Christine Milne (Tasmania, Australian Greens) Share this | Hansard source

I find this interesting, because you cannot cite where in the legislation it says land is not included. I asked the minister’s office to show me where it is in the legislation and all I got back was a concession that subdivision 40-J of the Income Tax Assessment Act provides a statutory deduction for capital expenditure incurred on establishing trees in a carbon sink forest. There were only two things to which they could refer to tell me that land was not included. One was the 2007-08 budget statement, which has nothing to do with anything. It is not the legislation; it is a statement in the budget papers, and half of those are wrong half the time. They went on to talk about the horticultural plant provisions. They said it is modelled on the provisions. So what! It is modelled on the provisions; it is not the provisions. Lots of things are modelled on things. They are not the provisions.

Of course, they then compare it to MISs because they are under the horticultural provisions. Other things are under horticultural provisions; therefore this one is. On the contrary. One is about trees that are going to be cut down. This is about trees that are staying. The only other reference that the government could give me was that of the Australian Taxation Office issuing a tax determination on what amounts are included in the establishment expenditure for the purposes of horticultural plant provisions. But it is only modelled on that. It is actually wrong. No-one from the minister’s office could point me to where in the legislation this stands. And in the hearings, again, we got the same thing from various people. The Department of Climate Change, in its submission, said that landholders can also offer land to businesses that grow carbon sink forests in return for payment for use of the land. In this situation the business would obtain a tax deduction. How lucky is that!

The point here is that they do not point to anywhere in the legislation. They go back to the explanatory memorandum or to the tax office determination but not the legislation itself. That is why I went to see a tax barrister and said: ‘Look at the legislation. Have a look at the interpretation of it and tell me if the land is deductible.’ He said it most certainly is because of the specific reference that says expenditure in relation to the establishment of a carbon sink forest is deductible and the two circumstances that it cites where it is not deductible: (1) the cost of land clearance and (2) the cost of draining a wetland. Apart from that, the inference is that everything else is deductible and that a court would take the view that, because you have specified the two things that are not tax deductible, everything else is tax deductible in terms of capital costs.

He went on to explain a range of other things in relation to this, but the fundamental principle was there. He went through the legislation, and there is nothing there. He quite clearly said that, regardless of what the explanatory memorandum says, in several cases before the High Court where there has been a difference between the legislation and the explanatory memorandum, the High Court has taken the legislation as the primary document, and indeed it would in this case. There is nothing in the legislation, and the tax office determination is not regarded as having anything like the power of the legislation itself.

So I would point out to you that I am still not satisfied that you have shown me anywhere in the legislation where it says the land is not deductible. I think that there are going to be a few tax barristers and tax lawyers around looking at this, not the least of whom, as Senator Boswell pointed out, are from the MIS companies. Already they have set up subsidiary companies for the sole purpose of switching across to this mechanism. If this was going to be some small initiative for marginal land, for biodiverse plantings, don’t tell me that those companies would be going to the trouble they are going to now to set up these subsidiary divisions, because they are doing that for a reason. So, unless, Senator Conroy, you can pick up the bill and point out where the specific exclusion of land is, I am going to go with the interpretation of a tax barrister who works with this all the time. And I might say that, in the course of talking to him, he did pose the question: why is it that government does not outsource part of the drafting of the legislation to people who are working in the field all the time, who have to interpret the law and go into courts and deal with the law, so that the drafting actually gives effect to what the government is saying it wants to do, and not draft legislation that is so full of loopholes it ends up with everybody in the courts losing a great deal in the process? That is the point I want to make. I will come back to it, and I will be very happy for you to point out where that is in the legislation. And, if indeed it is anywhere else in the legislation, I am interested that the minister’s office could not point it out to me and could only refer me to the budget papers or the tax office determination but nothing in the legislation. I presume that is still the case.

The second thing I want to ask is in relation to the role of the climate change secretary giving the commissioner of tax a notice if he or she is satisfied that one or more characteristics of a carbon source have not been met or will not be met et cetera. I would like the government to tell me what the role of the climate change secretary is—what he or she actually reports to the commissioner of tax on in relation to the guidelines.