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

I rise on behalf of the shadow Treasurer to speak on this Tax Laws Amendment (2013 Measures No. 1) Bill. The bill has three schedules. Firstly, it seeks to strengthen integrity rules for scrip-for-scrip rollover in relation to small business and other concessions. Secondly, it seeks to provide tax exemption status for certain ex gratia payments for natural disasters. Thirdly, it seeks to extend tax deductibility status to ethics education. In relation to the third schedule the coalition has a number of reservations in relation to the broad drafting, and in the consideration in detail stage we will seek to remove this schedule from the bill. This was foreshadowed yesterday by our shadow Assistant Treasurer, Senator Mathias Cormann.

First, let me deal with the first two schedules. The first schedule seeks to amend the Income Tax Assessment Act 1997 to ensure that certain integrity rules in the small business concessions and the scrip-for-scrip rollover apply to life insurance companies, superannuation funds and trusts in the same way that they apply to other types of entities. Scrip-for-scrip rollover is where a company is allowed to defer a capital gains tax gain until a later CGT event happens with its shares. The connected entity test in the small business entity provisions ensures that assets and turnover of related entities are taken into account in determining whether the limits for access to the relevant small business concessions have been exceeded. The significant in-common stakeholder tests contained in the CGT scrip-for-scrip rollover are designed to ensure that an entity that has a sufficiently high level of ownership in both the original and acquiring entity cannot use the rollover to defer tax indefinitely on the disposal of the underlying assets of the original entity.

The changes contained in schedule 1 of this bill seek to ensure that the small business connected entity test and the CGT scrip-for-scrip rollover stakeholder tests apply on the basis of who owns relevant interests in the entity rather than who benefits from those interests. Schedule 1 to this bill ensures that these integrity rules and the capital gains tax provisions more generally are applied as if absolutely entitled beneficiaries, bankrupt individuals, companies in liquidation and security providers are the owners of relevant assets. That is, in these provisions the nominal owners are looked through to the underlying owners of such assets. These changes are largely integrity measures, as the coalition recognises. The scrip-for-scrip rollover integrity provisions that apply to individuals and companies also apply to trusts, superannuation funds and life insurance companies.

Some trusts, superannuation funds and life insurance companies consider the integrity provisions do not apply to them because, as the stakeholders, they own the interest for the benefit of others—that is, the beneficiaries—rather than for their own benefit. The government claims this was never the intended interpretation of the integrity provisions. Following the release of the government's 2013-14 budget, which showed a marked deterioration in budget settings, the coalition announced that we reserve the right to accept all savings put forward in previous budgets that were yet to be legislated. This falls into that category.

The integrity rule changes are retrospective and align with the date these changes were announced—being 10 May 2011—and, from the 2011-12 budget, to transactions that occur from the time of that announcement. The look-through treatment provisions were announced on 8 May 2012 as part of the 2012-13 budget. The look-through treatment provisions, whilst potentially retrospective, do not disadvantage taxpayers as they are optional until the commencement of these provisions. The measures are worth $220 million in additional revenue for the budget over the forward estimates and, as stated at the outset, the coalition will not oppose these changes.

Schedule 2 to the bill also amends the Income Tax Assessment Act 1997 to exempt from income tax the disaster income recovery subsidy for people who have lost income as a result of disasters occurring across Australia during the period 3 January this year to 30 September this year. The coalition is of course supportive of the schedule.

Schedule 3 seeks to add a new deductible gift recipient category to the Income Tax Assessment Act 1997. It seeks to extend tax deductibility to donations to public funds established solely for providing education in ethics in government schools in Australia as an alternative to religious instruction, where the ethics education to be provided is in accordance with state or territory law. Currently, the tax laws contain a deductible gift recipient general category for organisations which provide religious instruction in government schools but there is no category for ethics classes.

As I foreshadowed at the outset, as drafted, the coalition has reservations in relation to this schedule of the bill. As the shadow Assistant Treasurer, Senator Cormann, said yesterday, the coalition has no philosophical objection to ethics classes, but we do not think that it is appropriate at this point that a whole new category be created. The coalition believes that the government's proposal to introduce an entire new general category of deductible gift recipients in relation to ethics education is too rushed—as has often been the case—and too broad.

At present there is one provider of relevant services nationally, Primary Ethics, who provide services in one state only, and that is New South Wales. There is a method available under the current income tax laws now to provide DGR status to that organisation if the government chose to specifically propose the listing of that organisation. Given that there is only one provider who sought such a listing and was rejected by the government, it would seem more appropriate to consider these requests on a case-by-case basis rather than open up a whole new category at this point in time. In this context, the implications of starting a whole new category, instead of approving the one listing requested, need more careful consideration. For that reason, the coalition will move in the consideration in detail stage to excise this schedule from the bill.

In conclusion, as stated at the outset, we will not be opposing the bill. We acknowledge the integrity measures put forward by the government within schedule 1 in relation to the integrity rules for scrip-for-scrip in its application to life insurance companies, superannuation funds and trusts in the same way they apply to other types of entities. We also welcome tax exemption for natural disasters, contained in schedule 2 of this bill. For the reasons that I have outlined, the coalition will be seeking in the consideration in detail stage to move an amendment to remove schedule 3 from the bill.

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

I would like to thank the member for Casey for his contribution to the Tax Laws Amendment (2013 Measures No. 1) Bill 2013, although I will take issue with a number of the things that he said in his contribution. Schedule 1 amends the income tax law to ensure the stakeholder and connected entity tests work appropriately. Broadly, the connected entity test and stakeholder tests seek to determine whether an entity controls or can influence another entity.

I now turn to subsidy payments made in response to the natural disasters occurring in Queensland, New South Wales and Tasmania during early 2013. In the wake of recent disasters it is important that these payments are tax free. Exempting these payments from tax maximises the value of the payments so that people can get on with the job of cleaning up after the floods and fires. Exempting these payments from tax also ensures consistency with previous disaster relief payments that were also tax exempt. In addition, the tax exemption of all future disaster income recovery subsidy payments for natural disasters occurring up until 30 September 2013 will ensure that such payments receive a consistent tax treatment. From 1 October 2013, the disaster recovery allowance will replace the current disaster income recovery subsidy payment. This will establish a permanent means-tested solution to providing disaster assistance to workers, small business people and farmers who experience a loss of income as a direct result of a future disaster.

Schedule 3 to the bill extends the general deductible gift recipient categories in the gift provisions in the Income Tax Assessment Act 1997 to include public funds established solely for the purpose of providing ethics education in government schools as an alternative to religious instruction where ethics education is in accordance with state or territory law. The amendment will allow taxpayers to claim an income tax deduction for donations made to these funds that are endorsed by the Commissioner of Taxation and will assist these entities in attracting donations.

The opposition has said that they will propose an amendment that removes schedule 3. They prefer an approach whereby every organisation which is seeking deductible gift recipient status to support the provision of ethics classes in government schools would need to apply to be specifically named in the tax laws. This is a complex and time-consuming process involving a parliamentary amendment every time a new organisation is specifically listed. Perhaps that is exactly what the opposition want—to make it harder for new providers of ethics classes in government schools to be established and to obtain donations. Perhaps there is some sort of hidden agenda here. What we are proposing is a better, simpler and more principled way of providing DGR status to eligible organisations. Under our approach, eligible organisations would make an application to the ATO rather than having to try and secure a parliamentary amendment. This will be important as new organisations are established over time to teach ethics classes in government schools.

The Liberal Party claims to be a party that supports choice, but again they have demonstrated that these are just empty and hollow words with no basis in fact. This announcement that they will be amending the bill to pull this schedule out has one very real impact, and the real impact that it will have is to deny organisations that provide ethics-based instruction in our schools from the ability to raise funds with donations that are tax deductible. That is the principle that is at stake here. It is an important principle, because the organisation that has come to the government seeking that this matter be addressed is Primary Ethics, operating in New South Wales and permitted under New South Wales law to ensure that parents who have children in government schools, who do not wish to participate in scripture-based or religion-based instruction, have the choice. They have the option of allowing their children to participate in ethics-based instruction.

The application made was for specific listing. But one of the key considerations that the government must take into account when considering any application for specific listing is the precedent value of that decision. Indeed, every person that has sat in the Assistant Treasurer's chair in the past, and no doubt every person that will get the opportunity to do so in the future, will know that whilst it is always open to a government to come into this place and to specifically amend division 30 of the Income Tax Act and to specifically identify an organisation, that should be a process of last resort, because obviously the tax act cannot be filled up with every single organisation seeking to have the benefit of DGR status.

I note that the shadow Assistant Treasurer was asked about this on radio today, and before I come to the comments that he made on radio, I make this point. Under division 30 of the Income Tax Assessment Act 1997, we currently have a category available for people to bring forward organisations and obtain the benefit of DGR status, a category that is addressed towards the provision of religious instruction in schools. So any organisation that complies with the requirements of a category can go to the Taxation Commissioner and ask to be endorsed as a DGR entity and from that day forward all of the contributions will be tax deductible. That assists organisations to raise funds. That is already in the law. Indeed, when the New South Wales government took the decision to allow ethics instruction to occur, they made this point: they would not be providing one dollar of assistance to that organisation, Primary Ethics, because no money was provided to religious organisations that were carrying out religious-based instruction in schools. So the New South Wales government took the view—and the former New South Wales government was endorsed by the O'Farrell government when they came into office—that there should not be a different set of rules for religious-based instruction as there are for ethics-based instruction, and that is precisely what we are doing. That is the principle that is at stake and that is the principle that this parliamentary amendment will enshrine.

When the shadow Assistant Treasurer was asked about this on 702 ABC this morning, he said, 'In principle I support that we put ethical education on the same footing as other similar providers, for sure.' If that is his sentiment, he should be supporting this parliamentary amendment, this bill. He should be supporting it because this is not just about Primary Ethics, this is about organisations who are seeking to provide ethics-based instruction in our schools. It is a very tightly and narrowly targeted provision that we are seeking to put into the tax act so that this will not be exploited by organisations willy-nilly. I find it incomprehensible that the opposition can assert that they support that principle of extending the opportunity for ethics-based instruction in our schools, yet they come in here and they are proposing to take a schedule out of this bill, leaving the currently existing organisation, Primary Ethics, without the benefit of DGR status and we know that the organisation has been on the public record saying that the funding arrangements they currently have are threatening their existence. They need this support to continue to be able to provide ethics-based instruction in our schools, and the proposal from the opposition is, 'We do not think that we should deal with it at this point in time.' All of those hardworking volunteers and all of the parents whose children are beneficiaries of the work of Primary Ethics need to understand that what the Liberal Party is proposing is tantamount to bringing to an end the existence of this organisation that is doing some good work in our community and in our schools.

I make the point that if indeed the opposition are committed to supporting the principle that ethics based instruction organisations should be afforded the same treatment as other organisations—that is, religious organisations that currently obtain the benefit of DGR status—then there is absolutely no reason why they should do anything other than support the bill that is before the House. If members opposite have concerns about organisations that they think might be slipped in under this category, then they should detail them. Let us understand what your concerns are. Let there be no doubt that, in taking the course of action you are taking, you will be denying Primary Ethics the ability to obtain DGR status and you will be killing off an organisation that is doing wonderful things in schools in New South Wales.

I look forward to consideration in detail of this bill, because I am eagerly awaiting some indication from the member for Casey of these nefarious organisations that he has concerns about, that he fears might be able to come in under the new category and that would be funded. Which are the organisations that he believes will somehow get the benefit of DGR status that we are not currently aware of? It is very simple: they are organisations that are providing ethics-based instruction.

If the Liberal Party are opposed to ethics-based instruction in our schools, they should just say so. They should not come in here, hiding behind a Mickey Mouse amendment that will effectively kill off an organisation that is doing some fantastic work in our community and in our schools, simply because they have some ideological objection to the work that they are doing. The truth is that, if you go down the path of specific listing, every single ethics based instruction organisation that wants to obtain the benefit of DGR status and that so-called equal treatment—and Senator Cormann said the principle was equal treatment for similar organisations—they need to lobby the government of the day to move an amendment to the law. Those other organisations do not need to do that. It is an administrative process where they go to the tax commissioner and, if their documentation and their bona fides stack up, they get the tick of approval and are a DGR status organisation.

This is just ridiculous and incomprehensible, and I call upon the member for Casey in consideration in detail to detail in full his concerns about which organisations he believes the benefit of DGR status will be extended to and which ones he objects to. If he cannot detail them, then he should withdraw the amendments that he is proposing to move and support the government's bill. I commend the bill to the House.

Question agreed to.

Bill read a second time.