Julie Owens (Parramatta, Australian Labor Party) Share this | Link to this | Hansard source

On behalf of the House of Representative Standing Committee on Economics, I present the committee's advisory report—incorporating a dissenting report—on the Tax Laws Amendment (2012 Measures No. 6) Bill 2012, together with the minutes of proceedings. I ask leave of the House to make a short statement in connection with the report.

Leave granted.

The bill makes a range of amendments to the tax law. Three of the schedules—schedules 2, 3 and 4—did not attract submissions from stakeholders, and the committee accepts this as support or acceptance of the amendments. Schedule 2 updates the list of deductible gift recipients. The organisations that have been listed or have had their listing extended include: AE1 Incorporated, which seeks to locate and honour the crew of Australia's first submarine; Teach For Australia, which seeks to attract top graduates to teach in disadvantaged communities; and Australia for UNHCR, which raises funds to support the humanitarian programs of the United Nations High Commissioner for Refugees. These are important causes and the committee is pleased that they have been included in this bill.

Schedule 3 extends the immediate deductibility of exploration expenditure already provided to mining and petroleum explorers to geothermal energy explorers. This will restore competitive neutrality in the sector and support a clean energy source. Schedule 4 extends the interim streaming provisions for managed investment trusts from 2012 to 2014, in line with the government's announcement to defer until 2014 the commencement of the new overall regime for managed investment trusts and the new general trust income rules. The committee expects that coordinating the commencement of these different systems will reduce compliance costs for taxpayers.

The committee received submissions in relation to the other four major schedules in the bill. Schedule 1 clarifies the tax law so that payments under native title agreements will be subject to neither income tax nor capital gains tax. These reforms have been on the policy agenda since 1998 and the committee is of the view that this tax treatment is fully consistent with the unique nature of native title. At the hearing, however, there was considerable support for the view that the schedule should also provide preferential tax treatment for Indigenous community development corporations. This is outside the scope of the bill and the committee does not believe that a recommendation along these lines would be appropriate.

However, the committee would like to stress that native title is only 20 years old. Indigenous people have spent much of that time proving native title and are still learning how to release the economic potential of that title for the benefit of present and future traditional owners. The evidence given indicates that there is work to be done in finding consensus on what is an appropriate legal framework that recognises native title once it has been transferred through a compensation payment to a monetary form. Finding that consensus will become more important as Indigenous communities explore new mechanisms to unlock the economic potential of native title for the benefit of their community now and in the future. However, the purpose of schedule 1 is to amend the tax law so that it largely reflects the way that the tax office has been applying the law in relation to native title, and the committee believes that it should proceed in its current form. However, the committee expects that, in the coming years, the broader matters raised in submissions and in the hearing will be the subject of board consultation, both in terms of who is involved and the policies that are on the table.

Schedule 5 applies an income based means test to the rebate for medical expenses. The Australian Medical Association argued that a means test should not apply to a medical care safety net because illness does not discriminate on the basis of income. The committee nonetheless supports the schedule because it will result in better targeted health expenditure and a more sustainable health system.

Schedule 6 amends the definition of limited recourse debt, following a High Court case in 2011 where BHP Billiton secured double deductions for its iron briquette plant in Western Australia. Although there was general support for the provisions, there were also concerns about retrospectivity and whether the schedule will be limited to related party transactions—similar to the facts in the BHP Billiton case. The committee was not unduly concerned about retrospectivity because the new law will apply from the date of announcement and the policy intent of the provisions is unchanged. Further, there has been only a short delay between the announcement and the introduction of the bill. Although limiting the schedule to related party transactions may appear attractive, it overlooks the fact that the limited recourse debt rules play an important role in the wider integrity of the tax system.

Schedule 7 removes the concessional fringe benefit tax treatment for in-house fringe benefits accessed through salary sacrificing. In-house fringe benefits are those where the employer provides the same or similar goods or services as part of their business. The in-house provisions were initially included in the fringe benefits tax because the tax is imposed on employers and in-house benefits cost less to employers to provide them. However, since then, the in-house rules have evolved into a key element of employee remuneration in some industries, contrary to their original goal.

Overall, the bill makes a range of amendments that will protect the integrity of the tax system, closer aligns it to the underlying policy and achieves important social goals. The bill should pass.

On behalf of the committee, I thank the organisations that assisted the committee during the inquiry, through submissions or participating in the hearing in Canberra. I also thank my colleagues on the committee for their contribution to the report and the secretariat, who worked so hard, particularly over the Christmas break. I commend the report to the House.

Steven Ciobo (Moncrieff, Liberal Party) Share this | Link to this | Hansard source

by leave—I rise to make comments with respect to that part of the report to which there has been a dissenting report lodged by the coalition members of the House of Representatives Standing Committee on Economics. The chair has quite competently and ably run through the various schedules of the bill. I commend her for that. I would also like to associate myself from the very outset with the comments that she made about the good work that was done by the committee secretariat. They are a tireless bunch and are to be applauded for their efforts.

With respect to the dissenting report, I would like to especially focus on two schedules: schedule 1, native title benefits; and schedule 3, geothermal energy explorers. Schedule 1 basically deals with a multitude of evidence that was put to the committee. The dissenting remarks from coalition members deal with the fact that there was a very clear, unambiguous feeling from those that were present—not all, but certainly the majority of witnesses—that the report that has been formed and the conclusion that has been formed in the report is not consistent with their evidence—that being that the reforms seeking to be made by the bill would in fact be a retrograde step.

What is clear is that, when it comes to native title, Liberal members of the committee were particularly concerned with the evidence was put forward by the Minerals Council of Australia, BHP Billiton, Rio Tinto, the Chamber of Mines and Energy of Western Australia and others. All of this evidence indicated that the changes that are proposed in the bill would be a step that would actually make it more difficult, and not better, for those Indigenous Australians who hold native title.

It was best summarised perhaps by the opening statement that was put forward by the Minerals Council of Australia and was supported by BHP and the Chamber of Minerals and Energy. They said:

The Minerals Council of Australia supports the government's policy objective to deliver a more flexible and less legalistic approach to native title and to deliver practical outcomes for Indigenous Australians. We are committed to working with the government to ensure that agreement monies constructively contribute to socio economic outcomes for Indigenous Australians in line with the government's Closing the Gap policy objectives. While we support reforms to the taxation system to maximise the economic value of native title compensation and benefits packages, we are concerned that the proposed native title payment tax treatment may have a range of unintended consequences. Specifically, we consider that those amendments disincentivise investment in intergenerational wealth creation, as tax will be payable on any transfer of monies to future generations or on income earned. It disincentivises the provision of benefits under agreements to Aboriginal people who are resident in an area but who are unrelated to native title determination and it limits the main tax treatment to the defined beneficiaries.

That is important, because it pertains to the very attempt that native title seeks to encapsulate, which is to reward in an intergenerational sense those native title holders as a consequence of agreements that are put in place. One thing that struck Liberal members of the committee was the fact that the majority advisory report effectively outlined that the concerns that were raised by witnesses—in particular, those who represented the mining lobby—were 'unlikely to eventuate because native title agreements are structured to prevent it occurring, and this feature of the contracts has been largely driven by the mining companies themselves.'

We find it passing strange that the very agreements that the majority advisory report seeks to rely upon, which are put forward by the mining industry in the main, are in fact by the same authors—that is, the mining industry—who say, 'We've got genuine concerns about this because it is going to result in negative impacts on intergenerational wealth transfer.' So, we think it is a bit of a case of government members of the committee wanting to have their cake and eat it too, to claim that the mining lobby is raising genuine concerns and also that they do not need to be concerned about what the mining lobby says because the mining lobby has already taken care of it in agreements. Liberal members found that counterintuitive.

The final point I would make is in relation to schedule 3, and I reiterate again that the coalition is of course opposed to the minerals resource rent tax and will repeal the tax should we be fortunate enough to be elected at the next general election. Given that this is in fact associated expenditure from the MRRT, we are opposed to it.