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

In speaking on this Tax Laws Amendment (2012 Measures No. 4) Bill I will deal with each of the three schedules. I will deal with the first schedule, which is in many respects the most comprehensive schedule, last. I will deal with the less controversial schedules 2 and 3 initially.

This bill was introduced into the House on 28 June by the Assistant Treasurer and Minister Assisting for Deregulation, the member for Lindsay. The bill, as I just indicated, has three schedules. The first alters the living-away-from-home allowance rules, which is a budget measure. The second clarifies the GST treatment of certain transactions involving incapacitated entities. Finally, the third schedule clarifies the treatment of interest payable on sums overpaid or underpaid by the ATO and taxpayers in the case of amended assessments under the consolidation regime.

As I indicated, I will deal with those final two schedules first. Both are technical amendments that are necessary and cause the opposition no problem whatsoever. In respect of the clarification of GST treatment of incapacitated entities there is a bit of a history to this but, as with most measures, this is seeking to clarify the original intent of the GST legislation, following a court case. That is quite normal in these tax law amendment bills.

The third schedule, dealing with consolidation, is part of the tax treatment of consolidated entities. My colleague at the table at the moment, the member for McMahon, was dealing with consolidation when he was Assistant Treasurer, so it is a bit of an ongoing feast, isn't it, Minister? The government announced last November that no interest would be payable by the ATO if an overpayment of tax was made by a company and then a subsequent assessment finds a deduction is allowed. A company will not be liable to pay shortfall interest or administrative penalties if an amended tax return increases income tax liability because a deduction is subsequently disallowed. Both these changes are in relation to the amendment of the consolidation regime passed in the Tax Laws Amendment (2012 Measures No. 2) Bill 2012. Both schedules have a nil financial impact.

Let me now turn my attention to the first schedule if I may—that is, with respect to changes to the living-away-from-home allowance. What this bill proposes to do is to change the rules regarding that allowance to allow a deduction for employees for substantiated accommodation, food and drink expenses above ordinary weekly food and drink expense items. Essentially—I am referring now to the report of the Standing Committee on Economics that inquired into this bill and reported in the last 10 days or so, and specifically to the coalition members' report—the bill would, as those committee members articulate rather well, split the taxation treatment of the food and drink allowance. The first $42, that being ordinary weekly food and drink expenses, would be treated under fringe benefits tax legislation. Then additional reasonable expenses for food and drink would be treated as a tax deduction under the income tax legislation. I will come back to that particular aspect in just a second, because it is a moving issue as far as the government is concerned today.

The other aspect of the government's proposed changes in this legislation is to limit that allowance to a maximum period of 12 months, with fly-in fly-out workers being exempted from that limit. My colleague the member for Wright, with me in the chamber, is a member of that committee and has inquired into this legislation in some detail. I know he has some remarks to make later on in the debate.

I will return to that aspect of this proposal in the legislation essentially to split the taxation treatment between the fringe benefits tax and the income tax systems. It was that that particularly got the focus of all members on that economics committee. Recommendation 5 recommended that the living-away-from-home allowance and associated benefits be treated within one taxation system only. And it went on to say:

The committee supports retaining the taxation treatment of living-away-from-home allowances wholly within the fringe benefits tax system.

The government, as I said at the outset, introduced this legislation on 28 June. When they introduced this legislation the Assistant Treasurer said:

The government held two extensive consultation processes in relation to these reforms.

I have to say that with what has occurred at the committee and with what has occurred today every member of this House is right to doubt that statement from the Assistant Treasurer.

It is worth checking whether he just says this as a matter of course in every tax law amendment introductory speech. But for the government to have introduced a proposal that would split taxation between the fringe benefits tax and the income tax system and claim they have had extensive consultations, I find that impossible. And not only do I find it impossible; members of the House economics committee found it impossible. You need only look at the submissions that were received. As the coalition members pointed out in arguing that the approach of splitting the tax treatment of food and drink should be abandoned, the submission to the committee by the legal firm Ashurst stated:

Such a system is likely to be unworkable in practice, will significantly increase compliance costs for employers and employees and will give rise to uncertainty.

If they were consulted with, they certainly were not listened to.

The Tax Institute, in its submission to the committee, also observed that the approach in the bill would introduce an additional compliance burden on the Australian Taxation Office, as pointed out by the coalition members on that committee. Those are just two opinions. And Robert Jeremenko from the Tax Institute pointed out that the tax treatment of the allowance should certainly be determined in either the income tax system or the fringe benefits sphere, not both as is currently the case under the bill. He said:

We will have a discussion, I am sure, about which one may be preferable. Let us be honest, the tax system does not need any help in being complex, and this is just a case in point. We do not need to cover both systems for this one.

The minister introducing this legislation claims that 'the government held two extensive consultation processes in relation to the reforms'. You cannot have it both ways. Either the consultation processes were not extensive or the minister and those working on this legislation with him did not listen to what was being said. As I said, the committee recommended that this recipe for difficulty and complexity be rectified. So today we have a situation where this bill has been scheduled a number of different times through the day, and just a few hours ago the government provided the opposition with some background on some amendments which, I am told by the clerks, have been moved in just the last couple of hours.

Essentially the government has told the coalition that the amendments will change that original proposal in the bill to ensure that the allowances are taxed entirely within the fringe benefits tax system rather than in the personal income tax system or a combination of both. The amendments which have been tabled, rushed in at this last minute, apparently also expand the definition of fly-in fly-out workers and drive-in drive-out workers for the purposes of the reforms. They will also expand the definitions in some respects and there are a number of other associated measures.

But my point is the obvious one. This is yet another case where the government has put forward a proposal that has proved wholly unworkable. They claim to have had extensive consultation. At the very last minute they realised they were heading completely down the wrong track and listened to the good work of the economics committee, the entire view of those members on the economics committee. So here we are debating this legislation with amendments moved at the very last minute. Well, it is good that they have listened, but, again, these are late amendments that are being circulated on the very day the bill is to be debated.

The coalition have maintained that there is no doubt that there are arguments for reform in this area, but the way the government has gone about it was to propose something that was poorly designed that would add a great deal of complexity. That is certainly not the path the coalition would have taken in government, and we are of course committed to a more streamlined tax system.

The amendments have been moved. As indicated earlier, my understanding is that the coalition have received from the government certain assurances. We will in this debate take the government at their word that their last minute announcements that have been circulated will give effect to what they claim will address the concerns that have been obvious and that have been highlighted in great detail after the government have tabled this legislation and after they say they have had extensive consultation. We will not be opposing the amendment or the legislation.

Shayne Neumann (Blair, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak in support of the Tax Laws Amendment (2012 Measures No.4) Bill 2012. Like the member for Casey, I intend to deal with the second schedule and the third schedule and then come back to the first. The second schedule deals with incapacitated entities—that is, companies in liquidation. It inserts a tie-breaker provision ensuring that where a representative of an incapacitated entity is in possession or control of the property of a corporation, the GST rules apply to creditors and debtors instead of supplies of property that the representative makes in the satisfaction of a debt that the incapacitated entity owes to the representative. This provides some certainty in the law, particularly for taxpayers who are operating in the mortgage lending sector, which are usually banks or credit unions. It is supported by the industry and is a sensible provision.

The third schedule deals with the consolidation regime announced by the then Assistant Treasurer and Minister for Financial Services and Superannuation back in November 2011. It implements an outstanding element of that announcement, namely, that no interest or penalties are payable on overpayments or underpayments of tax because of a claim for a deduction which is allowed or disallowed as a result of those changes to the consolidation regime by the Tax Laws Amendment (2012 measures No.2) Bill 2012.

The first schedule is what I really want to talk about. It comes about by an old standing law which operated from the days of World War II, back in 1945—that is, amendments to the living-away-from-home allowance. This is not something that applies to fly-in fly-out workers. I have about 3,500 of those workers in my electorate travelling to Central Queensland and Western Australia for work. Many of them have a history of working in the coal mining industry and in other mining in and around Ipswich. They are not actually affected by this particular legislation.

There are a number of deficiencies in the current legislation. The living-away-from-home allowance has had many guises and many amendments made to it over the years. But there are mistakes or problems in this area and there are probably three that we can identify. The first is the problem of somebody not actually maintaining a home in that particular location—that is, they do not have their old home or are renting it out and so they are still living away from home. It is not technically their home so they are still able to claim the concession. That is a problem because it allows them to claim a concession that other taxpayers would not be able to claim in the circumstances.

The second problem was if they claim, for example, in excess of their actual expenditure on accommodation and food then they are still able to claim that tax concession in that particular matter. (Quorum formed)I always thought that the Liberals were interested in tax laws but obviously not. I was going through explaining why this particular tax law was being exploited and abused and obviously they are not interested in good tax law reform. I am glad that my colleagues are so willing to come here and listen but, sadly, they have gone—although I have got the former Speaker here.

The third problem in this legislation was that it could go on for years so it was not a temporary measure. It allowed a small number of people with high incomes to gain concessions which in no way reflected their true income. It simply was not fair or reasonable to ordinary taxpayers who could not get this kind of tax perk. The fact that by closing this down, according to the figures received, it would provide about $1.9 billion over the forward estimates to the taxpayer is a demonstration that this particular method by which people were being paid was being abused. Sadly, it went on for a while and has been a problem.

If you were to give me $1.9 billion, there would be a lot of things I could do in my electorate. If you were to divide $1.9 billion among the 150 members of this House, I am sure a lot of people would spend that money more wisely than by allowing lurks and perks for people who are simply getting taxpayer-funded tax breaks. I think this is good law and this is a sensible provision.

There was extensive consultation on the provision, as the minister said in his second reading speech. The matter was referred to the House of Representatives Standing Committee on Economics, and I thank them for their assistance. I want to make it clear that, with the tax concessions for fly-in fly-out arrangements, employees will not be subject to the 12-month limit. We are also saying that a home in Australia has to be maintained while they are living away from home for work purposes. I think that is reasonable. If they are saying they are living away from home, they should retain a home to get the living-away-from-home-allowance tax concession. The 12-month limit for accessing this tax concession is reasonable in the circumstances.

The matter was referred to House's economics committee. The member for Casey made out that this was some sort of aberration and a failure of the government. It is quite common for parliament to refer bills to parliamentary committees for consideration. I am sure all the people in this place have considered bills in their various committees—for example, on the Standing Committee on Social Policy and Legal Affairs or the economics committee or any of the committees that consider bills in this place. The economics committee called for and received submissions in relation to this. The government has responded to the recommendations of the House economics committee. There is nothing untoward or unusual about that. Governments respond to committees' recommendations all the time. Indeed, under this parliamentary arrangement they are duty bound to do so and within a time limit.

The amendments make it clear that we are dealing with what have been described in the past as 'unintended consequences' for this legislation. A number of things are being done, and I understand that the Assistant Treasurer will deal with this matter further in the chamber shortly. As the member for Casey touched on, the recommendations include returning the tax treatment of all living-away-from-home allowances and benefits to a fringe benefit tax system. I agree with the House economics committee. It seems to be a sensible recommendation that has been taken up by the government. Broadening the concession provided to fly-in fly-out and drive-in drive-out workers to cover those workers who provide their own transport and those whose transport is provided by their employer is another sensible suggestion by the committee. Clarifying the circumstances in which the 12-month time limit may be paused—giving the employer an option to pause, with the effect that no concession can be obtained during a pause—is another sensible suggestion.

I thank the committee, chaired by the member for Parramatta, and I thank all those who participated in the inquiry for coming up with some very good suggestions. There are others as well, but I will not take up the time of the chamber by mentioning those. I thank those who made submissions. It is a prudent way for the public to have their say. I thank the Assistant Treasurer for his commitment. That $1.9 billion can be better spent on roads, hospitals and schools than by being given out in lurks and perks for those who are not the average taxpayer who might work in a shop or an accounting practice and go every day to and from work by car, bus or train and not enjoy the concessions available to a few, who, sadly in many cases have exploited the circumstances of the living-away-from-home allowance.

Scott Buchholz (Wright, Liberal Party) Share this | Link to this | Hansard source

I rise to speak on the Tax Laws Amendment (2012 Measures No. 4) Bill 2012. As the previous speaker said, it is not uncommon for bills to be referred to committees. What is an uncommon practice is for amendments to bills to be tabled just hours before the bill hits the House. That is becoming a more regular occurrence. It has happened with a number of bills I have spoken on recently. What is also becoming more apparent is that in committee hearings—on these tax laws amendments and on other measures—where we have eminent people giving advice or evidence, as well as industry bodies who are unanimous in their position, regrettably those positions will often be discarded in favour of Treasury advice or union advice which is in complete conflict with it. I make that point in reference to comments made earlier by the previous speaker.

The three schedules to this bill are highly concerning. The Tax Laws Amendment (2012 Measures No. 4) Bill 2012 proposes the following changes. Firstly, it alters the living-away-from-home-allowance, or LAFHA, rules. Secondly, it clarifies the GST treatment for certain transitions involving incapacitated entities, which I will go into further, and it clarifies the treatment of interest payable on sums overpaid or underpaid by the Australian Taxation Office—in this case the amended assessments under the consolidation regime. I want to be clear that I and my colleagues do not oppose this bill—particularly the changes that have been forthcoming at the last moment—but I stress that it is critical that the appropriate policies be implemented if Australia is to have a workplace that is capable of ensuring strong growth for our nation and continued economic success while meeting our future skills needs.

The coalition members of the House of Representatives Standing Committee on Economics strongly support its recommendations that the living-away-from-home allowance and associated benefits be treated within one taxation system. The committee supports retaining the taxation treatment of the living-away-from-home allowance wholly within the fringe benefits tax system. As one who sits on the economics committee, I am pleased that the recommendation has been adopted by the government. At least we now see the benefit of the economics committee recommendations being considered after nearly 30 submissions and contributors to the public inquiry, several weeks ago. One contributor to the inquiry was the legal firm Ashurst Australia, which said in its submission:

… such a system is likely to be unworkable in practice, will significantly increase compliance costs for employers and employees and will give rise to uncertainty.

You have to ask the question: why would we burden people with having to comply with both fringe benefits tax and income tax legislation? Such eminent bodies as the Tax Institute have indicated that the approach in the bill would present an additional compliance burden on the ATO as well. We are seeing yet again the government's continuing habit of making amendments before bills are halfway through a debate or even before they are introduced.

The government's response on this matter indicates a serious disregard for 457 visa holders and proves more concisely Labor's complete lack of interest and empathy for business, in particular for the mining sector, the resources sector and the university sector—in my electorate is the University of Queensland Gatton campus—but, more importantly, for the agriculture and horticulture sector, a sector that is vitally important to my electorate of Wright.

The government does not have appropriate policies in place to address current and future labour shortages in Australia and is, essentially, starting to panic. How can a government fail to realise that temporary labour migration is a useful mechanism to manage labour market fluctuations, demands and gaps? Living-away-from-home allowance is one incentive that has been used by employers to attract skilled workers to Australia and especially to the regional areas, where the jobs are, particularly in the mining, resources and university sectors.

With reference to the universities, we heard evidence at the inquiry that we throw our net to the world looking for specialists in their field to come and contribute to research in Australia. There is a small talent pool from which we can try to get people to come here. We heard evidence from universities about the implications of this bill and the ramifications it would have for that sector. Yet the government has made no transitional arrangements for temporary residents, and Treasury has not even undertaken to model such a possibility, despite widespread industry submissions pointing to the detrimental effect and hardship this would cause for both current and prospective 457 visa holders.

These amendments mean that all temporary residents who are not maintaining a home in Australia will lose access to the concession. However, while I acknowledge that there is a problem with exploitation of the current living-away-from-home allowance rules, I believe it is of interest to the wider Australian economy and my electorate that we move forward with accepting these amendments. The exploitation, I believe, is where business owners source personnel from overseas. They pay them, say, $100,000 a year and top them up, over and above that, with the allowance. As I mentioned earlier, the living-away-from-home allowance is one incentive that has been used by employers to attract skilled workers to Australia, particularly to regional areas and to the mining and agricultural sectors.

This bill as originally proposed would essentially have split the taxation treatment of the food and drink allowance, making it more confusing and tying business up in even more red tape. Thankfully, the government has recognised the error of its ways on this issue. The economics committee recognised that introducing this change midstream would mean greater uncertainty for temporary migrants and would potentially damage Australia's attractiveness as a destination for temporary skilled migration. This is particularly relevant for the mining sector, where a guaranteed supply of skilled workers is critical in providing the investor security needed to get huge projects started and to guarantee long-term investment in Australia for Australians. It would have a detrimental impact upon industry decision making at a time when important investment decisions are being made and need to be encouraged. I stress that they need to be encouraged, not hindered. In particular, I am talking about the mining and resources sector.

I mentioned earlier the university sector and that we want to encourage experts in their field to come to Australia. But I also draw attention to the agricultural sector, which is employing migrants and skilled workers on 457 visas. In Queensland—and I am sure also in other horticulture states—the loss of these workers would be a great disadvantage. Our fruit and vegetable growers depend on these workers; they are hardworking and reliable and are a vital part of farm life at the moment.

While there are only a small number of foreign workers in Australia on 457 visas, their economic contribution is substantial. According to Access Economics estimates, the more than 90,000 people entering on 457 visas in 2010-11 will have generated just on $2.2 billion over three years, or more than $27,000 each, while permanent skilled migrants will generate a net fiscal impact of $22,000 each over three years. Furthermore, the imposition of a 12-month time limit has raised concerns that these measures will create widespread uncertainty and may dissuade people from pursuing temporary visas in Australia, leaving many industries with chronic skills shortages and gaps.

The other section of this amendment is a technical clarification to the tax law, which I do not oppose. It clarifies the GST treatment of a representative who is an 'incapacitated entity.' This means, firstly, that no interest would be payable by the ATO if an overpayment of tax is made by a company and then a subsequent assessment finds a deduction is allowed, and that a company will not be liable to pay the shortfall interest or administrative penalties if an amended tax return increases income tax liability because a deduction is subsequently disallowed.

Both these changes are in relation to the amendment of the consolidation regime passed in the Tax Laws Amendment (2012 Measures No 2) Bill 2012.

In conclusion, I reiterate that, while I do not oppose the changes in this amended legislation, it should be noted that they have a very profound impact upon the ability of Australian employers to create attractive compensation packages to attract those skilled workers that Australia vitally needs. With the fact that there is no clear program to ensure that skilled labour will be available in plentiful supply in the future, the simple and inescapable fact of the changes to the living-away-from-home allowance is that this government, without having transitional arrangements, has immediately made 457 visa workers disadvantaged. It has made Australia less competitive when it comes to attracting skilled workers, not to forget the profound change to the landscape of our national ability to attract the best and the brightest to a number of jobs where there is a skilled labour shortage.

This bill shows yet again that the excessive regulations that burden business in this country are reaching new highs. Since November 2007, over 18,000 new regulations have been implemented. Perhaps this government should make a greater effort to understand that there are many people currently working in Australia on 457 visas who have made deliberate financial and career decisions to work here in Australia on the understanding and basis that they would be eligible for the living-away-from-home allowance. To remove this condition without warning does nothing to assist in creating confidence amongst current and future temporary migrants. So, on top of an already preposterous and hurtful carbon tax, the Australian people and, closer to home, the people of Wright are once again forced to settle for a government that is intent on unnecessary complexities and poor tax system designs.

Scott Morrison (Cook, Liberal Party, Shadow Minister for Immigration and Citizenship) Share this | Link to this | Hansard source

I rise to speak on the Tax Laws Amendment (2012 Measures No. 4) Bill 2012 and place on record my strong concerns as shadow minister for immigration and citizenship about the government's handling of the proposed changes to the living-away-from-home allowance, particularly as they apply to 457 visa workers who are existing in the country as opposed to those who may come after, who will be aware of and informed of these changes before making their decisions. Labor's failure to consider the ramifications of these changes for existing 457 visa holders and the industries that rely on temporary skilled labour, let alone investigate transitional options for those temporary workers who are already here, is particularly alarming. It demonstrates a complete lack of understanding of how the businesses that rely on these workers operate and the challenges facing, in particular, the minerals and resources sector, with many standing at a decision point when looking to how they will be investing funds in this industry in the years ahead in terms of the minerals boom. This government does not understand that those looking to invest in Australia, and our resources projects in particular, may simply decide to take their money and go somewhere else.

There are currently more than $500 billion worth of mining and resource projects in the pipeline, which the Treasurer likes to talk about so often. The issue is: how many of these projects will actually be realised? The June Business Outlook by Deloitte Access Economics stated that the 'current spike in investment is due to decisions taken a while back, whereas we are getting few new mining mega-projects across the line'. Of the 393 resource projects listed in April, 75 per cent remain uncommitted, with a combined potential capital expenditure of $243 billion. The Newport Mining business outlook report for 2012-13 found that just 25 per cent of companies surveyed are planning to invest in major capex projects this year, in comparison with 52 per cent last year.

According to DFAT, planned and committed investment by Australian companies in African resources projects now exceeds $50 billion, with Australian resources companies having more projects in Africa than any other region in the world. They note there are at least 230 Australian companies with around 650 projects in mining exploration, extraction and processing throughout 42 countries in Africa.

The Chinese are also increasing their focus on Africa. The China Mining Association says China is pouring more money into Africa while backing away from traditional markets like Australia mainly because of the cost. Chinese investment in Africa's mining sector in 2011 was $15.6 billion—10 times more than the previous year. China's mining investment in Australia plunged to $1.3 billion in 2011, a 70 per cent drop on the previous year. In the first half of the year, China's total mining investment in Australia was just $140 million.

As an indication of the increased competition we face, Australia's global share of capital raised for mining projects has dropped from 21 per cent to 15 per cent since 2008. While the value of capital raisings in Australia increased slightly from $4.3 billion to $4.5 billion between 2008 and 2011, in Africa it was up 26 per cent, in Canada it was up 31 per cent and in South America it was up 59 per cent.

The lesson in all of this is that our minerals and resources sector cannot be taken for granted—the coalition understands this—yet those framing public policy in the government, who write about this area of policy and spend the funds raised from it, continue to not understand these matters. If the Treasurer does not change his taxing ways, he will turn the investment pipeline for future projects which he likes to boast about into a pipeline to nowhere.

The LAFHA changes effectively amount to a retrospective tax on Australian companies for employing foreign workers—another punishment tax from this government that will fall disproportionately on the minerals and resources sector. Once again it has been sold by a Treasurer addicted to the envy rhetoric he used to sell the mining tax and the carbon tax, arguing the LAFHA changes would stop 'rorting' by 'highly paid executives and foreign workers at the expense of Australian taxpayers'. This is just another example of poorly executed policy from an inept government that chops and changes policy at the drop of a hat, with often disastrous consequences. This is how Labor has introduced sovereign risk into the investment equation for Australia.

I note, as my colleagues have done, that the government has introduced late-hour amendments, largely in response to the recommendations of the House of Representatives Standing Committee on Economics, which seek to ensure the living-away-from-home allowances will be taxed entirely within the FBT system rather than in the personal income tax stream or a combination of both. This will ensure the requirement to pay tax and understand the tax rules remains with the employer and should hopefully create greater consistency with the treatment of other benefits. These amendments will also expand the definition of fly-in fly-out and drive-in drive-out workers and ensure that provisions which prevent people from accessing transitional treatments if they 'vary' an existing arrangement will only apply to 'material variations', not normal salary increases or things of that nature.

It is for the government to guarantee that these last-minute amendments will in fact do what they say they will and will not have unintended consequences. However, I remain concerned about the government's apathy towards temporary workers and employers whose livelihoods depend on being able to access temporary skilled labour where positions cannot be filled with specialised employees from within Australia's workforce, including the minerals and resources sector.

Our nation's prosperity over decades has been in no small part due to our skilled and productive workforce. Despite the very small number of foreign workers in Australia on 457 visas, their economic contribution to this country continues to be substantial. In May there were 90,280 primary 457 visa holders in the country, with 7,500 working in construction and another 5,200 in mining. The 457s account for less than one per cent of our labour force, yet Access Economics suggests that 457 entrants in the 2010-11 program year will generate $2.2 billion over three years, which works out to be more than $27,000 for each position. Similarly, permanent skilled migrants generate a net fiscal impact of $22,000 each across the space of three years.

A research paper by the American Enterprise Institute for Public Policy Research and the Partnership for a New American Economy found that two primary categories of temporary foreign workers in the US are associated with strong job creation for Americans. The study found:

States with greater numbers of temporary workers in the H-1B program for skilled workers and H-2B program for less-skilled non-agricultural workers had higher employment among US natives. Adding 100 H-1B workers created an additional 183 jobs for US citizens. Adding 100 H-2B visa class workers created 464 jobs for Americans.

The coalition does not see temporary labour migration as a threat to Australian jobs. Rather, it is an important tool to secure the future of businesses to ensure they can employ more Australians. A business that has to close because it cannot get the employees it needs employs no-one. It is lose-lose every time for everyone.

Of course we need safeguards. The coalition will retain the sanctions and penalty regime implemented following the Deegan review, and we will come down hard on those who abuse the system we would operate if we were elected. An employer abusing the 457 program can expect the same tough stance from a coalition government as anyone else seeking to undermine the integrity of our immigration program, including on our borders. But circumstances arise where gaps open up and demand for skills cannot be met as swiftly as required by project deadlines. It was the coalition who introduced 457 visas and we believe temporary migration remains a useful tool to manage labour market fluctuations. We have consistently made the point that our migration program should be a supplement, not a substitute, for the Australian workforce, to fill gaps that open up by the way our population grows naturally.

Companies behind large resource projects need security guarantees for their investors to ensure access to the skilled workers they need to operate these projects viably in Australia. That is why the coalition supported the government's enterprise migration agreements policy when it was included in the 2011-12 budget. In principle, it is a sound policy designed to safeguard investment in our country and protect Australian jobs. If backed up and competently implemented, enterprise migration agreements are good policy.

Sadly for the Roy Hill project, the first to engage this new policy, the government's EMA policy has so far proved to be a mirage. Despite bipartisan support, the government still managed to score an own goal on this policy. On the day of her own government's announcement of the Roy Hill EMA, the Prime Minister amazingly claimed to be 'furious', caving in to union pressure and hanging her immigration minister out to dry, casting doubt over the arrangement and the policy. DIAC officials testified at estimates:

… a lot of those businesses are waiting for the first application to be approved to see what sorts of concessions the government has approved before they make a decision to proceed.

The Roy Hill EMA is the first experiment and so far it has only set a precedent for uncertainty.

Our Prime Minister cannot be trusted not to change the rules on projects like this once an agreement or investment has been made. The living-away-from-home allowance debacle I think is a case in point. Historically, the living-away-from-home allowance has been one option used by employers as an incentive to attract skilled workers to Australia. This is particularly important for the resource and mining sectors. Businesses and employers need to have confidence that they can make important decisions about future investment and projects that might have a three- to five-year life, without the government changing the rules every few minutes.

Despite the impact these changes will have on existing 457 holders and reliant industries, the government has made no transitional arrangements available for these temporary residents. What is even worse is that it was revealed in answers to questions on notice posed by the House committee investigating these bills that Treasury had not even been asked to look at running a model over such a possibility. The coalition requested this bill be referred to the House Standing Committee on Economics to seek further clarification on the potential for unintended consequences to arise. The committee received widespread submissions from industry highlighting the damage this would do to Australia's reputation and the hardships this could cause for current and prospective 457 visa holders.

Introducing this change midstream runs the risk of triggering great doubt for temporary migrants and potentially damages Australia's attractiveness as a destination for temporary skilled migration, and the bill will be paid by Australian companies employing these workers who will have to pay the gross amount. So make no mistake: this bill will create a tax burden in addition to what is already being paid by these companies, simply for the fact that they currently have temporary 457 workers on their books. This is particularly pertinent in the mining sector, where guaranteed labour supply of skilled workers is time critical in providing investor security to get megaprojects off the ground and ensure long-term investment in Australia and Australian jobs.

Extensive consultation with industry has consistently raised concerns that these measures will create widespread uncertainty and may dissuade people from pursuing temporary visas in Australia and leave many industries with chronic skills shortages and gaps. You just cannot go changing the rules all the time and expect people to believe you when you say they are not going to change again.

The other issue I wanted to raise was that in the report tabled last week coalition members of the committee, including me, expressed concern in supplementary comments to the majority report over the lack of consideration given to the flow-on effects for 457 visa holders and, consequently, Australia's sovereign risk. The government has estimated the measure will provide $50 million in 2012-13 and $217 million in 2013-14. An additional $353 million is expected in 2014-15 and just under $400 million in 2015-16. Treasury admitted in response to coalition questions that, given the uncertainty around how individuals choose to respond to the policy, there is a high degree of uncertainty about the respective contribution of different revenue components to the total fiscal impact.

The coalition put to Treasury two scenarios extrapolated from Department of Immigration and Citizenship data, as opposed to ATO numbers, which suggested the additional tax revenue of this scheme could exceed $550 million per financial year. These figures suggest—and I put it on record here—that this measure could have a significant tax windfall for the government, and they have failed to investigate it. And, knowing that there was potentially additional revenue here, the government did not seek to address the retrospectivity issues of this bill. As a result it has allowed the perception to now be confirmed that the government will change the rules on you midstream.

When asked whether, based on those models, the department agreed the revenue was likely to exceed their estimates, they answered, 'No; the Treasury modelling has been informed by data provided by the ATO.' Treasury noted that 'revenue from 457 visa holders is not expected to increase significantly year on year', yet no further details were offered as to modelling scenarios that may have involved fluctuating 457 numbers, given this visa program is market driven.

Treasury indicated that for the purpose of modelling it was assumed that around 50 per cent of employees will convert LAFH allowances and benefits into salary wages. However, they have not indicated how this was arrived at. Treasury have indicated that costings were modelled 'on the notion of average rate of LAFH allowances or benefit, which reflected a range of family compositions'. However, Treasury did not indicate what the ATO considered to be the average rate of LAFH allowance or the nature of family compositions. Furthermore, Treasury have not provided their costings in calculations relating to food and accommodation allowances, and there are many different permutations and combinations that could result from the removal of the living-away-from-home allowance. What all this adds up to is that the Treasury did not model parallel transitional provisions for 457 visa holders. When asked about this, the Treasury simply did not have the costings for these scenarios.

What is concerning here is that when you make changes you should always avoid retrospectivity, because retrospectivity is not a taxation principle that, I hope, anyone in this House would support. The impact of this retrospectivity is just another big tax on the mineral and resources sector in particular. It is a tax from this government on people who have employed foreign workers.

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. The Tax Laws Amendment (2012 Measures No. 4) Bill 2012 amends various taxation laws in order to implement a range of improvements to Australia's tax laws. Schedule 1 amends the tax laws to better target the tax concession for living-away-from-home allowances and benefits to people who are legitimately maintaining a home away from their actual home in Australia, for an initial period. These reforms will ensure that this taxpayer funded tax break cannot be misused or exploited.

The schedule implements the reforms that were announced as part of last year's Mid-Year Economic and Fiscal Outlook and also the reforms announced in this year's budget. As part of the Mid-Year Economic and Fiscal Outlook, in November last year the government announced two reforms to the tax concession. First, in order to be able to access the tax concession, temporary residents will need to be maintaining a home in Australia for their immediate use and enjoyment at all times that they are required to live away from home for work. This addresses the anomalous situation where a temporary resident worker could receive much more take-home pay than an Australian worker performing the same task. Second, all individuals will need to substantiate their actual expenditure on accommodation and food, where it goes beyond the commissioner's reasonable amount.

In this year's budget we announced two new reforms to the tax concession. To be able to access the tax concession, permanent residents will need to be maintaining a home in Australia for their immediate use and enjoyment at all times that they are required to live away for work. There will be a 12-month time limit on how long all people, other than fly-in-fly-out and drive-in-drive-out workers can access the tax concession.

The government has held a number of consultation processes in relation to these reforms. I would like to thank those individuals and organisations that made submissions. In response to the submissions received, the government deferred the general start date of the reforms from 1 July 2012 to 1 October 2012, with the reforms announced at the budget applying from 1 July 2014 for arrangements entered into prior to budget night.

I would also like to thank the House Standing Committee on Economics for the considered analysis detailed within their report. It supported the policy intent of the reforms but identified that the schedule as currently drafted results in a number of unintended consequences. The government will be moving amendments that pick up on all of the key recommendations in the committee's report, to ensure the reforms operate as intended.

The government's reforms to the tax concession for living-away-from-home allowances and benefits will provide savings of $1.9 billion over the forward estimates. For up to 12 months, the tax concession will continue to support people who are bearing additional costs because they have to maintain a home for work purposes away from their actual home in Australia. The reforms will not affect the tax concession for fly-in-fly-out and drive-in-drive-out arrangements, as these employees will not be subject to the 12-month time limit. They will not affect the tax concessions provided for remote area fringe benefits and they will not affect the tax treatment of travel and meal allowances.

Schedule 2 amends the GST law to ensure that the correct provision of the GST Act applies where a representative of an incapacitated entity is a creditor of that entity. This will ensure certainty for entities involved in the mortgage lending sector and reduce compliance costs for these entities. The amendments restore the intended operation of the GST law following previous amendments to the GST Act. As a result of the previous amendments, there are circumstances where two conflicting provisions of the GST Act could apply to a mortgagee, or other holder of security interests, in possession or control of a corporation's property. These amendments will apply from the first quarterly tax period after royal assent.

Schedule 3 amends the previous schedule 3 to the Tax Laws Amendment (2012 Measures No. 2) Act 2012 so that no interest or penalties are payable if an overpayment of income tax arises or if additional tax becomes payable under the recent amendments to the consolidation regime for consolidation events before 30 March 2011. However, where interest has already been received by a taxpayer, in most cases the taxpayer will not need to pay back the amount received. In addition, taxpayers will not have to pay interest and penalties if a deduction is disallowed as a result of the recent amendments. These changes were announced in November 2011 as an important part of the amendments to the consolidation regime. I commend the bill to the House.

Question agreed to.

Bill read a second time.