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

This tax law amendment bill was introduced into this place on 21 March by the Assistant Treasurer. I will say at the outset that the opposition will not be opposing this bill. It has five schedules. I will very briefly run through each of them as the minister did during his introduction back in March.

The first schedule disallows a deduction against rebatable benefits from 1 July 2012. This relates to a 2010 High Court case that held that study expenses incurred in gaining student Youth Allowance were able to be deducted from assessable income. In summary, that case changed what had been the previous law and practice prior to that decision. It was the position not only of this government but of previous governments, including the Howard government, that study expenses not related to employment were not tax deductible. Following the High Court decision, the government announced in the 2011-12 budget that it would disallow deductions from 1 July 2012, although it would allow them for 2010-11 and prior income years in line with the court decision. This change restores the tax position to what it was prior to that High Court decision or what the understanding of it was.

The second schedule relates to limited trading stock exemptions for superannuation funds and removes the trading stock exemption to the capital gains tax primary code rule for certain assets of a complying super fund. The Assistant Treasurer outlined this schedule in some detail in his introductory speech.

The third schedule is a tax exemption for ex gratia payments to New Zealand non-protected special category visa holders. Essentially, it exempts income tax ex gratia payments to New Zealand non-protected special category visa holders paid in relation to the floods in January of this year. This schedule is necessary for consistent treatment with other previous natural disasters and payments in this regard and is non-controversial.

Schedule 4 enacts a decision that the government announced, I am pretty sure, in the MYEFO with respect to the phasing out of the dependent spouse tax offset.

The final schedule, as is always the way with these tax laws amendment bills, is a series of miscellaneous changes to address what are always termed 'minor technical deficiencies'. In this case, it is in the MRRT legislation, we are told, and a series of other drafting issues that are necessary.

As I indicated at the outset, we will not be opposing the bill. Of course, as we have pointed out, the MRRT bills as passed were legislatively flawed—and the government knew it when they put them forward—and schedule 5 deals with very technical issues. Each of the four unrelated schedules relate to fairly technical tax issues and, as is almost always the case, the coalition comes to these debates wanting to see improvements in the technical aspects of the tax legislation, and this is no different.

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

Tax reform is continuous because it is essential that the government of the day ensures that our taxation system is fit for the purpose. Included in those purposes is regulating and encouraging activity, raising revenue and, in certain circumstances, discouraging certain activity, such as smoking cigarettes and the like. The measures contained within this series of bills go to each of those points. In most respects, they appear to have the support of all members of this House—and that is welcomed, because there have been instances where legislation intended to reform the tax system has not enjoyed support on all sides of this House—and it is probably why the Treasurer was able to stand up in his budget speech last night and deliver a budget which is going to return the budget to surplus in 2012-13 and at the same time provide additional funds for much needed social purposes. This is in complete contrast with those on the other side, who have a gaping $70 billion black hole in their budget. The reason there is a $70 billion black hole in their budget is that they are not willing to do the hard yards—in particular when it comes to putting in place responsible savings measures.

There are five schedules in the Tax Law Amendment (2012 Measures No. 1) Bill 2012; the first of which has the intention of putting in place amendments which will restore the intended operation of the GST law. This was made necessary because of an adverse decision in the Department of Infrastructure and Transport case. It will ensure that the supply by a healthcare provider paid for by an insurer or a government entity is treated as GST-free supply, where the related supply from the healthcare provider to an individual is GST-free health supply. The amendments avoid increased compliance costs arising for taxpayers in the multiparty arrangements involving suppliers of health related goods and services, and have been supported by industry.

The second schedule also deals with GST treatment of appropriations. The amendments again restore the policy intent of GST law following another adverse decision in 2009 of the full Federal Court in the TT-Line case. The amendments will ensure that payments under a government appropriation relating to the non-commercial activity of government related entities are not subject to GST. This was the understanding of the law prior to the TT-Line decision. The amendments will ensure that there is no increase in compliance or cash-flow costs for government entities and that the Commonwealth, states and territories will not need to change their budgetary processes.

Schedule 3 of the bill is a savings measure. Schedule 3 goes to the superannuation concessional contributions cap. It attempts to put back the indexation that would otherwise have applied for the concessional contributions cap. It was expected that the indexation would increase the concessional contributions cap from $25,000 to $35,000 per annum in the year 2013-14. The pause in indexation essentially means that the cap will not now increase until 2014-15. As the higher concessional contributions cap for individuals aged 50 and over and the non-concessional contribution cap only move with changes in the general contributions cap, these contributions caps will not change in 2013-14. They are expected to generate savings in the order of $485 million over the forward estimates period. It is an important savings measure and again one that enables us to deliver a budget which will return to surplus.

The fourth schedule goes to the situation where taxpayers either accidentally or inadvertently make contributions in excess of the concessional contributions, thereby attracting a greater tax upon those contributions. The measures in this bill will enable the tax office to refund—on the request of the taxpayer, without attracting any more than the marginal tax that would otherwise apply to those superannuation contributions—those excess superannuation contributions as if they had not been paid as superannuation and are just taken as any normal form of income.

The fifth and sixth schedules go to the disclosure of superannuation information. The sixth schedule in particular is important because it places an obligation on employers to advise when the superannuation guarantee contributions are going to be made to their employees. This is important. It works hand-in-hand with the Fair Work legislation because it sends a trigger to the individual employee enabling them to check that their superannuation contributions have been made.

The ATO reports that the vast majority of employers are paying in accordance with their obligations their superannuation contributions on behalf of their employees. But the 2010-11 annual report reported that there were in excess of 17,000 individual employee complaints in relation to suspected non-payment of superannuation entitlements. Nearly $269 million in unpaid superannuation entitlements was collected and deposited into employee superannuation accounts as a result of these complaints and the investigations by the tax office, and there were around $140 million in penalties. Whilst it may only be one per cent of the employer population that is not complying with their obligations, the impact on employees is profound, and that early signal to the employee, which enables them to check if they fear their superannuation contributions are not being made, saves a lot of heartache for the employee. It ensures that their entitlements are paid in full and on time and alerts the tax office, as well as the employee, to other issues that may be going on inside the firm. I am very pleased that each of these schedules is enjoying the bipartisan support of all members in this place—as indeed they should. I commend this legislation to the House.

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

It is my pleasure tonight to rise on the Tax Laws Amendment (2012 Measures No. 1) Bill 2012. This bill is an important part of the government's economic reforms—a set of economic reforms that are laying the foundation for Australia's prosperity. It is a set of reforms that recognise we are here not just to help in solving immediate problems but also to put in place long-term solutions. I see the Assistant Treasurer in the chair here, and I would note in particular the aged care reforms, a set of reforms that are long overdue and that recognise that for too long the Howard government put bandaids on an aged care system that really needed root and branch reform. I commend him for his work on aged care reform.

In the area of tax laws, this Labor government is committed to improving the tax schedule. We put in place the Henry review—a comprehensive review in the spirit of the 1975 Asprey review—which really looked right across the tax code at reforms that were needed. One of those reforms was the abolition of the dependent spouse tax offset, and this bill continues that. In an earlier bill, this parliament chose to abolish the dependent spouse tax offset, except for taxpayers with a spouse born on or before 1972. Now that date is taken back to 1952. That is an appropriate change, recognising the change in our society since the dependent spouse tax offset was put in place. It recognises that a dependent spouse tax offset was a measure that might have been appropriate in a day when most men worked and most women were homemakers, but is not appropriate in modern Australia.

In the same spirit, we are continuing to modernise a range of different tax measures. Today this House has been debating the abolition of the education tax refund and its replacement with the schoolkids bonus. That again was an updating of the tax and benefit system, and it was an updating that recognised that the education tax refund was not being claimed by one million of the 1.3 million Australians who were eligible for it. Those opposite in the debate today were arguing that the one million out of 1.3 million Australians who were not claiming the tax refund in full somehow did not want the money. Well, they would have been the first to have met an Australian who did not want $410 for a primary school child and $820 for a secondary school child. What is more likely, and the reason that we reformed that particular provision, was that Australians were simply too time poor and busy to be able to keep the receipts necessary to make those claims. One of my staff related to me a conversation she had had with friends of hers who had three young children and who were simply unaware of the education tax refund. They were on family tax benefit part A: they were doing it tough and they needed the money, but they did not know about the provision and they were not getting those benefits.

As John Maynard Keynes once said: 'When the facts change, I change my mind. What do you do, Sir?' We on this side of the House looked at the facts and they were incontrovertible. One million out of 1.3 million Australians were not claiming the education tax refund. It just was not good enough, and we replaced it with the schoolkids bonus—a measure which goes to all Australians. Those opposite are concerned that the schoolkids bonus will not be spent on education expenses, but it is very clear when you look at Australian families that they are spending substantial amounts of money on their children's education.

It is unusual to see those opposite arguing that money going to families should be tied. If you like, it is a conservative notion, not a liberal notion. If you are a small 'l' liberal, then you believe in putting money in the hands of families. You trust them to do with that money what is best. If you are a conservative you do not trust families. It is the spirit of conservatism that gave rise in the United States to the food stamp system, a notion that you cannot just give poor people money, you have to give them tied money—money that is tied to spending on food. We in Australia have not had things like food stamps because we have trusted low-income Australians to do the right thing with money that is given to them by the government. That is the same spirit that embodies the schoolkids bonus. It is a spirit that says if you put money in the hands of parents of school-aged children they will do the right thing with that money, but it is not necessary to tie that money to educational expenditure to get a better outcome. Those opposite, taking the conservative path, distrust low- and middle-income Australians to do the right thing by their kids. We on this side of the House are taking the small 'l' liberal approach, the market-based approach—as on so many issues—by taking the view that Australians will do the right thing with money that is placed in their hands. We have seen the clear contrasts in this budget process. We have seen the strong recognition from the IMF of Australia's fiscal position and a broad recognition across economic commentators that Labor has a lower tax-to-GDP ratio than the Howard government did—that it is Labor that delivered real spending cuts. It is a real contrast, in that sense, with what happened in the Howard government under mining boom mark 1. The Howard government never had to face the tough decisions. It saw the money roll in and it just rolled it out the door.

It is Labor which has made tough decisions about what we are not going to continue funding. The government is about values, priorities and making choices for things you are not going to do. That is a great Labor tradition, with finance ministers Peter Walsh, Lindsay Tanner and now Penny Wong. What it chooses not to do marks out a party as much as what it chooses to do. But in this budget we are choosing to invest in critical areas of the economy—in skills and training, in a national broadband network, in spreading the benefits of the mining boom, in putting a price on carbon and in returning the budget to surplus in 2012-13.

Those opposite are like deer in the headlights. That is probably a little unfair to deer. Let us think about fish out of water. They are flip-flopping like fish out of water. We saw this in the famous budget reply of 2010. The Leader of the Opposition said that he would identify savings, and then the member for North Sydney said that he would identify savings and then the member for Goldstein was going to do it. Finally, the fish flopped here and there and was just left with an adviser at the back of the room shaking his head.

We saw it with the $70 billion black hole. The member for Goldstein and the member for North Sydney went to-and-fro on talk show after talk show on whether or not the $70 billion black hole was a real figure. Sometimes they said: 'Yes, it's our figure. It's a big target to meet.' Sometimes they said, 'That's a Labor hoax.' They were flip-flopping like a fish out of water. We have seen it in the question of entitlements. When we look to means-test benefits, such as family tax benefit part B, the baby bonus and the private health insurance rebate, those opposite say we are playing the politics of envy. They say that we are engaging in class warfare when we put in place means tests at $150,000. The shadow Treasurer went overseas and said, 'We'd like to have a Hong Kong style welfare state.' That is a pretty substantial cut to benefits, one would think. Then the Leader of the Opposition came out immediately and said: 'Oh, no. The coalition won't be cutting benefits.' They are flip-flopping like fish out of water.

When it comes to economic policy there is really only one member of their frontbench who does not look like a fish out of water and that is the member for Wentworth. He delivered a very thoughtful speech at a Melbourne institute event I attended here in Canberra. He spoke about his views on a sovereign wealth fund. I disagree with his conclusion that Australia needs a sovereign wealth fund but he put, quite provocatively, the argument that under the Howard government spending had sometimes got out of control, and argued that this could be the case for other governments. I can imagine his colleagues afterwards, saying: 'What were you doing up there on the surface? Surely you should be down here with us, down here swimming in the warm waters of populism.'

We know what their view is on costings. We have had very clear statements that the coalition are now going to eschew the parliamentary budget office—the same parliamentary budget office that Senator Joyce and the member for Higgins said they would back. They backed off that because they realised how deep their budget crater is. They realised the problem they got themselves into last time, when they went to the election and were later found to have an $11 billion black hole in their costings.

In response to Treasury finding the $11 billion black hole we saw the member for Mackellar and the member for Goldstein traducing the reputation of Ken Henry, a great Australian who was appointed Secretary of the Treasury by Peter Costello. Their response to Ken Henry finding that the coalition costings did not add up was a bit like the rich kid whose maths teacher finds a mistake in his homework—he immediately goes to the principal and asks for the maths teacher to be fired. They were in here attacking Ken Henry and attacking the Department of the Treasury for what they said was politicised work. It was nothing of the sort. The Department of the Treasury engaged in the same costings process for the coalition that it has engaged in for other political parties.

The coalition have now moved to an audit commission. That audit commission is simply a phrase to disguise the fact that their costings will not be audited this time. Why will they not be audited? It is because when they went to the last election they discovered that audit has a legal meaning. If you want an accounting firm to audit your costings, it must afterwards say that they have been audited. I spoke yesterday in this place about the shadow Treasurer's attempts to suggest that there was such a thing as a small 'a' audit and that somehow the coalition could engage in a small 'a' audit rather than a large 'A' audit. Unfortunately, there is no such thing.

That is where we find ourselves, with the coalition, at the moment: all promises to special interests but an inability to make the hard decisions that government requires. Government does require often unpopular decisions to be made. Certainly we would not be claiming that every decision made by this government has been greeted with universal acclaim by the Australian people. But that is true of all the major economic reforms in Australian history. Great reform is not invariably greeted with cheering in the streets. It requires steady argumentation. It requires engaging the Australian people in a long conversation about why reforms are necessary.

You can imagine the Leader of the Opposition had he been leader when Australia was to float the dollar. He would have immediately engaged in fearmongering about foreign speculators. We know those opposite have engaged in fearmongering on foreigners. We see that with foreign ownership debates. 'What are foreign currency speculators doing determining the level of our dollar?' the Leader of the Opposition might have then said. In fact, we know he opposed the floating of the dollar as late as a decade after the dollar had been floated. But we now know that that was an enormously important economic reform. It acted like a shock absorber for the Australian economy. When international shocks come along, a floating exchange rate is enormously important to the prosperity of Australians.

Can you imagine if the Leader of the Opposition had been leader when Australia put in place substantial tariff cuts—tariff cuts that halved the price of a pair of kids' school shoes, tariff cuts that puts thousands of dollars in the pockets of Australian households? They were tariff cuts which could, all too easily, have been demonised by a populist looking for short-term gain. You can imagine what the Leader of the Opposition would have done— (Time expired)

Graham Perrett (Moreton, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak, very quickly, in support of the Tax Laws Amendment (2012 Measures No. 1) Bill 2012. This bill is another step forward in the Gillard government's mission to reform the tax system and make it fairer for all Australians. It brings in 2011-12 budget measures aimed at fostering a prosperous and even-handed taxation system—an improved system that supports all Australians.

Australian Labor governments continue to lead the way. We have led our country through global economic uncertainty to today, where it stands as a powerhouse economy on the world stage, the envy of Europe and the OECD, as acknowledged by the leader opposite—when he is in Europe.

We have ensured our fiscal position remains strong despite the global financial crisis. Unlike many other nations, we have successfully avoided recession and prevented serious job losses. This alone is a record of which to be proud. But not only did we safeguard our budget position and Australian jobs; we oversaw outstanding employment growth and a record investment pipeline of $456 billion, as I heard from the Treasurer today, despite the gloom and doom predictions of those opposite of what would be happening in the minerals sector when we brought in the MRRT.

More than 750,000 jobs have been created since the Labor government was first elected. Obviously there is more to be done. It is a patchy economy; we know that. While others pause we push ahead in the interests of the Australian people, and that is what this legislation is all about.

A key Australian value is the concept of a fair go. This bill moves to correct inequity in the tax system created by the High Court decision in the Commissioner of Taxation v Anstis case. It simply is not fair that taxpayers with the same level of income will have different deduction entitlements depending on whether they receive a taxable government assistance payment. The Anstis decision violates the basic principle that expenses incurred in generating income that is effectively tax-free should not then be deductible—that is, no money into the public purse should prohibit you from taking money out of the public purse. Overturning the High Court decision is the right thing to do in order to make the system fairer for everybody.

The Gillard government is committed to helping Australian students on income support, but this must be done efficiently and effectively. Providing assistance via the transfer system is more targeted and timely. The university students of Australia have not been forgotten by Labor governments. I stress that. After a decade of underinvestment by the Howard government, Australian universities were in a dire state when Labor came to power in 2007. That is why we increased funding to universities by more than 50 per cent.

Griffith University is one of Australia's most innovative tertiary institutions and its Nathan campus is located right in my electorate; I drive past it every day when I go to work. I have spoken of Griffith University many times in this chamber, and I am very proud of its numerous achievements. Many students at Griffith are already well supported by the Gillard government's measures. For example, we provide start-up scholarships worth $2,100 to students receiving youth allowance, Austudy and Abstudy living allowance. We have lowered the youth allowance age of independence and we are helping many first-year students who must live away from home to study with relocation scholarships worth up to $4,000. This assistance, plus $1,000 in subsequent years, will go a long way to making sure that Moreton students who can no longer live at home get the best start to their tertiary education. I thank the Gillard government for its focus on nurturing tomorrow's leaders.

Another function of this bill is to remove the ability of complying superannuation entities to treat certain assets—primarily shares, units in a trust and land—as trading stock. This measure will reduce present ambiguity around the application of the trading stock provisions.

Another aspect of this bill which speaks to the fundamental principle of fairness in Australia is tax exemptions for payments to individuals impacted in recent flooding in New South Wales and also in my home state of Queensland. The Gillard government is making ex gratia payments to New Zealand special category visa holders who have been impacted by the 2012 floods exempt from income tax. This is in line with the payments' counterparts, the Australian Government Disaster Recovery Payments, which are also exempt. We made these payments exempt for eligible New Zealand residents during the summer of sorrow in 2010-11, and again for those struck by Cyclone Yasi in February last year. New Zealanders living in western Queensland need our help to cope with the financial hardship wrought by the 2012 floodwaters just like their Australian neighbours.

Natural disasters have rocked Queensland in recent times but have served to show the world the compassion and resilience that exists in Australian communities. This spirit was evident in the faces of many people in my own electorate who were hit hard by the 2011 floods. I welcome all measures to help everyone affected by this most recent natural disaster, as my community is only just starting to get back on its feet.

On a different note, but still on the theme of doing the right thing, this bill extends the phasing out of a truly outdated tax offset, the dependent spouse tax offset. This relic of the tax system is better placed in a black-and-white television show than in modern-day Australia. The dependent spouse tax offset was introduced at a time when a husband was expected to maintain a spouse, even without children, and there were limited employment opportunities for women. Considering that the leader of our country and our head of state are women, this is definitely no longer the case in modern Australia. Our action to phase out this offset is based on a recommendation from the Australia's Future Tax System Review. Actions such as this are vital as we update the tax and transfer system to better align with community expectations. It is important that all Australians who can work do so. However, we know it can be unreasonable for a spouse who has been out of the workforce for a very long time to be expected to find work. That is why we are keeping the current system for spouses who were born before 1 July 1952. In the 2011-12 budget the Gillard government introduced the carer spouse and invalid spouse tax offset to ensure that taxpayers who maintain a spouse who is unable to work because of their invalidity or carer obligations are not affected by these long overdue changes. We have also taken the limited employment opportunities in regional areas into account, making sure that taxpayers eligible for the zone tax offset will not have their entitlement affected.

Finally, this bill makes miscellaneous amendments to the taxation laws. These changes are part of our commitment to look after the tax system. Such changes are made from time to time to correct technical or drafting issues, remove anomalies and correct unintended outcomes in the tax legislation; in this case the changes address minor technical issues which have been identified with the minerals resource rent tax legislation. Such bills have been aimed at delivering practical measures to support individuals, families and small businesses across Australia. We must continue to improve the quality of our systems, continually evaluating processes to ensure they suit the aims of modern Australia. This bill is a fine example of the Gillard government's commitment and I commend it to the House.

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

I would like to thank those members who have contributed to this debate. Schedule 1 of the Tax Laws Amendment (2012 Measures No. 1) Bill 2012 implements the government's 2011-12 budget measure to disallow deductions against government assistance payments. The measure reinstates the principle that stood prior to the High Court decision, in the Commissioner of Taxation v Anstis, that taxpayers should not be able to claim a deduction for expenses they incur in qualifying for government assistance income. Disallowing deductions against rebateable benefits recognises that these benefits are effectively tax free because of the operation of the beneficiary tax offset.

This measure is important as it restores equity in the tax system so that individuals with the same level of income pay the same amount of tax. The measure is also important as it provides certainty to taxpayers on the scope of eligible deductions. The government provides targeted and timely assistance to the students who need it the most through the transfer system. Measures this government has introduced include start-up scholarships for new students, relocation scholarships for students who need to live away from home to study and a reduction in the age of independence for youth allowance to 22 from 1 January 2012.

Schedule 2 amends the income tax law to clarify the tax treatment of certain assets owned by a complying superannuation entity, including shares, units in a trust and land. These changes remove the ability of complying superannuation entities to treat these assets as trading stock, which is consistent with the general industry practice of treating shares on capital account.

Schedule 3 provides an exemption for ex gratia payments made to certain New Zealand visa holders affected by the recent floods in New South Wales and Queensland. Exempting these payments from income tax maximises the amount of payments that individuals receive and is consistent with the tax exemption provided to the equivalent payments to Australians, which is the Australian government disaster recovery payment. It is also consistent with the exemption provided for ex gratia payments to certain New Zealanders affected by the 2010-11 floods and Cyclone Yasi.

Schedule 4 of this bill implements the government's 2011-12 Mid-Year Economic and Fiscal Outlook measure to phase out the dependent spouse tax offset for dependent spouses born on or after 1 July 1952. The dependent spouse tax offset needs to be reformed to allow for Australia's modern and growing economy. This reform is an important measure to reduce the disincentive for dependent spouses without children to undertake paid employment. Taxpayers with a dependent spouse aged 60 or over on 1 July 2012 will not be affected by this measure, nor will dependent spouses with children, or taxpayers whose dependent spouse is a carer, an invalid or permanently unable to work. Taxpayers eligible for the zone, overseas forces or overseas civilian tax offsets are also not affected by this measure.

Schedule 5 rectifies some minor technical and machinery errors which have been identified in the taxation laws. The government periodically progresses miscellaneous amendments like these as part of its care and maintenance of the taxation laws. I commend the bill to the House.

Question agreed to.

Bill read a second time.