Tony Smith (Casey, Liberal Party, Deputy Chairman , Coalition Policy Development Committee) Share this | Link to this | Hansard source

The Tax Laws Amendment (2011 Measures No. 7) Bill has nine schedules within it. As is always the case, they relate to a variety of changes to the taxation law. I can say at the outset on behalf of the opposition that we are not opposing this bill. I will very briefly run through each of those nine schedules and the changes that they will effect to the taxation law after the bill receives Royal Assent. The Assistant Treasurer on 21 September introduced this bill into the House. He outlined in great detail each of those schedules and the effect they will have. I will in brief summary give the coalition's perspective on each of them. As I said at the outset, we will be supporting this tax laws amendment bill.

Schedule 1 effects some tax changes with respect to special disability trusts. Essentially it provides some more favourable treatment by removing income tax barriers, particularly with respect to capital gains tax. The Assistant Treasurer outlined this in great detail just a few weeks ago, but the special disability trusts which were established in 2006 enable immediate family members and carers who have the financial means to do so to make private provision for the current and future care and accommodation needs of a family member with a severe disability. This schedule removes some of those capital gains tax barriers that might exist for those families. We welcome those changes. Schedule 2 relates to specific seasonal workers. The tax change that is being effected in this schedule is to change the lowest marginal tax rate for participants in the scheme from 29 per cent to 15 per cent.

Schedule 3 relates to TOFA, the Taxation of Financial Arrangements. There have been many tax law amendment bills that have dealt with these highly technical issues. You will probably be pleased to know, Mr Deputy Speaker, that this morning I will not reiterate every single aspect of the TOFA reforms that have occurred over many years but will just comment very briefly on schedule 3. This schedule makes some changes to the pay-as-you-go instalments and also some technical amendments with respect to them.

Schedule 4 of this bill gives the Commissioner of Taxation some discretion that will enable the extension of time for notifying transitional elections in financial arrangements. Essentially, this will provide the Commissioner of Taxation with the discretion to extend by up to three months the time in which a taxpayer may notify the commissioner of a transitional election under division 230 of the Income Tax Assessment Act 197—the TOFA provisions.

Schedule 5 relates to farm management deposits in a couple of respects, and they are positive changes. They will allow farmers affected by a natural disaster to withdraw deposits within 12 months with no tax penalty. Also, they will make provision for more information. They are positive changes to remove some unintended barriers, as I would see them.

Schedule 6 relates to superannuation. It extends temporary loss relief for merging superannuation funds. As the Assistant Treasurer outlined in the House on 21 September, it will extend the end date for temporary loss relief for funds that are merging by three months from June of this year until September of this year.

Schedule 7 relates to penalty notices. It is essentially an integrity measure that will preserve the validity of penalty notices that the Commissioner of Taxation has issued. It needs to do this as a result of a recent case in the New South Wales Court of Appeal. Some 17,000 penalty notices would be in doubt without this amendment. So without it there would be a risk of litigation, and obviously revenue implications as well. This schedule seeks to rectify the intention of the law.

Schedule 8, the second last schedule, relates to public ancillary funds. It essentially makes some changes that I believe were announced by the government in last year's budget. It will rename trust funds that qualify for deductible gift status. It will give the Treasurer some powers to make guidelines and a range of other administrative changes.

Schedule 9, the last schedule, relates to film tax offsets in each respect. It will provide for more generous treatment for the producer offset, including by amending the qualifying expenditure threshold—on my reading, reducing it to $500,000—and a range of other changes. I make the point on behalf of the opposition that these changes are very similar to the arts policy commitments made by our shadow minister, Senator George Brandis, at the last election, and we offer our support for this schedule.

As I said at the outset, I on behalf of the coalition support this tax law amendment bill and each of the schedules within it. We commend the bill to the House.

Stephen Jones (Throsby, Australian Labor Party) Share this | Link to this | Hansard source

In December 2009 the then head of Treasury provided to the Treasurer a copy of what is colloquially known as the Henry tax review and formally known as Australia's Future Tax System report, a comprehensive review of our tax system and its sustainability into the future. At page 11 of that report the review committee made this observation:

Australia has too many taxes and too many complicated ways of delivering multiple policy objectives through the tax system. The capacity of the legislative and operating platforms of these systems and their human users to deal with the resulting complexity has been overreached. To a large extent, this is a reflection of a compartmentalised and incremental approach to tax policy that has been weighted towards achieving finely calibrated equity and efficiency outcomes at the expense of simplicity.

It is observations such as this which have driven the Gillard Labor government to ensure tax reform is at the top of its economic reform agenda. It is what underscored the desire to hold a summit in Canberra last week, in which we brought some of the leading thinkers in the area of economic and tax reform to Canberra to discuss what we needed to do over the next decade to reform the tax system to ensure it was fit for use for the remainder of the century.

I observed in a debate yesterday that taxation has a number of objectives, including raising revenue and regulating behaviour in the public interest. We have had both of these things in mind as we have set about the task of reforming the Australian tax system to ensure it is fairer and more equitable and that we will have revenue streams to provide the essential government services that Australians expect now and into the future. We understand—and I think there is bipartisan understanding of this fact—that by the time my children, who are now very young, enter the workforce the ratio of people of working age in the workforce to those who are outside the workforce and not of working age will move from 1:5 to 1:2.7. This will place an increasing burden on those who are in the workforce and those who are paying tax to deliver the services that Australians expect. So it is incumbent on all sides of politics to ensure that we are spreading the taxation base, that it is administered in the most effective way, that it drives and incentivises the right sort of behaviour and that it creates the revenue needed to deliver much-needed services.

The amendments put forward by this bill are in part driven by those objectives. Schedule 1 to the bill is important. This morning many of us from all parties attended in this place a parliamentary breakfast for the National Disability Insurance Scheme. At the breakfast we heard from carers and people living with disabilities about the importance of government doing everything in its power to ensure that we are providing financial sustenance and other service arrangements to meet the growing needs of people in that position. Schedule 1 is not the whole game but it does some work in this area. It extends the capital gains tax main resident exemptions to special disability trusts. Removing these barriers makes it more attractive for families to provide for the long-term care of a family member through the trust system to enable them to make financial arrangements for loved ones, for a family member who has a severe disability. I commend this particular schedule to the House. Schedule 2 of the bill reduces the lowest marginal tax rate that applies to non-resident workers employed under the government's Pacific Seasonal Worker Pilot Scheme. It reduces this from 29 per cent to 15 per cent. Not only is this of benefit to those working under the government's Pacific Seasonal Worker Pilot Scheme but it also provides an indirect benefit to the agricultural sector, that has been crying out for many years for arrangements and assistance from the government to provide much-needed workers during the picking seasons—the peak work seasons. It provides an indirect benefit to employers at the same time as providing a direct tax benefit for those in our near region who wish to come to Australia and work under the scheme, so everyone benefits from this.

Schedule 3 amends the pay-as-you-go instalment provisions to ensure that the concept of instalment income interacts appropriately with the concepts of gain and loss in the taxation and financial arrangements provisions. In essence, the amendments ensure that the interaction does not impose a significant administrative or compliance cost whilst maintaining the objective of ensuring that the pay-as-you-go instalment provisions are made.

Schedule 5 amends the tax law and the Banking Act 1959 to make four changes to the farm management deposits, or FMD, scheme. Essentially these amendments are to the benefit of our farming community to ensure that there is more flexibility at their disposal in the case of natural disasters to access their farm management deposits within 12 months of making a deposit while still retaining concessional tax treatment for those arrangements. Again, this is an important arrangement for the benefit of our farming community.

Schedule 6 is concerned with the superannuation and taxation arrangements for superannuation schemes that are in the process of merging. This fulfils a number of objectives. It is a policy objective of this government to ensure that our superannuation schemes are of a sufficient scale and size to enable them to gain the benefits of scale and have access to a capital base that will enable them to make the right sorts of investments at the right cost and be involved in the right deals to provide a profit to the fund and a benefit to the members. The specific provision here will provide additional time for those funds when they do merge to take the benefits of loss relief. It extends that by three months. The fund is the immediate beneficiary, but obviously the account holders, the superannuation beneficiaries, are the indirect and ultimate beneficiaries of this schedule.

Schedule 7 is essentially a remedial provision that addresses the consequences of a recent court of appeal decision. In essence, it ensures that if directors, when they receive notices advising directors, do not cause their company to take certain actions with respect to debt then they will become personally liable. As I said, this is a remedial provision which clarifies the law as a consequence of a recent court of appeal decision.

Schedule 8 is the fulfilment of the Gillard government's 2010 budget commitment to provide a regulatory framework to improve the integrity of public ancillary funds similar to that which has applied to private ancillary funds since October 2009. This framework will provide the trustees of such funds with greater certainty as to their philanthropic obligations. Schedule 9 is aimed at ensuring that we are providing greater incentives to our domestic film industry. It goes to changes to the film tax offsets, and these changes affect producer offsets and the location and post-digital and visual effects offsets. They will apply from 1 July 2011 and are estimated to increase expenditure on the film tax offsets by around $8 million over the forward estimates—that is a tax expenditure, of course. These amendments to the film tax offsets are aimed at reforming and strengthening the Australian film production industry, something that I know is very dear to the hearts of all members in this place.

The schedules in this bill are an important part of the government's taxation reform agenda. The reform agenda does not end with this bill; it is far-reaching to ensure that we have a sustainable and equitable taxation system which creates the right sorts of incentives for economic activity, is administratively efficient and generates the revenue necessary now and into the future to ensure that the Australian government, whoever occupies the Treasury bench, has the revenue necessary to deliver the services that all Australians expect. I commend this bill to the House.

Michael McCormack (Riverina, National Party) Share this | Link to this | Hansard source

I would like to take up two points that the member for Throsby raised. Firstly, like him, I attended the national disability insurance breakfast this morning, where we heard a most gracious speech, I have to say, by the Prime Minister in relation to the Every Australian Counts campaign. This has bipartisan support and needs to be brought forward sooner than the seven years suggested. Like the member for Throsby, I am signed up to the cause, and I am proud to say that I was the first New South Wales parliamentarian in this place to put my name to the campaign.

The member for Throsby also said that Australia has too many taxes, and again I find myself in agreement with him. But on this point I do say that his Labor government—the federal Gillard, Greens, Independent, Labor government—has not yet seen a tax it does not like. It has not yet seen a tax it will not impose on the people. Yesterday we saw the carbon tax, the misnamed 'clean energy' bills, foisted on the Australian nation. In the electorate of Throsby I am sure that people are going to be very angry with the fact that these carbon tax bills have been put through the lower house and that they will possibly pass through the upper house, where I am sure that New South Wales Nationals Senators Fiona Nash and John Williams will be doing their utmost to prosecute the case against the carbon tax. I want the member for Throsby to know that people in his electorate will be angry. I want him to remember that word 'angry' because that is what people are certainly going to be in his electorate.

The coalition has no issues with some schedules of the Tax Laws Amendment (2011 Measures No. 7) Bill 2011. Overall we agree with the amendment, but there are some aspects which are of some concern. Looking at the amendment in its entirety, it seeks to alter the tax treatment of special disability trusts, which, as we have heard, takes into account the National Disability Insurance Scheme. It reduces the lowest marginal tax rate for Pacific seasonal workers; makes changes to the taxation financial arrangements; seeks to give the Commissioner of Taxation limited discretion to extend time for notifying transitional elections in financial arrangements; alters farm management deposits to allow for withdrawal within 12 months when affected by natural disaster; extends temporary loss relief for merging superannuation funds by three months; validates directors' penalty notices invalidated by New South Wales Court of Appeals decisions; defines public ancillary funds and allows the Treasurer to make guidelines to their establishment; and makes various alterations to film tax offsets. All in all, these are some worthwhile amendments.

The coalition has no problems with schedule 1, tax changes for special disability trusts, nor with schedule 2, regarding Pacific seasonal workers. Seasonal workers such as fruit pickers, always difficult to find, will have their lowest marginal tax rate adjusted from the too high—we accept that—29 per cent to 15 per cent. We agree with schedule 3, which deals with the taxation of financial arrangements, as well as schedule 4 pertaining to the limited discretion to extend time for notifying transition elections in financial arrangements.,

Certainly the coalition is in support of schedule 5 relating to the farm management deposits. This schedule allows farmers with farm management deposits to withdraw deposits within a year when affected by natural disasters without incurring a tax penalty. The farm management deposits scheme allows individual farmers to set aside pre-tax income in good years for use in low-income years. This will greatly assist food and fibre producers in regional areas who are so prone to the vagaries of commodity prices, the weather and especially over the past four years, poor Labor government policy. Our farmers are a resilient lot. They can cope with drought, fire, flood, frost, plague locusts, mice and a whole host of other setbacks. But they find it difficult to cope with bad policy from this bad government, which has ignored agriculture and does so at its and the nation's peril. We are best placed to meet the future global food task, but Labor's policies do not, sadly, reflect this.

The government has not acted on the recommendations in the House of Representatives Standing Committee on Regional Australia inquiry into the impact of the Guide to the Murray-Darling Basin Plan. A year on and regional communities are still wondering if they will be able to use the water productively—if they have a future. I acknowledge today we have the Griffith mayor, Councillor Mike Neville, in this place to talk about what future his community and communities around him may well have with the water debate continuing to go on. This government has failed on the Asian bee incursion; the live cattle export trade issue; and the importation of New Zealand apples, thereby placing our sustainable industry at risk of fire blight. Yesterday they voted in the lower house, despite having no mandate to do so, a carbon tax which will hit rural and regional Australia the hardest. Then there is the scrapping of the wheat export marketing system; Labor's inability to deliver the AQIS inspection reform; the European house borer in Western Australia, myrtle rust; the exit grant fiasco; Labor's inability to manage the grasshopper and mouse plagues; its inability to deliver reforms on the Australian Pesticides and Veterinary Medicines Authority; its slow reaction to floods, particularly in New South Wales; the scrapping of exceptional circumstances, leaving farmers in financial and emotional despair; its inability to deliver appropriate labelling for Australian produce; and the milk price debacle, turning its back on our wonderful dairy farmers. Put simply, the Gillard-Greens government, propped up by the three Independents, has failed the regions and the people who grow our food and the fibre to help clothe us.

As far as this amendment is concerned, farm management deposits provide tax benefits if retained for at least 12 months but if withdrawn before 12 months an amended tax return for the year of the deposit must be lodged. There is currently an exception to this 12-month rule for farmers in exceptional circumstances but this exception excludes those events covered by natural disaster relief and recovery arrangements. This measure extends this exemption to include those areas covered by an applicable natural disaster, that is where NDRRA are declared. These measures were announced in the 2012 budget.

Schedule 6, the extension of temporary loss relief for merging superannuation funds, requires this amendment to avoid capital gains tax being imposed on recent fund mergers. Industry would prefer this relief to be made permanent to remove the significant barrier to the merger of some smaller funds. But overall the coalition supports this amendment and does commend it to the House.

Andrew Leigh (Fraser, Australian Labor Party) Share this | Link to this | Hansard source

Last week I had the pleasure of attending the Australian government's two-day tax forum. When I mentioned to a couple of friends that I had been spending two days talking about tax, they rolled their eyes. To many of us, I think, the tax system is something that is too complicated, too tricky to understand, too involved with interest groups and too detailed. But every now and then we need to step back from the minutiae of the tax system and remind ourselves of the simple maxim that with taxes we build society. I was reminded of that this morning in speaking with Ken Neilson, who I am pleased to say is here in the gallery. Ken was a good friend of my paternal grandfather, Keith Leigh. Keith passed away the year before I was born. Through Ken I have had the privilege of getting a bit of an insight into what my paternal grandfather was like and into the values that drove him—of Methodism, of a fair go and of making sure that Australia was a generous country with a social safety net that befits our affluent society. I was reminded of the same values this morning while attending the Every Australian Counts morning tea in support of a national disability insurance scheme, speaking there with Estelle Baines and her daughter Scarlett about the challenges that children with disabilities, adults with disabilities and their carers face under the current system.

It is important for us all to recognise that we need a strong tax system to fund the social services that Australians demand. At the same time, that tax system should not take in more revenue than it needs to do its job. This year the tax share is expected to be 21.8 per cent of GDP, less than the 23.5 per cent we inherited. That is not a bad thing. Those of us on this side of the House do not strive to increase the tax take for its own sake. Our aim is to keep taxes as low as they need to be to fund the social services that we support.

As part of the Tax Forum there was a broad discussion of how Australia's tax system can be improved and a broad recognition that it is important to move from mobile tax bases to immobile tax bases. That is why this government is working to bring down the rate on company taxes. We recognise that, in a world of mobile capital, if we have high company tax rates our companies will not get the investment that they need to grow employment and boost wages. That is why we are putting in place a minerals resource rent tax, recognising that, by their very definition, Australia's minerals cannot travel, they will always stay here, and that Australians should get a fair share for the minerals that are their birthright.

We recognise that taxes can be used to bring about better environmental outcomes. That is why we put in place reforms to put a price on carbon pollution and reforms to change the old fringe benefits tax system, which created perverse incentives to get a bigger car and drive it further. We have recognised that complexity is a major challenge in the tax system. As part of that, we are raising the tax-free threshold, tripling it from $6,000 to $18,200. Phasing down the low-income tax offset is the right thing to do. We recognise, through that, that we should have people filing a tax return as seldom as is absolutely necessary. My constituents, I can assure you, do not enjoy filing their tax returns. They are not alone in that. I have been suffering through my own over this past weekend. Anything we can do to take complexity out of the system and ensure that fewer people have to file is a good thing.

We also use the tax system to implement important social policies, like the Higher Education Contribution Scheme and the arrangements put in place under the Hawke government for the collection of child support obligations. Our tax system is also used to collect compulsory superannuation contributions. In a week in which we have heard those opposite say that people's eyebrows will fall off when the carbon price comes in, it is important to recognise that many of those opposite said similar things when universal super was put in place by the Keating government in 1992. But of course universal superannuation was a great boon to the dignified retirement of many Australians. Universal superannuation is not something which any party now goes to an election claiming to abolish. It will be the same with putting a price on carbon pollution. Indeed, this government is now committed to raising the universal superannuation contribution rates. We are doing so within a context in which the Australian retirement savings system is recognised to be one of the best in the world. A recent report from the 2011 Melbourne Mercer Global Pension Index rated Australia's retirement system as being the second best in the world, after only the Netherlands. The Mercer report noted that there is no perfect retirement system, but it said that the Australian system did particularly well, due in large part to universal superannuation. The Mercer report did, though, note that raising the level of mandatory contributions would be an important way of improving Australia's overall index value. And that is exactly what this government is doing in moving the universal superannuation contribution rate from nine per cent to 12 per cent.

The Tax Laws Amendment (2011 Measures No. 7) Bill 2011 puts in place a number of important amendments. The removal of income tax impediments affecting special disability trusts means that now the trustee of a special disability trust can sell the primary residence of a person with a disability without incurring CGT. As a result, that provides more money to assist in the future care of a family member with a disability.

We are reducing the marginal tax rate of Pacific seasonal workers, recognising as we do that the sensitivity to marginal tax rates is particularly high for low-wage workers. Just as we have sought to reduce effective marginal tax rates by lowering benefit withdrawals, this is a reform in the same spirit. We are dropping the marginal tax rate for participants in the Pacific Seasonal Worker Pilot Scheme from 29 per cent to 15 per cent.

We are putting in place technical amendments regarding the taxation of financial arrangements and pay-as-you-go instalments. There are similarly uncontroversial amendments regarding the commissioner's discretion to extend the notification time for taxation of financial arrangements and farm management deposits.

We are extending by three months the temporary loss relief for merging superannuation funds. That is being done in recognition of some of the ongoing difficulties certain funds are facing. We are also introducing a variation on penalty notices, in response to an adverse New South Wales Court of Appeal decision in the case of Deputy Commissioner v Soong. Another reform is the improvement in the integrity of public ancillary funds. Finally, we are putting in place reforms to the film tax offset, amending the location offset in such a way as to increase the incentive to invest in films in Australia.

I end where I began with an acknowledgement of Ken Neilson and my late grandfather Keith Leigh, who I believe would be proud of the work this government is doing to put in place a tax system that is efficient, equitable and simple and that raises the revenue we need in order to put in place the social programs that Australians deserve. I commend the bill to the House.

Jill Hall (Shortland, Australian Labor Party) Share this | Link to this | Hansard source

I rise to support the Tax Laws Amendment (2011 Measures No. 7) Bill 2011. In doing so I will outline that there are nine schedules to this bill. The bill is a very significant piece of legislation and I am pleased to see that the opposition supports it. The schedule that I would like to particularly comment on is schedule 1, which relates to disability trusts. When disability trusts were established I do not think that proper mechanisms were put in place. Schedule 1 removes the income tax barriers that impede families from making financial contributions to disability trusts. These changes include extending the capital gains tax main residence exemption to SDTs and provide a CGT exemption for assets transferred into the special disability trust for no consideration. By removing these barriers, special disability trusts become more attractive for families looking to provide long-term care for family members with severe disabilities. In my electorate, I have been working with a constituent who had set up a special disability trust to care for her disabled son and who had made her other son the trustee in charge of this special disability trust. The more she looked at it the more she found that it would not work and would have enormous implications for his financial security into the future. Therefore, it was not achieving what she wanted for her son with a disability. I would like to put on record my thanks to the minister for this change that he has made to schedule 1. It will benefit a number of families throughout Australia. I commend the legislation to the House.

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

I would like to thank those members who contributed to this debate and in particular the member for Shortland for her contribution. Schedule 1 amends the income tax law to make it easier for families and carers to make a financial contribution to a special disability trust in order to provide for the future care and accommodation needs of a family member with severe disability. These changes will enable families and carers to donate assets to a special disability trust without facing a CGT liability and will ensure that a special disability trust can access the CGT main residence exemption.

Schedule 2 reduces the lowest marginal tax rate for Pacific seasonal workers, improving remittance outcomes for participants in the government's Pacific Seasonal Worker Pilot Scheme. It will also help alleviate the relatively high effective tax rates that these workers are currently subjected to. These changes help support the government's broader Pacific engagement strategy, which is designed to improve the economic development of our Pacific neighbours. Australian workers and other nonresidents will not be impacted by this change. Further, as nonresidents, Pacific seasonal workers do not have access to the tax-free threshold or the low-income tax offset.

Schedule 3 amends the pay-as-you-go instalment provisions to ensure that the concept of instalment income and the concepts of gain and loss in the taxation of financial arrangements, the provisions in stages 3 and 4, interact appropriately and in a way that does not impose significant compliance costs for affected taxpayers or administrative costs for the ATO.

The amendments in schedule 4 provide some administrative flexibility so that affected TOFA taxpayers are not prevented from obtaining the compliance benefits of the transitional election. Schedule 5 makes a number of changes to the farm management deposit scheme. The amendment to exempt primary producers from the 12-month rule will remove the existing situation whereby primary producers affected by drought are treated more generously than those affected by natural disasters such as floods and bushfires. This schedule gives effect to the government's 2011-12 budget announcement.

Schedule 6 amends the application provision of the temporary loss relief for merging superannuation funds to extend the end date by three months to 30 September 2011. This will benefit affected funds by providing additional time for mergers to take place before the loss relief expires. The requirement that affected mergers are completed in a single income year is relaxed to permit funds to benefit from the extension. Schedule 7 ensures that certain director penalty notices remain valid. These retrospective amendments will help preserve the integrity of the tax compliance framework by clarifying that certain penalty notices remain valid and the penalties attaching to these notices will remain recoverable.

Schedule 8 honours the government's 2010-11 budget commitment to improve the integrity of public ancillary funds and to provide the trustees of such funds with greater certainty as to their philanthropic obligations. Following a thorough public consultation process, this schedule amends the Income Tax Assessment Act 1997, the Taxation Administration Act 1953 and the A New Tax System (Australian Business Number) Act 1999 to improve the integrity of public ancillary funds.

Schedule 9 makes a number of changes to the film tax offsets. The amendment to the producer offset will refine delivery of government support to screen producers, reduce the financial and administrative burden on applicants and improve operational efficiency. These amendments to the film tax offset will reduce the compliance cost for affected taxpayers and this schedule gives effect to the government's 2011-12 budget announcement.

The bill deserves the support of the parliament. I thank those members who have contributed and I commend this bill to the House.

Question agreed to.

Bill read a second time.

Message from the Governor-General recommending appropriation announced.

Ordered that this bill be reported to the House without amendment.