than most other countries, in fact, the lowest of all advanced economies. What we are seeing in this country right now is growth. With that growth come new investment funds. With that growth comes the need to borrow funds in order to pay for new developments, and that in turn means that we will have a financial services sector that will be more and more important to the future of this country.

The finance and tax laws of Australia are complex. It would be fair to say that most people would have little understanding of their complexities. Whether it is the taxation acts or the superannuation acts, they are very complex laws. Undoubtedly, because of their complexity these laws add to the cost of business in this country and will add to the cost of doing business into the future unless we begin a process of simplifying them. If we streamline and simplify the laws under which companies operate, we not only reduce their overheads—and that will be something that is welcomed by them—but also make them much more competitive.

This bill, with these amendments, does exactly that. It is a bill that will simplify tax laws in this country. It is a bill that will make Australian business more competitive and, in doing so, will put us on the right track to securing Australia as a leading financial centre for the Asia-Pacific region. It is something that this country has been pursuing for some time. The Rudd government has recognised this and is doing what it can to ensure that we do become a financial hub. Disappointingly, I heard the minister make it absolutely clear that the opposition does not support the intent of the Johnson report and does not support Australia becoming a future financial hub in years to come. That is disappointing because we have an opportunity that we should not let go. As I said a moment ago, this bill simplifies our tax laws and makes business more efficient. Those measures can only be welcomed by the business sector of Australia. I commend the bill to the House.

Bill Shorten (Maribyrnong, Australian Labor Party, Parliamentary Secretary for Disabilities and Children's Services) Share this | Link to this | Hansard source

I would like to thank those members who took part in this debate. The Tax Laws Amendment (Foreign Source Income Deferral) Bill (No. 1) 2010 bill, which gives effect to the repeal of the foreign investment fund, or FIF, and deemed present entitlement rules, delivers the first tranche of reforms that were announced in the 2009-10 budget. As part of wider reforms to Australia’s foreign source income anti-tax-deferral attribution rules, this measure will assist Australian managed funds and other businesses to compete internationally by reducing complexity and compliance costs that are associated with the making of foreign investments. The repeal of the FIF and deemed present entitlement rules further contributes to the government’s objective of promoting Australia as a pre-eminent financial hub in our region. This will support Australian jobs. This measure, being part of wider reforms to better target Australia’s attribution rules, will also further simplify the taxation law and bring consolidation of the two-income tax acts a significant step closer. This bill deserves the support of the parliament. I commend the bill to the House.

Question agreed to.

Bill read a second time.