Bruce Billson (Dunkley, Liberal Party, Shadow Minister for Small Business, Competition Policy and Consumer Affairs) 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 range of changes to the taxation and superannuation system. I can state at the outset that the coalition has reservations about a number of specific schedules contained in this bill. We will be moving to excise these schedules from this bill and, if our amendments to remove these schedules are unsuccessful, we will vote against the passage of this bill.

Schedule 1 of the bill contains amendments which relate to the government's ill-thought-through MYEFO budget measure which changed time limits on the transfer to the government of unclaimed moneys held in lost bank accounts of individuals and companies, as well as lost superannuation accounts, in order to keep alive the illusion of a budget surplus just that little bit longer.

This was a significant revenue measure for the government, bringing in more than $750 million over the forward estimates. The change in the schedule seeks to implement one of the recommendations made by the committee inquiring into this bill, which was to make the interest paid by the Commonwealth on unclaimed moneys from 1 July 2013 exempt from income tax.

Schedule 2 of the bill seeks to improve consistency across the fringe benefits tax law and to also reduce complexity of the law. Currently the taxable value of 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 air fare charged by the provider or a carrier where relevant at or about the time of travel over that route. For international flights this is broadly 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 year of tax.

Under the changes put forward in the schedule, the taxable value of an airline transport fringe benefit would be aligned with the in-house benefit valuation method. This would be calculated at 75 per cent of the standby airline travel value of the benefit less the employee contribution. Where the transport is on a domestic route the standby airline travel value is 50 per cent of the carrier's lowest standard single economy air fare for that route as publicly advertised during the year of tax. Where the transport is on an international route the standby airline travel value is 50 per cent of the lowest of any carrier's standard single economy air fare for that route as publicly advertised during the year of tax. These changes are technical and should act to simplify this particular area of taxation law.

Schedule 3 of this bill allows participants in the Sustainable Rural Water Use and Infrastructure Program to choose to make payments received under the program free of income tax, including capital gains tax. If this choice is made then expenditure related to infrastructure improvements under the program is non-deductible. Alternatively, the participant can decide to stay under the current rules—that is, the payments will continue to be taxed in the year they are derived but expenditure incurred on relevant works will be tax deductible only in future years. This program provides funding to irrigators to improve water efficiency. Some of the resulting water savings are then transferred to the government to be used for environmental watering. The current arrangement results in a cash flow gap between the timing of the tax liability and tax deductions. If chosen, the new arrangements remove this cash flow gap. The coalition has indicated that it is supportive of this change which was originally announced in February 2011.

Schedule 4 is where the coalition has a number of reservations. This schedule seeks to amend the Superannuation Industry (Supervision) Act 1993 to prescribe requirements for the acquisition and disposal of certain assets between self-managed superannuation funds and related parties. Where an underlying market exists, the proposed changes require that the transaction should be conducted through that market. Where such a market does not exist, a value must be sought from an independent qualified valuer. These changes seem to be an unnecessary regulatory burden. The government have not made the case about the evil they are supposedly trying to prevent with this measure. The Self-Managed Superannuation Funds Professionals' Association of Australia, for example, is concerned that the drafting is not clear regarding the evaluation of hard-to-value assets, such as frozen assets or assets for which there is not a readily available market. If these assets cannot be disposed of to a related party, for example a self-managed super fund member, then it is likely many SMSFs will not be able to be wound up.

In the evidence provided by SPAA to the inquiry it said:

… there are many types of assets held by SMSFs (many types of collectables for example), where no individual has the specific knowledge, experience and judgement necessary to be considered a qualified valuer. In these scenarios, the absences of a qualified independent valuer may result in the SMSF being unable to dispose of the asset which may then prevent the SMSF from being wound up even if it is clearly in the member's best interest to do so.

This would result in the ATO being required to still administered numerous legacy self-managed superannuation funds that have no functional purpose. This change is yet another example of the Gillard government's constant undermining through badly drafted regulation of the flexibility and the effectiveness of SMSFs. For example, in its submission SPAA stated that it was:

… concerned that the requirement to acquire listed securities from a related party (or to dispose listed securities to a related party) in a prescribed manner is limited to transactions involving SMSFs. Off-market transfers of listed securities also occur in the Australian Prudential Regulatory Authority (APRA) regulated sector of the superannuation industry, where they buyer and seller of the securities is essentially the same entity. This would suggest that similar integrity concerns regarding off-market transfers and the manipulation of transfer prices of listed securities would similarly arise in the APRA sector.

These changes, as drafted, are unnecessary regulatory burdens. The government have not made the case about the evil they are supposed to be trying to prevent. The coalition does not support this schedule and will be moving amendments to excise it from the bill. If our amendments to excise this schedule are not successful then the coalition will vote against the bill.

Schedules 5 and 6 of this bill seek to implement the loss carry-back for small and medium enterprises. This expenditure is linked to the proceeds of the government's ill-fated minerals resource rent tax. This measure will cost the budget $700 million over the forward estimates. This is the failed mining tax that is fundamentally flawed and has raised next to no revenue. The coalition opposes all elements of the MRRT, including all measures linked to and supposedly funded by the MRRT. The exception is the increase in compulsory superannuation, which we continue to support with a delay to the increase by two years, given the budget emergency which we face in light of the deficits delivered a fortnight ago.

The government cannot afford to implement costly measures supposedly paid for by the MRRT that raises next to no revenue. The original resources superprofit tax was estimated to bring in $37 billion over the next four-year period, from 2012-13 to 2015-16. The redesigned mining tax, which was then rebadged as the minerals resource rent tax, was estimated to bring in $22.5 billion over the same four-year period, a $14.5 billion write-down. These estimates were then revised down in the 2012-13 budget, with a forecast to bring in $13.4 billion over the same four-year period. Again, in the 2012-13 MYEFO a further write-down to $9.1 billion over the same four-year period was booked. Then in the budget handed down for 2013-14 the government revised the mining tax receipts down even further, to just $3.3 billion over the same four-year period.

This tax went from supposedly collecting $37 billion to $22.5 billion to $9.1 billion and then to just $3.3 billion over a four-year period. That is a $33.7 billion write-down since its inception. The government negotiated the design of the MRRT exclusively and in secret with the managing directors of Australia's three biggest mining companies. As well as excluding any other mining industry stakeholder and state governments, they also excluded all Commonwealth officials from the negotiating process. The coalition has said for some time that Labor's MRRT was a fiscal train wreck in the making. Treasurer Wayne Swan overestimated the gross revenue from the MRRT and underestimated the costs of the various concessions he and Prime Minister Gillard made in their MRRT heads of agreement with the three mining executives.

The government has spent all the money that they expected to raise from the mining tax and more, much more, through the linking of various expenditure measures, including loss carry-back to the mining tax. The government simply cannot afford to continue adding to the $192 billion in accumulated deficits over the last four years with another large budget deficit forecast for 2012-13. In any case, the government's change to allow loss carry-back ignores the fact that only one-third of small- and medium-sized enterprises are actually incorporated and therefore two-thirds are not able to benefit from this measure. This is because only businesses with franking accounts can avail themselves of this measure. Unincorporated businesses that must compete with those using carryback will be handed a competitive disadvantage by this measure.

The government seem to persist in overstating the benefits of this measure. I draw their attention to comments from the Institute of chartered accountants whose Yasser El-Ansary said:

The institute estimated that while there are 2.8 million small businesses, only 400,000 were incorporated and even fewer would swing from profit to loss in the way needed to gain the carry back benefit.

He said:

The likelihood that there are going to be an awful lot of businesses that benefit from this is very, very slim.

The coalition will be moving amendments to exclude schedules 5 and 6 from this bill. Schedule 7 of the bill makes miscellaneous amendments to taxation laws, almost all of them in relation to and attempting to fix problems with the government's failed mining tax. In fact, of the 48 pages in this schedule, 39 comprise amendments that correct 'minor technical errors'—which is clearly an understatement of some significance—in what has proven to be substandard drafting of the MRRT law. Only nine of these pages are devoted to correcting minor amendments in other parts of the tax law.

As stated, the coalition will be moving amendments to excise schedule 4, which relates to related party transactions between self-managed super funds, as well as schedules five and six, which relate to the government's underfunded tax measure of tax carry-back losses. If the government amendments to excise these three schedules are not successful then the coalition will oppose the bill's passage through the parliament. We will move our amendments in detail at that stage of debate, but I ask the parliament to consider those thoughtful contributions to the debate on this measure.

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

I am pleased to speak on the Tax and Superannuation Laws Amendment (2013 Measures No. 1) Bill 2013. I am pleased to follow the member for Dunkley, who gave his thoughtful views in such a civilised manner. I shall attempt to do my bit the same way—sometimes the behaviour in parliament is quite reasonable.

The tax and superannuation laws amendment bill 2013 is one of the bills known as TSLABs. It has a range of changes to tax and superannuation, all included in the same bills. There are seven schedules in this bill that cover issues such as unclaimed money, airline transport fringe benefits, how irrigators apply the law in relation to their Commonwealth sustainable rural water use and infrastructure program, and the rules for self-managed superannuation funds trustees and investment managers, as well as introducing a refundable tax offset to corporate tax entities, known more generally as the loss carry-back. The final schedule makes a whole series of miscellaneous technical amendments to taxation law. It is quite an interesting bill that covers a range of areas that will be of interest to a broad range of people.

Schedule 1 refers to the interest on unclaimed money. In the 2012-13 Mid-Year Economic and Fiscal Outlook the government announced that from 1 July this year the government would preserve the real value of unclaimed moneys, such as lost superannuation, by paying interest on those moneys. This is part of the package of reforms to end unclaimed money and lost superannuation announced in the Mid-Year Economic and Fiscal Outlook that will help people reunite with their lost money sooner. Exempting interest payments paid on unclaimed moneys from income tax will help ensure that these amounts maintain their real value for the benefit of the owners. As you would know, Deputy Speaker Scott, there is a very large number of accounts out there both in superannuation and in other forms which seem to have lost contact with their owners, and the government has been working very hard over a number of years now to reunite some of those lost dollars with the people who have ownership of them. This is an important part of that change, as it maintains the real value of those lost moneys while we are finding ways to reunite them with their original owners.

Schedule 2 amends the Fringe Benefits Tax Assessment Act 1986 in response to concerns raised by the airline industry that the methodology for valuing standby airline travel is no longer relevant. In particular, the industry was concerned about the amount of time spent and costs required to calculate the taxable value of the benefit, and the fact that the industry had evolved a great deal since the time the revisions were introduced in 1986. The industry views also reflected a need to update the application of the provisions, as the concept of standby travel, while still available to employees of airlines and travel agents, is no longer offered by airlines commercially to members of the public, with airlines now using discounted pricing as a means to optimise passenger travel. Anyone in this House who is my age or over would well and truly remember heading off to the airport for one of those standby tickets but, as we all know, they are not quite as common now as they used to be. The government undertook targeted consultation with the major airlines on the drafting of this section of the bill to address concerns raised after the budget announcement, and to ensure the reforms were consistent with airline practices. The reforms also bring the airline industry into line with recent changes introduced into the parliament to the concessional treatment of other in-house fringe benefits in other industries.

Schedule 3 concerns sustainable rural water and infrastructure programs. The Commonwealth makes payments to irrigators under this program to help upgrade rural water infrastructure to improve the efficiency and productivity of rural water use. Some of the resulting water savings are transferred to the Commonwealth for environmental activity. This measure benefits irrigators receiving payments under the Commonwealth's sustainable rural water use and infrastructure program, and it is designed to encourage take-up. Irrigators can choose to apply a new treatment that ignores the payment for income tax purposes and makes their corresponding expenditure on upgrading their water infrastructure non-deductible. This allows irrigators to avoid the need to find funding to pay their tax if they derive the payments before they can fully deduct the expenditure. It is very much in response to a cashflow issue and gives flexibility to irrigators in the way they receive their payments under this program. It is in response to concerns raised in consultation, mainly from small irrigators. People who believe they are better off under the current law can continue to apply it instead of the new treatment.

Schedule 4 relates to the self-managed superannuation funds and related parties. Schedule 4 of the tax and superannuation laws amendment introduces specific rules for self-managed super fund trustees and investment managers in acquiring assets and disposing of assets to related parties. A trustee's or investor's management of a self-managed superannuation fund must not require an asset from a related party of the fund except subject to certain conditions. These exceptions are based on the transactions being conducted by reference to an underlying market or supported by evaluation from a qualified, independent valuer. This measure will ensure the acquisition and disposal of assets between self-managed superannuation funds and related parties is transparent, and not open to manipulation to illegally benefit the parties involved. The amendments will provide greater transparency to related party acquisitions and disposals. This will enhance the integrity of the self-managed superannuation fund sector by allowing approved SMSF auditors, and the Commissioner of Taxation as regulator, to monitor these transactions more effectively. This recommendation, by the way, came from the super system review—it is recommendation 8.13 of that review. It is an important part of maintaining transparency and efficiency of self-managed superannuation funds.

Schedule 5 introduces loss carry-back for corporate tax entities. Entities that meet the requirements to be able to carry back their losses will be entitled to a refundable tax offset. This introduction implements recommendation 31 of the 2010 Australia's Future Tax System Review, which stated that companies should be allowed to carry back a revenue loss to offset it against the prior year's taxable income, with the amount of any refund limited to the company's franking account balance. It also acts on the recommendations of the Business Tax Working Group, which found that loss carry-back would be a worthwhile reform in the near term.

I recall the member for Dunkley saying that the opposition will seek to excise this schedule from the bill. I point out to the opposition that it is actually a recommendation of both the Future Tax System Review and the Business Tax Working Group. When I attended the tax summit a couple of years ago in the Great Hall as a previous small-business owner who is well aware of some of the difficulties small business have been facing as they adjust to the higher dollar and increasing savings rates for consumers, I clearly saw that there were a number of people in that room calling for just this measure as an extremely important reform of the tax system for small business.

The amendments provide a refundable tax offset to corporate tax entities that make a loss where the entity chooses to carry that loss back to either of the two preceding years. The reform will encourage companies to adapt to changing economic conditions and take advantage of new opportunities through investment. This measure is part of the government's reforms to boost productivity by helping business invest, innovate and take sensible risks. The amendments will enable corporate tax entities to carry back their losses to either or both of the two preceding years. There are some transition measures. In the 2012-13 income year the loss can only be carried back one year to the 2011-12 income year. The refundable tax offset will be the lesser of the tax liability of the preceding year or years to which the loss is being carried back or the franking account balance as at the end of the tax year in which the offset is being claimed. The maximum loss that can be carried back is $1 million, so applying the current corporate tax rate of 30 per cent the maximum refundable tax offset for an income year is $300,000.

This measure will encourage business to invest and adapt and will mean that companies in the slow lane can use their tax losses now when they need to rather than in the future when their businesses are performing better. Treasury estimates that the loss carry-back will benefit around 110,000 companies in its first four years. Furthermore, 90 per cent of these will be in small business and one in six are expected to be manufacturers.

Again I note that the opposition will seek to excise this schedule but it is an incredibly important one for businesses that find themselves in a particular set of circumstances and one which was called for in the Australia's Future Tax System Review, by the Business Tax Working Group and in the tax summit, which I note the opposition did not attend and did not send representatives to, where there was quite an extensive calling for just this measure. I would strongly suggest to this House that when the business sector calls for such a thing perhaps the opposition should in fact listen.

Schedule 7 deals with miscellaneous amendments to the taxation laws. The government periodically makes miscellaneous amendments to the taxation laws to correct technical or drafting defects, to remove anomalies, to cover unintended outcomes in the tax legislation. Progressing such amendments gives priority to the care and maintenance of the tax system, as supported by the 2008 recommendation from the Tax Design Review Panel. This package of proposed miscellaneous amendments addresses minor technical deficiencies in the minerals resource rent tax, petroleum resource rent tax, income tax assessment, income tax rates and tax administration legislation among others. These deficiencies have been identified by industry, Treasury and the Australian Taxation Office. They are a practical demonstration of the government's commitment to the care and maintenance of the taxation system. These amendments address minor technical issues which have been identified across the taxation laws, including the minerals resource rent tax, petroleum resource rent tax, income tax assessment, income tax rates and tax administration legislation. The government consulted publicly on the amendments last year and a number of the concerns raised were in fact addressed in this bill.

I am aware that there is about three minutes remaining before the 90-second statements and I know the next speaker is there, but if he prefers I will continue until 1.45 so that he does not have to do just a couple of minutes.

This is an important piece of legislation. It is one that includes seven schedules that have had wide consultation. They cover areas that we know are of concern to the community or the business sector. Ensuring that interest is paid by the Commonwealth on unclaimed money is particularly important and is part of an ongoing reform to link unclaimed money and lost money with the people who own it. It is incredibly important that money retains its value while it is in that lost state. The bill implements some changes to the airline transport fringe benefit arrangements, again at the request of the airline industry that no longer finds that the law relating to their standby rates is particularly relevant. It is an important change sought by the sector and there has been wide consultation on that. It allows irrigators greater flexibility in relation to the Commonwealth Sustainable Rural Water Use and Infrastructure Program. They now have one of two ways to apply the law to their payments, which again gives them greater flexibility and allows them to avoid the timing mismatch that can arise when payments are assessed before the expenditure is fully recognised. This is incredibly important for cashflow management, and those of us who have been involved in small business know that cashflow can bring you undone sometimes even if your profit and loss would actually be just fine. It introduces specific rules for self-managed superannuation fund trustees, important reforms.

The bill introduces the loss carry-back for business, something that was requested by the business sector, in two major reforms and something which I know the small-business sector in my community has been calling for and will welcome. It is a particularly important reform and I am greatly disappointed to see that the opposition will try and excise that schedule today. I understand the point that the opposition is making, that the loss carry-back will not be able to be applied by every business at every time, nor should it. For a start, you have got to be making a loss, and one would hope that the number of businesses that could actually apply this would be less than those that cannot. But 110,000 businesses, including one in six in manufacturing, is an incredibly large number.

Bruce Scott (Maranoa, Deputy-Speaker) Share this | Link to this | Hansard source

Order! It being 1.45 pm, the debate is interrupted in accordance with standing order 43. The debate may be resumed at a later hour and the member for Parramatta will have leave to continue her remarks at a later hour when the debate is resumed.