Andrew Leigh (Fraser, Australian Labor Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

I say at the outset that the opposition supports this bill, which contains four schedules. Schedules 1, 3 and 4 are non-controversial, technical changes with no fiscal impact. Schedule 1 provides tax relief for certain mining arrangements. Schedule 3 deals with income tax look-through treatment for instalment warrants and similar arrangements. Schedule 4 deals with certain categories of company losses.

Schedule 2 is the material schedule of the bill; it increases the statutory effective life of in-house software from four years to five years. This means that deductions will be claimed over five years for expenditure allocated to software development pools. The measure is recognition of the fact that software developed in-house has a longer effective life now than it had in the past. The saving is not inconsiderable—$420 million over the forward estimates.

It is a measure of Labor's constructive and bipartisan approach to budget savings measures that we support this bill. We believe it meets the key tests of being equitable and efficient by aligning the statutory life of in-house software with its practical life span. I would, however, contrast Labor's constructive approach to this particular measure with the approach that the coalition took in 2008, when the effective life of in-house software was last changed. In the 2008 budget Treasurer Swan recognised that the effective life of in-house software had risen and moved that it be extended from 2½ years to four years. The member for Cook, Scott Morrison, referred to that move as 'a completely fruitless and pointless exercise' and 'a grab for tax'. In 2008 the coalition displayed a lack of bipartisanship when facing exactly the same measure we are considering today. They chose the cheap political grab over sensible and constructive support.

The opposition will not be doing that today. We recognise that the depreciation of in-house software ought to reflect its practical life span; we recognise that the practical life span of in-house software has increased. Software is now doing its job for longer in the real world, and the tax laws need to keep up with that. We will not be suggesting, as the coalition did in 2008, that this is 'a completely fruitless and pointless exercise' and 'a grab for tax'. We do recognise that in-house software development is an extremely important part of innovation in a modern economy. It is supported through the tax deduction for software development itself and through the research and development tax credit.

In this vein, the significant cuts to the research and development tax credit contained in the Tax and Superannuation Laws Amendment (2015 Measures No. 3) Bill puts in jeopardy the $9.3 billion of in-house software development carried out by companies with turnovers larger than $20 billion. The Parliamentary Library has estimated that research and development spending will be 0.56 per cent of GDP in 2014-15. That is the equal lowest level since records began in 1978-79. It is hardly surprising, given that this is a government that came to office without a science minister, a government which has been slashing jobs from the CSIRO and a government which has been cutting the research and development tax credit. It is hard to imagine how Australia goes forward as a strong and innovative nation when we have a government which is so anti-science—shutting down the Climate Change Authority, cutting back on funding to the CSIRO and the research and development credit. Many on this side of the parliament have a passion for research and development, for the development of new firms and for the ability of existing firms to innovate. But you do not get any of that when you cut back on research and development assistance.

This is a tax reform measure and so it is appropriate that we look at the government's overall record on tax. If we look at tax as a share of GDP and at tax receipts, we see that tax receipts are predicted to rise from 22.3 per cent of GDP in the current fiscal year up to 23.4 per cent of GDP at the end of the forward estimates. That puts tax considerably higher than it was under Labor. During the Labor period of office, the tax share of GDP sat around 20 to 21 per cent. So Australians will find it strange when they hear Mr Abbott and Mr Hockey bellowing about this being a low-taxing government. All you have to do is look at the budget papers—I am looking at Budget Statement No. 1, pages 10 to 12 and 10 to 13—to see that they give the lie to the suggestion that this is a low-taxing government. This is a government which aims to have a tax share of GDP considerably higher than Labor did. The last budget brought down 17 new or increased taxes, and when this government brings down taxes almost invariably they are taxes that hit low- and middle-income Australians.

We on this side of the House believe in serious tax reform. That is why during the first half of this parliamentary term we brought out a policy on fair taxation and multinationals—a move unprecedented, I believe, since the 1990 to 1993 parliamentary term. It is a policy that will raise over $7 billion over the course of the decade by allowing more careful treatment of hybrid instruments—by allowing the Australian Taxation Office to look at how other tax offices deal with hybrid instruments, rather than being blind to the tax treatment of hybrid instruments in other jurisdictions.

Labor's multinational tax package says that rather than allowing companies to pick their favourite debt deduction rule, all companies should have to use the debt deduction rule that makes economic sense. That is the worldwide gearing ratio, a rule that, put simply, says that if you owe a lot of money to the banks you can deduct a lot of money for your Australian operation. If you do not owe much to the banks you cannot claim large debt deductions for your Australian operation. It is economically sensible, it is grounded in work that the OECD has been doing in their Action Plan on Base Erosion and Profit Shifting, and it adds to the budget bottom line to the tune of $7 billion over the course of the next decade.

This year Labor has also announced a package curtailing excessive superannuation tax concessions. The government's own Financial System Inquiry found that 10 per cent of Australians receive 38 per cent of Australia's superannuation tax concessions; more than the bottom 70 per cent of Australians receive. Indeed, if we go further up the distribution we know that the top one per cent of Australians get more superannuation tax concessions than the bottom 40 per cent. This is why the government's own Treasury secretary, John Fraser, has said that we need a rethink of superannuation tax concessions. This recognises that the superannuation tax concessions are the fastest growing tax concessions in the budget.

As the shadow Treasurer has pointed out, our superannuation tax concessions are not fair and they are not sustainable. The forgone budget revenue from superannuation tax concessions almost doubles over the next four years, from $11.8 billion in 2014-15 to $22.4 billion in 2017-18. The forgone budget revenue, as a result of the superannuation tax concession, will soon exceed the total expenditure on the pension. The government's own tax white paper, the curiously ungrammatical Re:think tax white paper, suggests that superannuation tax concessions are an area that ought to be looked at. The government has eschewed that recommendation, saying instead that they will not change superannuation. When they say that, they are not saying that they will not take away the low income superannuation contribution, which benefits three million low-paid Australians, two-thirds of whom are women. No, they are willing to scrap that! They do not mean that they will not continue to increase the universal superannuation contributions, frozen at 9½ per cent. No, they intend to do that, despite the fact that they themselves benefit, as those who have served as parliamentarians in the House since 2004, receive a 15.4 per cent superannuation contribution. Nine and a half per cent is apparently good enough for the low paid—15 per cent is good enough for those who serve in here. We on the Labor side of the House are deeply concerned that the government is not willing to tackle the unfair and unsustainable superannuation tax concessions, as so many business groups, the head of the Treasury, and the government's own tax white paper have said.

The government's approach on multinational taxation has been to try to shield big companies from legitimate scrutiny. Extraordinarily, the Treasurer was out yesterday saying that we did not need the Senate economics inquiry into multinational tax, because the government was already requiring firms with a total income over $100 million to report total income, taxable income and tax paid. It might have helped if he had also told listeners to that program that that was the measure he was trying to wind back. That is right. It is such good measure that Mr Hockey is trying to shield almost half the firms that are affected by it.

Multinational taxation is a core part of the taxation reform agenda, which we are discussing in this bill today. Unless the government is serious about tax transparency, unless they are willing to take on Labor's sensible measures on multinational taxation, we are not going to get far with a constructive bipartisan debate that will add to the budget bottom line. The government's own multinational tax measures are so woolly that Treasury cannot cost them. The bits that can be costed raise a desultory $30 million, less than 1/60th of what Labor's package raises. Fundamentally, that is because this government is not serious about cracking down on multinational profit shifting.

When Labor brought a sensible multinational profit shifting package to the parliament in 2013—under the leadership of Wayne Swan and David Bradbury, who a couple of years later received the international tax award given to the 50 most serious tax reformers around the globe—the coalition voted against it. When they came to office the coalition failed to enact $1.1 billion of that package, effectively handing $1 billion back to multinationals. When Labor came up with our package, I have to be honest, given all the government's complaining about the budget emergencies I fully expected the them to embrace part of it. I thought, 'Well, that is a pity, we will not get to see a Labor government embrace it.' But, ultimately, what you want in this place is for your good ideas to be taken up. We were extremely surprised when the government decided instead to back the big end of town. Well, maybe we were not all that surprised after all, because, let's face it, they do have a bit of a track record on this. If on the one hand say that there is a budget emergency and on the other hand you are doling out a billion dollars to multinationals, it does not seem to fit.

Many Australians will be concerned about the sacking of 1,100 compliance staff in the tax office in the past year alone, including 270 from the specific section that investigates private companies. Labor's additional investments in the tax office's compliance program continue to provide dividends in the form of increased revenue for the tax office, significantly exceeding, in increased revenue, what we spend on it. That program is slated to come to an end, and the government has no plans to continue it. Unfortunately, what plan they have is to increase the goods and services tax. Prior to the last election Mr Abbott ruled out any GST increase 33 times. At one point he said:

Let me be as categorical as I can, the GST will not change. Full stop. End of story.

I know that this is going to make some members of the House fall off their chairs, but Mr Abbott does not seem to have kept that promise. When Mike Baird called for a rise in the GST from 10 to 15 per cent, the Prime Minister said that was a 'very sensible proposal.' So we have gone from the GST won't change, full stop, end of story in 2013 to increasing the GST by 50 per cent being a very sensible proposal. This increase in the GST seems to be entirely at odds with what is in the government's own Re:think tax paper. Chart 2.9 on page 25 is a very useful graph showing the government's best estimates of the efficiency cost of various taxes. That is an important economic question—you need to know how many cents of economic activity are destroyed when you raise a dollar of revenue. We know that state taxes such as insurance taxes and stamp duties have a very big drag on economic activity, and we know other taxes such as land taxes have a very small drag on economic activity.

The question is where do income taxes and GST sit on the spectrum. Thanks to the tax white paper we now know what the government thinks about that question. The government's own tax white paper estimates that when you raise a dollar of revenue from income tax you destroy about 20c of economic activity, and for the GST you destroy about 20c worth of economic activity. That is right—the government's own tax white paper says that the GST is about as efficient, or about as inefficient, as the income tax. So for all this talk about the GST being a fabulously efficient tax and income taxes being awfully inefficient, that is not what you find from the evidence of the best boffins in Treasury, signed off by the Treasurer.

So the GST is not more efficient than the income tax, but it is far less equitable. An article by Greg Jericho in The Guardian on 30 October 2014 compared how much different income quintiles spend on food. He found that the bottom quintile spend 18 per cent on food and the top quintile spend five per cent on food. We know that is true for other areas of expenditure which are fully captured by a GST. Across just about any category of spending you want, the poor are spending more than the rich. So the GST is inequitable and it is not particularly efficient either. The member for Wannon wants the base broadened—he wants the GST expanded to food, health care and education; he believes the GST should apply to school fees and to bananas, to dentists and to wheelchairs. If that were to be the case, we know from the analysis that is presented by Mr Jericho that in particular putting the GST on fresh food would have an adverse impact on the bottom quintile. The top quintile save about a quarter of their incomes; the bottom quintile spend all of their incomes. Expenditure taxes tend to hit the poor hardest, and an expansion of the base or an increase in the rate would be a regressive tax reform.

The tax reform conversation is important. A national reform summit has been pulled together by The Australian newspaper and The Australian Financial Review, and I have been struck in speaking to some of the participants and in looking at some of the early papers coming out that conversations around superannuation tax concessions are in the mix. The Prime Minister might be ruling out curtailing the fastest growing tax concession in the budget, but sensible business groups are not ruling this out. The Prime Minister might be ruling out doing anything on negative gearing, but sensible business groups are calling for a conversation around negative gearing. This sensible and mature conversation the Prime Minister calls for seems only to apply to his favoured policy of increasing the GST. Certainly it did not apply when we were having conversations about emissions trading schemes in Australia a couple of years ago. Going out and standing in front of rallies with offensive signs is hardly an indication of a sensible and mature conversation. Labor is committed to that sensible and mature conversation, very much in accord with the Hawke-Keating legacy.

I do notice there has been a bit of conversation this week about the degree of bipartisanship the Hawke-Keating governments enjoyed. An opinion piece by John Howard in the Financial Review on Monday suggested that the bulk of those reforms enjoyed bipartisan support. Paul Keating begged to differ, pointing out a reform or two not backed by the then coalition. Let me go through only a partial list of those tax reforms and other reforms of the eighties and nineties which were not backed in. Medicare was fought by the coalition, native title was fought by the coalition, the petroleum resource rent tax was fought by the coalition, the HECS scheme was fought by the coalition, capital gains tax was fought by the coalition, the assets testing of the pension was fought by the coalition, the fringe benefits tax was opposed by the coalition. They like to come in here and talk about the legacy of the Hawke and Keating governments; they love to say they were halcyon days when Labor believed in reform and the coalition just backed it in. The fact is that so many of the reforms on which Australia has been built—from universal superannuation to Medicare—were fought tooth and nail by the Liberal and National parties. They have to be dragged kicking and screaming to support good and sensible reform.

By contrast, we on this side of the House are today standing up and supporting the kind of reform that was opposed by Scott Morrison when he was standing at this very dispatch box in 2008. When we see sensible reform we back it in. When the coalition sees an opportunity to score a tagline, a headline, a cheap shot they will always go for it no matter whether it is sensible reform. Labor is going to be supporting this bill and I look forward to that sensible, mature conversation about tax reform that the Prime Minister seems to be praying for but is unable to do his part to deliver. I move the following amendment to the motion that the bill be now read a second time:

That all the words after “That” be omitted with a view to substituting the following words:

“whilst not declining to give the bill a second reading, the House condemns the Government’s failure to ensure multinational corporations pay their fair share of tax.”

Ewen Jones (Herbert, Liberal Party) Share this | Link to this | Hansard source

Is the amendment seconded?

Graham Perrett (Moreton, Australian Labor Party) Share this | Link to this | Hansard source

Yes.

Ewen Jones (Herbert, Liberal Party) Share this | Link to this | Hansard source

I thank the member for Moreton. The original question was that this bill be now read a second time. To this the honourable member for Fraser has moved as an amendment that all the words after 'That' be omitted with a view to substituting other words. If it suits the House, I will state the question in the form 'that the amendment be agreed to'. The question is that the amendment be agreed to.

Graham Perrett (Moreton, Australian Labor Party) Share this | Link to this | Hansard source

Deputy Speaker, it is good to see you sitting in the chair rather than being cruelly thrown out!

Ewen Jones (Herbert, Liberal Party) Share this | Link to this | Hansard source

The member for Moreton should be very careful not to reflect on the chair!

Graham Perrett (Moreton, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak on the Tax and Superannuation Laws Amendment (2015 Measures No. 2) Bill 2015 to add to the very thorough contribution made by the member for Fraser. Aspects of this bill are not controversial—aspects of it. The only measure in this bill that has any fiscal impact is the measure that extends the statutory life of in-house software by one year. This was the previous Labor government's initiative. Labor, in its 2008-09 budget, moved to increase the life of in-house software by 1½ years. Software developed in-house could then be claimed as a tax deduction over four years, an increase from the previous 2½ years.

The measure in this bill will mean that software developed in-house can now be claimed over five years instead of the four introduced by Labor. It is a measure that will better align the average useful life of such software for businesses with its statutory life. Over the forward estimates this measure will raise $420 million. Such measures, as touched on by the member for Fraser, illustrate that Labor is always willing to be bipartisan and constructive when it comes to making sensible budget savings. This is consistent with the approach taken by Labor on this measure when we were in government.

The bill before the chamber is tinkering with the tax policy in a very small way. Sadly, it does nothing to address the major issues surrounding tax policy in Australia. It does nothing to address tax avoidance by multinationals—a huge issue at the moment in Australia and in other OECD nations. It does nothing to address the unfair allocation of superannuation tax concessions—something that the government's own advisers have indicated is a problem for the economy and a problem that will become a more pressing issue over the next few years. This is absolutely consistent with this government's inability to tackle major structural reform.

When it comes to economic reform, this Prime Minister and Treasurer are all pea-heart and sinew—there is no economic substance to them. In these difficult times this is not what our nation needs. The unfairness of our current tax structure is nowhere more evident than in the great divide between the haves and the have-nots. At the moment the three most wealthy people in Australia have more wealth than the poorest one million. I repeat: the three wealthiest Australians now have more resources than the poorest one million!

They say that when you study great civilisations such as the Roman Empire, the Greek Empire and the like, if you look at the reasons for the decline in such empires, the main reason is when a great chasm opens up between the rich and the poor—not that I am suggesting that modern Australia is anything like the Roman Empire! If you interfere with Australia's egalitarian organisational principles, you will undermine the very basis for Australian society. I know the member for Fraser has touched on this extensively in his book Battlers and Billionaires. I recommend reading that if you want to explore the topic.

It is interesting to look at the Abbott government's reform priorities and at what they have done and how they have interfered with those egalitarian principles. They have cut family payments for low- and middle-income families. They cut the superannuation tax break for those on low pay, a decision that had particular ramifications for women—two-thirds of the people affected are women. They cut pensions. They forced unemployed youth to have no income for a whole month. And they imposed a 'divorce tax' on people going through the stress of separation. After the Senate rejected it, they went out 14 days later and basically introduced the same tax, the same increase—and then the Senate responded again. This heartless government has one default setting, and it is a lazy one. It is to hit those in Australian society who can least afford it.

Labor knows that there is a need for real reform of tax policy in particular, as was touched on by the member for Fraser in greater detail. The Abbott government is not prepared to touch real reform unless it hits those who cannot afford it. People in my electorate are still talking to me about the Treasurer's first budget and how it targeted those who could least afford it. The greatest claim to fame for the second budget was that it was less bad. That is the great thing that the Treasurer has to cling to: 'My second budget was nowhere near as bad as my first budget'! We saw the other day the Prime Minister jump, like a seagull onto a sick prawn, at the proposal from Premier Baird of a 50 per cent hike in the GST. As we all know, the GST is a regressive tax that hits the poorest hardest. We saw those percentages mentioned in the member for Fraser's speech.

A fair, competitive and sustainable tax system is critical for the future prosperity of this nation. Australia's tax system raises the revenue that governments require to provide the quality public goods and services that are needed by the community. We can see in countries where they do not collect the same amount of tax revenue that there is no safety net. If you stumble or fall or even just get sick in places like the United States, before Obamacare was rolled out, you would basically be on the scrapheap of society.

A key area for reform, in these days where multinationals have challenged the nation state, is reducing multinational tax avoidance. Labor when in office put in place measures to ensure that multinational companies paid their fair share of tax. Those measures would have prevented $4.1 billion in revenue being moved offshore by multinationals—$4.1 billion buys a lot of hospitals, funds a lot of students and prevents a lot of pensioners from having a life of indignity.

It is not a hard concept to grasp. When large multinationals pay less tax, it means that families and small businesses have to pay more tax, especially if you have a government addicted to borrowing, like this one, which has borrowed over $100 billion in the last two years. I remember the member for New England, who is at the table, railing against government borrowing when he was in opposition. He is little bit quieter on government borrowing now, although it has hit record highs. Over $100 billion has been borrowed by this Treasurer, and our grandchildren will have to pay it off. The 19,000 small businesses in Moreton know this, but Treasurer Hockey does not seem to get it. Not only will this government not tackle tax reform at the big end of town; it intends to repeal the tax transparency measures that Labor put in place when we were last in government.

Unlike this government, Labor has proposals for tax reform on the table right now. Labor has proposed greater tax transparency and further anti-profit-shifting measures for multinationals. Before the budget, Labor put forward a fully costed package of tax measures relating to multinationals. Those measures are projected to bring in $7.2 billion in revenue over the next 10 years.

The government should stop trying to protect big companies from scrutiny but concentrate on trying to create a fairer tax structure for all Australians. The actions of the government are not consistent with those of a government that is concerned about all taxpayers paying their fair share, rather than just those in pay-as-you-go systems and small businesses.

The government has orchestrated the sacking of over 1,100 compliance staff from the Australian Taxation Office in the past year. Almost a quarter of those staff members were from the section that specifically investigates private companies. The Treasurer was quick out of the blocks in being tough on new mothers, calling them rorters and double dippers, but raised the white flag when it came to the top end of town.

This is a government that cannot stand up to multinational companies, at a time when nation-states are challenged by accountancy practices—accountancy trickery, really—that allow multinational corporations to avoid paying their fair share. The Australian people need and deserve better than that. We deserve a government that is committed to a fair, sustainable taxation system. I stress those two words: fair and sustainable. One of Treasurer Hockey's first acts was to roll back Labor's measures to tackle profit-shifting by multinationals. That flick of his pen effectively gave $1.1 billion back to multinationals. Just think what we could do for Australian families with that money.

Not only are the actions of the Abbott government weak on tax reform for multinationals; they are sadly out of step with the rest of the world. Who can forget last year's G20, that moment in the sun for Brisbane and Australia, when our Prime Minister, before some of the biggest countries in the world, bemoaned the fact that he could not bring in a Medicare tax? Talk about a great man of vision seizing the moment! Unbelievable. In Ireland, their finance minister has stopped what they call the 'double Irish Dutch sandwich'. That is an arrangement whereby companies transfer money between subsidiaries that are registered in Ireland and those in other European countries. Other countries are closing tax loopholes for multinationals, but our Treasurer, strangely, bizarrely, flying in the face of that, has reopened such tax loopholes.

Mr Hockey has also pushed back key global tax transparency measures negotiated through the G20 that were due to start in 2017. Australia will now be left to watch as the world's major economies start sharing information on company tax. The Treasurer is very strong on rhetoric. He said in September last year:

Supporting greater tax transparency and information exchange is our best weapon to crack down on tax avoidance and evasion right now.

Great words, hollow actions. He talks tough but walks very softly. He is no good on the follow-up.

The other area in which the government are completely impotent is superannuation reform. As we have seen from matters discussed in this chamber, at the cabinet table they have run out of ideas. They do not have a reform agenda or a vision for the future. After attacking the lowest paid in their first budget, with the effects then flowing through to small businesses and an extra 800,000 people joining the unemployment queue in the last two years, the government, after saying no to some Labor reforms, ran out of ideas. Yet our retirement income system is badly in need of sensible reform. It is unsustainable in its current state—as advised by the very people the Prime Minister appointed to advise him—especially in light of the revenue write-downs coming from the resources sector. Thankfully, there are a few little shoots going up in the economy, but the resources sector obviously has some challenges, particularly when it comes to coal and iron ore. So, as I said, we have record levels of unemployment, which also means households are affected by the problems associated with unemployment, such as bad role models and stress.

Australians deserve to have a comfortable standard of living in retirement, but this government is doing nothing about setting up the correct, sustainable system. By design, tax concessions are an integral part of the superannuation system. The great Labor initiative of universal super was not designed to be a tax haven for wealthy Australians. The government's own Financial System Inquiry found that 10 per cent of all Australians receive 38 per cent of Australia's superannuation tax concessions. The top 10 per cent are basically receiving 40 per cent of the concessions. In fact, there are 475 people in Australia with superannuation balances of more than $10 million each. These people earn tax-free incomes of $1.5 million each year. That is just not fair and not part of the Australian egalitarian system. How can this government continue to hit those who can least afford it—pensioners, youth, families—when the wealthiest are earning $1.5 million tax-free each year? This is unsustainable and unfair.

Thankfully, unlike the Abbott government, Labor has a superannuation reform plan. Labor will direct superannuation tax concessions to those that need them the most, which is how the superannuation system was designed to be used, by Paul Keating, and that is to provide retirement income for all Australians, sustainably. Labor's reforms would affect approximately 60,000 superannuation account holders, with superannuation balances in excess of $1.5 million. Earnings from those accounts above $75,000 would not be tax-free but would attract the same concessional rate of 15 per cent that applies to earnings in the accumulation phase. It is not the end of the world for those people. Hopefully, they would still be very comfortable in their retirement. This reform would make a huge difference to the retirement income system as a whole. It is estimated that the revenue from this proposed reform would collect $9.2 billion in the first 10 years. This is a sensible reform. It is the type of reform a good, sensible and brave government delivers. We are not likely to see this type of reform under Treasurer Hockey or Prime Minister Abbott.

The bill currently before the House is, as I said, not particularly controversial, but I would ask the government to step up and show a little bit of ticker when it comes to looking at the positive reforms that Labor has put forward. Good governments need to have the ticker to lead the Australian people. (Time expired)

Barnaby Joyce (New England, National Party, Minister for Agriculture) Share this | Link to this | Hansard source

Let me begin by thanking members who have contributed to this debate, especially those from the other side; however, I do need to draw their attention to a couple of things that need to be corrected. In 2015-16 the government will provide around $9.7 billion in support of innovation, science and research. This amount includes approximately $3 billion for the Research and Development Tax Incentive and $1.8 billion for the Australian government research activities, including through the CSIRO. I note that, in my own portfolio year, through matched contributions about a quarter of a billion dollars a year goes into research and development.

The Tax and Superannuation Laws Amendment (2015 Measures No. 2) Bill 2015 is part of the government's plan to repair the budget, tackle the debt and get the budget back on track. This is vitally important for maintaining living standards into the future for our children and our grandchildren. We are committed to living within our means so that we can deliver prosperity into the future. This bill also implements a number of announced but unenacted measures that will help to provide taxation certainty to corporates, investors and superannuation funds.

Schedule 1 to this bill keeps our promise to the resource sector that the limiting of the immediate deductibility of certain exploration expenses would not impact farm-in farm-out arrangements or resource sector interest realignments. These arrangements will ensure that genuine exploration activities and other legitimate restructuring arrangements can continue, without any unintended tax consequences. This measure maintains the tax neutrality of a farm-in farm-out arrangement and provides tax rollover relief for an interest realignment in which the parties to a joint venture exchange interest in mining, quarrying or prospecting rights.

Schedule 2 to this bill will extend the    effective life of in-house software from four years to five years. From 1 July 2015 taxpayers will claim the tax deduction for the expenditure on in-house software over five years. While there is no change to eligibility for the deduction, the measure ensures that the effective life of software for tax purposes better reflects the typical useful life of software for businesses. This change will save $420 million over the four years to 2017-18. This money will be redirected towards funding other priorities and paying back the debt left by the previous government.

Schedule 3 to this bill provides certainty for investors in instalment warrants and instalment receipts by clarifying the income tax treatment of these trust arrangements. Instalment warrants and receipts allow an investor to purchase an asset such as a share by paying in one or more instalments. Currently, industry looks through the instalment warrant or receipt for capital gains tax purposes. Although this is a longstanding practice, some uncertainty has arisen about whether the tax law supports this practice. This measure ensures that the investor is treated as the owner of the underlying asset for income tax purposes. This benefits investors as capital gains tax will not be applicable at the time of paying the last instalment. Equally, the investor rather than the trustee will be assessed on any dividends or income received from holding or selling the assets. It also provides long overdue certainty for individuals, businesses and superannuation funds.

Schedule 4 to this bill clarifies the company loss deduction rules. Companies make a tax loss when the total deductions they claim are greater than their income    in a year. Companies are able to carry forward these losses to subtract from assessable income in future years. I feel like I am back at accountancy! To carry losses forward, companies must have either maintained the same ownership and control or carried on the same business since the loss was incurred. A number of tests are used to assess this. There are a couple of minor technical issues with these tests. These issues have been unsettled for some time. This measure fixes these technical issues and will ensure that the company loss rules operate as intended. Full details of each of these measures are contained in the explanatory memorandum.

In summing up, the measures in this bill are part of the government's plan to repair our finances and strengthen our country so that future generations can enjoy the same or a better standard of living than we do. In addition, the bill provides important certainty for taxpayers, supports mining exploration and reduces red tape. This bill makes further progress in reducing the number of unenacted taxation measures. I commend this bill to the House.

Ian Goodenough (Moore, Liberal Party) Share this | Link to this | Hansard source

The original question was that this bill be now read a second time. To this the honourable member for Fraser has moved as an amendment that all words after 'That' be omitted with a view to substituting other words. The immediate question is that the amendment be agreed to.

Question negatived.

Original question agreed to.

Bill read a second time.