Stephen Conroy (Victoria, Australian Labor Party, Deputy Leader of the Government in the Senate) Share this | Hansard source

I thank all honourable senators who have made a contribution to this debate on the Tax Laws Amendment (2008 Measures No. 5) Bill 2008. The GST and sale of real property measure was announced in the 2008-09 budget. This measure will ensure that the GST law is consistent with the policy intent that GST applies to value added to real property by registered entities from 1 July 2000. The bill was referred to the Senate Standing Committee on Economics. The committee reported on 10 November 2008 and recommended that the bill be passed by the Senate.

The committee agreed that the proposed GST and real property amendments would not have a significant impact on the cost of housing. Further, the committee noted that if the amendments did not proceed there was a risk that property development transactions would be structured in a way that would give rise to a significant and inequitable loss of GST revenue. The GST and real property measure is an important integrity measure that will ensure that the appropriate amount of GST is collected on sales of real property. The changes will only apply prospectively from the date of royal assent so as not to impact on existing contractual arrangements.

Schedule 2 modifies the thin capitalisation rules to allow entities, when identifying and valuing assets and liabilities for thin capitalisation purposes, to depart in certain circumstances from the treatment provided by Australian accounting standards. The amendments are necessary to adjust for certain impacts of the adoption of Australian equivalents of the International Financial Reporting Standards on the thin capitalisation position of complying entities.

Schedule 3 makes bonds issued in Australia by state and territory central borrowing authorities eligible for exemption from interest withholding tax. This amendment will result in the states and territories being able to bring their offshore bond issuances onshore, unifying their issuances into one pool of funds, and improving depth and liquidity in the market. This should lead to a lower cost of capital and financing costs for the states and territories and aid in easing some of the pressures currently facing the Commonwealth government securities market.

Schedule 4 rectifies an anomaly in the fringe benefits tax law to ensure that fringe benefits associated with jointly held investment assets are calculated appropriately. Under certain salary sacrificing arrangements, associates of employees can receive a share of a fringe benefit made available to an employee. The current anomaly is that the associate’s share of the fringe benefit may often not be considered in the calculation of fringe benefits tax. As a result of these changes the fringe benefits tax law will now recognise the benefit being provided to associates of employees who hold investment assets jointly with the employees. The measure will have effect from 7.30 pm Australian Eastern Standard Time on 13 May 2008. However, there will be a transitional period for employees who have already entered into salary sacrificing arrangements with their employer. Arrangements that were put in place prior to announcement in this year’s budget will be able to continue under the existing law until 1 April 2009—that is, the end of the current FBT year. This will provide time for employers and employees to adjust salary packages as appropriate for those private arrangements.

Schedule 5 implements amendments to the eligible investment business rules for managed funds contained in division 6C of the Income Tax Assessment Act 1936. These amendments were designed following extensive consultation with the managed funds industry and with professional bodies. The safe harbours address industry concern with the operation of division 6C by making it easier for managed funds to comply with the eligible investment business rules. The amendments reduce the scope for funds to breach these rules inadvertently, thus lowering their compliance costs.

These amendments are part of the government’s plan to make Australia a financial services hub in the Asia-Pacific region. To date, the government has taken action on a number of fronts to further this objective, including reducing the level of withholding tax on distributions from Australian managed funds to non-resident investors. The government has also asked the Board of Taxation to review the taxation arrangements applying to managed investment funds. The board is due to report to government by the middle of 2009. These amendments are an initial reform, pending the outcome of the board’s review. I commend this bill to the Senate.

Question agreed to.

Bill read a second time.

Ordered that consideration of this bill in Committee of the Whole be made an order of the day for the next day of sitting.