Steven Ciobo (Moncrieff, Liberal Party, Parliamentary Secretary to the Treasurer) Share this | Link to this | Hansard source

I move:

That this bill be now read a second time.

Schedule 1 to this bill amends the Medicare Levy Act 1986toincrease the Medicare levy low-income thresholds for families in line with increases in the consumer price index. These changes will ensure that Australians who did not pay the Medicare levy in the 2012-13 income year will continue to be exempt if their incomes have risen in line with or by less than the consumer price index. All other thresholds have previously been increased by more than the growth in the consumer price index between 2011-12 and 2013-14, and therefore do not require a further increase at this time.

The increase in thresholds will apply to the 2013-14 year and future income years.

Full details of the measure in this bill are contained in the explanatory memorandum.

Schedule 2 to this bill introduces a measure to protect taxpayers who have self-assessed on the basis of particular announced taxation measures that the government has decided not to proceed with.

The decisions not to proceed with the particular measures that will be covered by the protection measure arise from the government's decisive action to restore integrity to the taxation system by clearing the large backlog of announced but un-enacted measures left by the previous government.

The protection provision will provide ongoing certainty for taxpayers that were impacted by an un-enacted announcement.

Schedule 3 to this bill amends the tax law to deny an entity the benefits of any additional franking credits that an entity receives as a result of distribution washing.

To distribution wash, an entity sells an interest shortly after becoming entitled to receive a fully franked distribution in respect of that interest, then shortly after purchases a new and substantially identical interest that also provides a second entitlement to another fully franked distribution.

The imputation system contains integrity rules to ensure that franking credits only benefit the true economic owners of shares, and to ensure that franking credits are only available to shareholders in proportion to their shareholdings.

Distribution washing contravenes both these principles by enabling sophisticated shareholders to effectively 'trade' their franking credits, and by enabling some shareholders to receive two sets of franking credits for effectively the same parcel of shares. It effectively allows foreign shareholders who cannot use franking credits to sell their franking credits to domestic investors.

Since announcement of the policy, there has been a significant decrease in activity that could be perceived as distribution washing. Of course, this affects only a small portion of the market. Overall trading activity has continued to grow with the value of trading increasing by five per cent since this policy was announced.

Addressing distribution washing by closing the loopholes will support investment by improving the efficiency and integrity of the tax system. t will also help ensure the long-term sustainability of the imputation system for all Australians. I give credit to the previous government for initiating this measure.

Full details of the measure are contained in the explanatory memorandum.

Debate adjourned.