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

This composite bill, the Tax and Superannuation Laws Amendment (2013 Measures No. 1) Bill 2013, deals with a wide range of changes to taxation and superannuation. They present themselves in seven different schedules to the bill. The coalition support some of the measures in the bill, but there are some that we are opposed to. We will be seeking to excise those parts that we cannot agree with, and for good reason. I will give evidence on behalf of the coalition as to why we cannot support schedules 4, 5 and 6. I will first run through an overview of each of the schedules, which will give clarity as to the reasons why the coalition have this position.

Schedule 1 speaks about interest on unclaimed money. This schedule ensures that income tax is generally not payable on interest paid by the Commonwealth on unclaimed money from 1 July 2013.

Late in 2012, the Gillard government was desperate keep the illusion of a budget surplus alive for just a little bit longer. Hasn't history been a cruel tool for the Gillard government? In the Mid-Year Economic and Fiscal Outlook released in October—which, I might add, was somewhat earlier than we would normally see the MYEFO, but they were grasping for revenue and, ultimately, trying to bring expenditure into that period much earlier than usual—the government promised a wafer-thin surplus of around $1 billion, a surplus which history has shown did not materialise, a surplus close on $19 billion. There seems to be a trend where this government just gets it wrong by about $20 billion as a regular occurrence. But I am not advocating that this government is dishonest; I do not think that. I think they come here with a heavy heart. I think they come here with all good intentions. But, as they do consistently, they missed the budget figure by roughly $20 million—sorry, $20 billion. See how easy that slip is? We seem to have morphed as a parliament from saying 'million' to saying 'billion', with little or no consequence. I dread the day that we start making the same transition from 'billion' to 'trillion'.

Three-quarters of that promised surplus was going to come from the unclaimed money bill. You may remember that it was around the time when the Prime Minister took the opportunity to speak about the devastation in Cyprus when the banks started taking money out of people's bank accounts, and proclaimed that as horrible. She did not know then that the same practice would become common amongst the hardworking businesses and families of Australia.

Over the first six months of this year, 2013, the government expected that this measure would raise over $760 million in additional revenue. The break-up is $550 million from lost super, $109 million from the lost bank accounts and almost $100 million from the lost bank accounts of companies. I have personal knowledge of that. We had a myriad companies, and one day I will get a team of lawyers onto it and we will go and try and recover some of that money which I know sits in those accounts. It would go a long way towards paying my kids' school fees.

Under pressure during the consideration of the unclaimed money bill, the government advised the Senate Economics Legislation Committee of its intention that this interest be exempt from tax. The rushed implementation of these changes was driven by nothing other than a desperate need for more cash to plug yet another government budget black hole. The financial impact of this measure is nil, as the government claims that they never budgeted for tax from interest payments. It suggests that this was another oversight in the rush to implement yet another policy thought-bubble by this government.

It seems to me that, in the legislation coming before the House, there are more and more bills that do not have regulations attached to them. When they are put up, we see less and less regulation in them, as a result of them being rushed through. The other day, I had the opportunity to speak with one of my colleagues who has been here longer than me, and I asked the question: 'Did we do that when we were in government? Did we not give the regulations—is this just payback?' The honest answer was: 'Yeah, there were occasions when we did do it, but scoreboard is inequitable now.' The amount of legislation that comes before this House with no regulations just shows the rushed and brash way in which this government is managing business.

Schedule 2, airline transport fringe benefits, is meant to improve consistency across the fringe benefit tax laws and reduce the complexity of the law. Currently, the taxable value of an airline transport fringe benefit is its value less the employee contribution. For domestic flights, this is broadly 37.5 per cent of the lowest publicly advertised economy airfare charged by the provider, at or about the time of travel, over that route. For international flights, it is broadly the same figure: 37.5 per cent of the lowest fare published in Australia as charged by any carrier for travel over that route in the 12 months preceding the end of the tax year.

The new measure contained in this bill is such that the taxable value of the airline transport fringe benefit will be aligned with the in-house benefit valuation method. Without boring you with the detail, it is predominantly a different way of calculating it. We are quite content that the financial impact of this measure is unquantifiable, and the compliance cost on it, as advised, is nil. As a result, the coalition supports that measure.

Schedule 3 allows participants in the Sustainable Rural Water Use and Infrastructure Program to make payments received under the program free of income tax, including capital gains tax. If this choice is made, then expenditure related to the infrastructure improvements under the program is simply non-deductible. The financial impact of this measure is around $45 million over the forward estimates. The coalition has previously been supportive of the change, which was originally announced in February 2011. As a result, we will continue to be so.

Schedule 4—moving right along—is 'Self-managed superannuation funds and related parties'. This is one of the bits we have a problem with. Schedule 4 to this bill amends the Superannuation Industry (Supervision) Act 1993 to prescribe requirements for the acquisition and the disposal of certain assets between self-managed superannuation funds and related parties. The proposed changes require that, where an underlying market exists, the transaction should be conducted through that market, and that makes sense. Where such a market does not exist, a valuation must be sought from an independent, qualified valuer.

This measures yet again targets with additional unnecessary red-tape costs those Australians doing the right thing by saving to achieve a self-funded retirement. It is also clear that the drafting of the measure creates further unnecessary uncertainty. SPAA, for example, is concerned that the drafting is not clear regarding the valuation of hard-to-value assets such as frozen assets or assets which do not readily have an available market—antiques, like Nanna's teapot; hard-to-value assets. Of course, in the absence of a market, you would refer back to a qualified, independent valuer. But then some of the valuation principles of a valuer would be based on market value, and in the absence of a market I am not too sure where that ends up, because there are many different valuations you can give. You can give market value, inherent value or perceived value. That is not the reason we are opposing it, but I just bring it to the attention of the House and the legislators behind that with reference to 'qualified, independent valuer' and what type of valuation we are actually looking for there.

If these assets cannot be disposed of to a related party, it is likely that SMSFs will not be able to be wound up and they will lie dormant. This would result in the ATO being required to still administer numerous legacy SMSFs that have no functional purpose. These changes are yet another example of the Gillard government's constant undermining, through badly drafted regulations, of the flexibility and effectiveness of SMSFs. We do not support schedule 4.

Schedules 5 and 6 relate to loss carry-back and consequential amendments. For those trying to get their head around what a loss carry-back is: if you run your business and make $100,000 worth of profit this year, and then next year you have a loss, a loss carry-back then allows you to write those losses off and make a claim back against the $100,000 profit as an expense in future years or thereabouts. Schedule 5 implements a loss carry-back for small business and medium-sized businesses linked to the mining tax, and schedule 6 includes the necessary consequential amendments.

Why would a businessman, why would someone from the Liberal Party, why would someone from the coalition—the party for business—be opposing such a tax measure? It is a good thing. But in order to do it you need to have funds, and this loss carry-back measure is being funded, we are led to believe, by the mining tax revenue. I will share with you what some of the mining tax revenue forecasts were and what has actually been realised on the books. As a nation, as a responsible government, should we be pursuing tax cuts and paying for them with money that simply does not exist on that side of the ledger where the offset was expected from?

The measure applies to assessments for the 2012-13 and later income years. It does not go back any further than that. A transitional one-year carry-back applies for the 2012-13 income year. If the loss carry-back conditions are satisfied, a corporate tax entity can get a refundable tax offset for the losses it chooses to carry back. The tax offset the entity can get is the lowest of the value—oh, don't worry about that stuff!

A government member: I was enjoying that bit!

Thanks! The provisions in the bill only take into consideration the interests of the corporates; it excludes small business. Those were the three points that my learned colleagues were hanging off their seats to hear! That is another reason we oppose the bill—because, by measure, it only applies to the corporate sector.

These two schedules—schedules 5 and 6—implement the government's announced loss carry-back measures, measure, a measure linked to and supposedly funded by the government's minerals resource rent tax. The money just does not exist. Remember that the RSPT was supposed to generate $37 billion over the forward estimates. Then it was revised, and the MRRT was to generate $22.5 billion over the forward estimates. That was never going to be. More recently it was revised from $13.4 billion to $9.1 billion and now to a measly $3.3 billion over the forward estimates.

With spiralling debt, we cannot support this measure, we cannot support this bill, because the nation just cannot afford it. We have record debt—$191 billion. It would be impractical and less than prudent for someone to go and commit funds to a schedule like this in a bill that simply cannot be afforded. We support the bill but we want to excise schedules 4, 5 and 6— (Time expired)

Dennis Jensen (Tangney, Liberal Party) Share this | Link to this | Hansard source

I rise today to speak on the Tax and Superannuation Laws Amendment (2013 Measures No. 1) Bill 2013 as a conduit for the voice of small business enterprise and industry in my electorate of Tangney in Western Australia. I have been contacted by authorised members of the Financial Planning Association of Australia and the SMSF Professionals' Association of Australia. These important stakeholders in our community and policy experts should and must have their concerns heard. My message here today is clear and simple: I want to see the removal of schedule 4 of the aforementioned bill.

The tax and superannuation laws amendment bill 2013 was introduced into the House of Representatives on 13 February 2013. Schedule 4 of the bill seeks to limit the ability of self-managed super funds to dispose of or acquire assets from a related company. The bill prohibits the sale of listed securities, such as shares, from a related party to an SMSF unless certain conditions are met. Schedule 4 of the bill intends to address concerns by the super system review relating to the acquisition and disposal of assets between related parties and self-managed super funds. This involves a situation where the buyer and seller of the asset are in effect the same person.

The most controversial aspect of schedule 4 will have the effect of prohibiting an SMSF from acquiring listed securities, such as shares listed on the ASX, from related members via an off-market transfer from 1 July 2013. Although schedule 4 does not impose a ban on off-market transfer, it facilitates regulations that will prevent SMSFs from acquiring listed securities from a related party via an off-market transfer.

This has significant implications for the SMSF sector. Transferring listed securities via an off-market transfer is a common and cost-effective way of allowing a superannuation fund to acquire publicly available investments to support the person's retirement savings. Forcing SMSF members to go on market in these situations will substantially increase the cost of this transaction, given the need for a stockbroker to execute both sides of the trade, with no true benefit to the SMSF involved in the transaction. I see this as placing SMSF members at a significant disadvantage compared to members of large superannuation funds, who will still be permitted to undertake off-market transfers without the cost of brokerage.

In addition to concerns over the off-market transfers of publicly listed securities, there are other aspects of schedule 4 which remain a concern. These include the requirement to obtain a qualified independent valuation for an unlisted asset which is being acquired from a related party or disposed of to a related party. This will create difficulties, and will likely have undesirable consequences for SMSFs. There may be scenarios where an SMSF will be forced to remain in place after most of the fund assets have been disposed of. This would occur where the SMSF trustees are not able to find a qualified independent valuer to value one or more of the fund assets. SMSFs with a collectable investment are an example. Even in situations where a qualified independent valuer can be found, the requirement to obtain a qualified independent valuation may result in little benefit or provide no transparency, and may result in unnecessary transaction costs being incurred by the SMSF.

Units held by an SMSF in a widely held unit trust are an example, where in the vast majority of cases there is an easily obtainable market price. As the SMSF trustee already has access to a qualified valuation of the units, it would seem necessary for the SMSF trustees in this scenario to obtain a further qualified independent valuation when selling units to a related party.

I believe the amendments in schedule 4 will result in higher and unnecessary transaction costs for many common SMSF transactions, and have other undesirable consequences as outlined. This bill is so very typical of the current Gillard government. It is another unnecessary piece of legislation that gets in the way of business. Not only that: this bill would disadvantage responsible SMSF participants.

The coalition is, at heart, about creating wealth and adding value to the economy. This measure as it stands does neither and is emblematic of all that is wrong with the Gillard government. Our country is failing to excel in the competitive index because of measures like this, where useless third parties are mandated to a deal. This is simply creating a job that never needed to be done. But, then again, Labor is hardly renowned for its perspicacity and predictive performance; more for the overbearing confidence—nay, arrogance—of this government. Why else would the government table this attack and attempt to end SMSFs as we know them?

The SMSF sector remained the largest sector of the Australian super industry, with 99 per cent of the number of funds and 31 per cent of the $1.4 trillion total super assets as at 30 June 2012. At 30 June 2012, there were around 478,000 SMSFs holding $439 billion in assets. There were also approximately 913,550 members in the SMSF sector, almost eight per cent of roughly 11.6 million members in Australian super funds.

The data confirms that the SMSF sector responds to changing economic circumstances. This was evident by changes in the level of growth in SMSFs, contributions made to the sector and shifts in asset types held. SMSFs are both flexible and resilient in their ability to concentrate or diversify asset portfolios. Why make it more difficult and expensive?

The trend continued for members of new SMSFs to be from younger age groups than those from the total SMSF population. The majority of SMSFs, 64 per cent, are solely in the accumulation phase; however, there is a clear shift for more recently established SMSFs to start pension payments earlier. SMSFs directly invested 78 per cent of their assets, mainly in cash and term deposits and Australian listed shares—a total of over 60 per cent. While smaller SMSFs tended to favour cash and term deposits, larger SMSFs had a greater tendency to invest in listed shares.

The estimated SMSF average operating expenses in dollar terms increased in 2010-11, particularly for SMSFs solely in the accumulation phase. This is the phase where most SMSF holders are, so it is just to add more expense upon their shoulders. This is the reality of the situation we are dealing with.

How can we trust Labor with such an important industry? Classic Labor myopia and vainglorious endeavour jeopardise our SMSF sector and super industry today and tomorrow. It is incumbent upon the House to reflect on the import of the sector and the potential irreversible damage of unintended consequences. I think credence must be paid to the old adage: 'If you don't know what you're doing, don't do it.'

The message is clear: Liberals are on the side of SMSF holders and will not build barriers of red tape. With Liberals in government, the SMSF holders in my electorate will have certainty that government is on their side and that, once more, hope, reward and opportunity will return to our land.

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

Firstly, I would like to thank those members who have contributed to this debate on the Tax and Superannuation Laws Amendment (2013 Measures No. 1) Bill 2013. Schedule 1 amends the Income Tax Assessment Act 1997 to clarify the tax treatment of interest paid on unclaimed moneys of superannuation funds, bank and first home saver accounts, life insurance policies and companies from 1 July 2013. This is part of the government's reforms to reunite people with their lost money sooner.

Schedule 2 amends the Fringe Benefits Tax Assessment Act 1986 to update the calculation method for the taxable value of airline transport fringe benefits, given the current business practices of the sector. Also, as part of the reforms, airline transport fringe benefits are being reclassified in the FBT law as a type of in-house benefit.

Schedule 3 is a measure to benefit irrigators who derive payments under the Commonwealth Sustainable Rural Water Use and Infrastructure program. The measure allows them to choose between the existing income tax treatment for those payments and making the payments non-assessable, non-exempt income. A corresponding treatment applies for their matching expenditure to upgrade water infrastructure. Making the choice will ensure that they incur no funding gap between the time they would otherwise be assessed on the payments and the time they would otherwise have fully deducted the expenditure. This measure will encourage irrigators to sign up for the program and therefore will improve the efficiency and productivity of rural water use, making more water available for environmental activities.

The government will be proposing an amendment to remove schedule 4 from this bill. Schedule 4 contains specific rules for trustees and investment managers of self-managed superannuation funds in relation to acquiring assets from and disposing of assets to related parties. The measure is a response to a recommendation of the Super System Review which was undertaken in 2010. Since the time of the review, the government has made significant reforms to the superannuation system, including to the SMSF sector. Further consultation with industry has indicated that the concerns the measure is seeking to address are not as pressing as they were at the time of the review.

Schedules 5 and 6 insert division 160 into the Income Tax Assessment Act 1997, which will allow corporate tax entities to carry back their losses by establishing a refundable tax offset. The government recognises that many businesses in Australia's patchwork economy may be struggling to adapt to the changing economic circumstances. This reform will encourage companies to adapt to changing economic conditions and take advantage of new opportunities through investment. It will do so by providing a cash injection at the time when they need it most. Furthermore, reducing the tax system's bias against corporate risk taking can be expected to increase the quantity and the quality of investment, improving the allocation of resources across the economy. This should have positive flow-on effects for productivity, which in turn will support growth in real wages and employment. The independent Business Tax Working Group, in its final report on the tax treatment of losses, provided the impetus for this measure. To ensure the policy intent of this measure is achieved, the government will propose a minor technical amendment to schedules 5 and 6 to ensure the measure operates effectively in respect of new corporate entities.

Finally, schedule 7 includes some minor technical and machinery amendments to the taxation laws. The government regularly advances schedules like this to ensure our taxation laws continue to operate as intended. I commend the bill to the House.

Question agreed to.

Bill read a second time.

Message from the Governor-General recommending appropriation announced.