Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Hansard source

Yes. But seven years on, we have finally got the measures. I am not having a shot at the tax office or the tax advice from Treasury; it is a shot at the incompetence of this government. We well know the burden and overload on Treasury and the tax office in terms of implementation. I think this extraordinary seven-year waiting period is a product of the churn of Assistant Treasurers and of the government taking its eye off the ball. It is out of touch and a bit stale, and just has not given it the priority it should have been given.

Section 51AD and division 16D in the Income Tax Assessment Act 1936 are replaced with a new division 250 in the Income Tax Assessment Act 1997. If division 250 applies to an arrangement, capital allowance deductions will be denied and the arrangement will be treated as a deemed loan that is taxed as a financial arrangement on a compounding accrual basis. The changes could do with some finetuning. However, Labor will not be opposing these changes. Generally, the sooner they are implemented, the better.

The history of this measure demonstrates a level of failure on the part of this government. The review of business tax, the Ralph review, recommended in 1999 that section 51AD be abolished. In response, the then Minister for Revenue and Assistant Treasurer, Senator Coonan, stated on 14 May 2002:

Further consultation on these issues will be undertaken through the course of 2002-03 and it is expected that legislation would be introduced in the Autumn 2003 sittings.

I repeat: ‘Autumn 2003 sittings.’ And here we are, in spring 2007. With respect to the 2003 draft exposure legislation that was released for comment by interested stakeholders, on 26 June 2003 Senator Coonan stated:

These provisions are in urgent need of reform ... The Government ... is committed to its early introduction into Parliament in the spring sittings, 2003.

Now, here we are, in spring 2007, with the legislation before the parliament. It is anyone’s guess as to how much investment in infrastructure has been lost because of the delay that has been caused and as a result of the four years it has taken to get what was described by the then minister, Senator Coonan, as urgent legislation.

It is simply not good enough that, at a time of capacity constraints—we all know the pressures on infrastructure in the economy—this government has delayed the reform of tax rules to encourage investment in infrastructure. This is yet another example of this government’s stale, short-sighted, out-of-touch approach and its lack of vision. However, better late than never—and Labor will support the proposal.

Schedule 6 of the bill removes the $100 million total income cap on the same business test. The schedule is particularly pleasing as it implements Labor policy and amendments from 2005. It represents another backflip by a government which would benefit from listening to business and Labor in developing tax policy. The same business test, the $100 million cap, was introduced by the government in 2005. I can recall Senator Murray’s contribution to the debate at that time—both Senator Murray and I have long memories! Both Labor and Senator Murray, on behalf of the Democrats, opposed it in the Senate in 2005. Labor consistently called for the removal of the cap, which had stood in the way of major investments in infrastructure projects, mining and venture capital. How right Senator Murray was and how right the Labor opposition was. Here we are in 2007 and the government is reversing a measure it introduced in 2005.

This approach by the government sends very bad investment signals to industry. The government is dragging its feet on key reforms which will build and assist productivity growth in this country. The measure removes the cap and it was strongly supported by submissions to the inquiry. This cap should never have been introduced in the first place. The Minerals Council, in its submission to the Senate inquiry, stated:

This arbitrary cap was denying legitimate capital allowance business deductions—which ultimately were factored into rate of return assessments, and potentially, discouraging expansion. This at a time when there is a significant need for investment in infrastructure projects in Australia.

The government claims to be pro-business and it introduced this cap, but here we are, two years later, removing it. I am glad the government has recognised the error of its ways and has adopted Labor policy—and, for that matter, Democrats policy.

Schedule 8 provides a CGT rollover for investors in a stapled group where there has been an interposition of a unit trust between the investors in the stapled group and the stapled entities. This will allow certain stapled entities such as Australian listed property trusts to restructure with an interposed head trust without any CGT consequences. There will also be a consequential amendment to division 6C of the Income Tax Assessment Act 1936 to ensure that the restructures do not result in the interposed trust being taxed as if it were a company. The measures will reduce the barriers for Australian listed property trusts to expand overseas, particularly in the US. However, the amendments only go a small part of the way to ensuring that Australian listed property trusts remain world leaders. The Property Council, in its submission, stated:

The Property Council views these reforms as the first stage of a now widely recognised need to comprehensively reform Division 6 …

Labor could not agree more. As I have already said, Labor has announced that it is committed to reforming division 6C and reducing the withholding tax rate to 15 per cent. Labor is strongly committed to making Australia the managed funds hub within the Asian region by increasing the competitiveness of what is a truly massive and world-class financial sector not just in terms of funds under management—it is the fourth largest, by volume, in the world—but also in terms of the quality and the skill of the employees. I think there are over 300,000 staff working in the financial services sector. It is world class in terms of the provision of the platforms and IT. It is a world-class industry which needs further encouragement to enhance its export potential. Labor supports this schedule; it makes a small step in the right direction. Labor also supports the government’s minor amendment to the schedule, which deals with the technical point raised in the Property Council submission.

Schedule 10 of the bill reforms the taxation concessions for Australian films. It introduces a new producer offset, which provides an offset of 40 per cent for film and 20 per cent for other media and increases the location offset from 12.5 per cent to 15 per cent. There are some other changes that are useful for the industry. The offsets are designed to support and develop the Australian screen media industry. They replace the current package of tax incentives, which have not been particularly effective in recent times. The independent producer sector has expressed concerns about the new producer offset, because commercial broadcasters will be able to access the 20 per cent producer offset for the television series, documentaries and other programs they produce. Labor notes these concerns. Labor will monitor the effect and the impact on the independent film industry.

The remainder of the schedules to this bill enjoy the Labor Party’s support.