Doug Cameron (NSW, Australian Labor Party) Share this | Hansard source

I rise to support the Tax Laws Amendment (2008 Measures No. 6) Bill 2009. I am pleased to speak in support of the bill and the five measures contained within it. Schedule 1 of the bill deals with capital gains tax rollovers for corporate restructures and the emergence of so-called ‘top hat’ schemes. Schedule 2 deals with amendments to the assistance-in-collection provisions in division 263 of schedule 1 to the Taxation Administration Act 1953. Schedule 3 deals with late payment offset for superannuation guarantee contributions. Schedule 4 deals with minor amendments and technical corrections. Schedule 5 is about facilitating assistance to individuals and communities affected by the Victorian bushfires and the north Queensland floods

Schedule 1, the capital gains tax rollovers for corporate restructures, is an important integrity measure. As has been indicated, the former government announced its intention to deal with this issue in October 2007. Those proposals have been refined by this government through extensive consultation. The amendments will apply to arrangements entered into after 7.30 pm on 13 May 2008 and will prevent companies from gaining significant and unintended tax benefits by restructuring.

The bill modifies the capital gains tax provisions in the Income Tax Assessment Act to prevent a market value cost base from arising when an entity is acquired by another entity following scrip-for-scrip rollover under an arrangement that is taken to be a restructure. Scrip-for-scrip rollover is designed for corporate takeovers and the exchange of share rollover is designed for corporate restructures. The exchange of shares rollover provides a tax neutral outcome for corporate restructures where there is no substantive change in the underlying asset ownership of the original entity. If this rollover applies, the cost base of the shares that an acquiring entity receives in the original entity reflects the cost base of the underlying net assets of the original entity.

The scrip-for-scrip rollover can apply to an arrangement only if the exchange of shares rollover does not apply. In scrip-for-scrip rollovers the cost base of the shares that the acquiring entity receives in the original entity reflects the market value of the underlying net assets of the original entity. Scrip-for-scrip rollovers contain integrity rules that apply if the owners of the replacement entity and the original entity are substantially the same. Integrity rules mean that the cost base of the shares that the acquiring entity receives in the original entity reflects the cost basis of the original shares held in the original entity, not the market value of the original entity.

Some entities insert new holding companies on top of the original entity. This has been described as a top hat scheme. This is designed to attract scrip-for-scrip rollover. The holding company obtains market value cost base for the shares acquired even though no significant change in the underlying ownership of the assets takes place. Where the original entity subsequently joins the holding company consolidated group, the consolidation tax cost setting rules apply to push this market value cost base into the underlying assets of the original entity. This effectively allows the tax costs of the original entity’s assets to be set aside which, in turn, can lead to an increase in capital allowance deductions and reduction in capital gains that arise on the disposal of those assets.

The government is determined to address this loophole in the tax laws that allows corporate restructuring for the purpose of accessing a tax advantage designed for legitimate takeover activity. I am very surprised that we still have corporate entities in this country who are trying to undermine the tax base of the country, trying to set up these false structures to avoid paying the proper tax to the community and to the government.

Schedule 2 makes amendments to assistance-in-collection provisions. Schedule 2 to the bill amends the assistance-in-collection provisions found in division 263 of schedule 1 of the Taxation Administration Act 1953. The amendments will overcome legal and administrative problems associated with deeming debts never to have been payable in the event that claims are removed from the foreign claims register or otherwise reduced. The amendments also expand the types of payments that the Commissioner of Taxation can make to a foreign country to include certain funds that the commissioner recovers in the course of legal proceedings, such as interest attributable to the debt and funds paid for in advance to the foreign country.

The amendments also clarify that the role of the register is to transform foreign tax debts into Australian tax debts, rather than acting as a day-to-day record of the debtor’s liability. The current assistance-in-collection provisions were enacted by the International Tax Agreements Act 1953 to enable the commissioner to meet Australia’s existing and future treaty obligations for mutual assistance in collection of tax debts. Specifically, these provisions enable the commissioner to take action to collect or to conserve debts owed in another country where the debtor is a resident in Australia or has assets in Australia.

Two issues have been identified which may impact on the commissioner’s ability to effectively meet Australia’s obligations under relevant international agreements. The first arises because of the consequence of deeming a foreign tax debt as never to have been payable where the debt is reduced under subsection 263-35(6). Debts can be reduced in circumstances such as where a debtor has made a part payment in the foreign country or where the debt is reduced in the foreign country as a result of an amendment to the debtor’s liability. Deeming such debts as never to have been payable in this way can significantly frustrate any proceedings that the commissioner has commenced or finalised to collect the debt.

The second problem arises in relation to the types of payments that the commissioner is able to make to the foreign country. Under current law, section 263-40 permits only the principal amount and any general interest charge referable to that amount that has been collected by the commissioner to be paid to the foreign country. However, there may be circumstances where other amounts will need to be paid. These amendments also provide an opportunity to clarify the role of the register.

Schedule 3 of this bill amends the Superannuation Guarantee (Administration) Act 1992 to vary the period within which an employer can make a contribution to an employee’s superannuation fund after the due date for a quarter and still be able to use the late payment offset. The calculation of the general interest charge on an unpaid amount of the superannuation guarantee charge where the offset is used is also amended.

An employer is eligible to use the offset to reduce the superannuation guarantee charge liability in the following circumstances: where the employer has made a contribution for a quarter into an employee’s fund after the due date for the quarter; where the contribution in respect of the employee is made before the employer’s original assessment of the superannuation guarantee charge for the quarter; where the employer has given an election, in the approved form, to the commissioner to use the offset in respect of the employee to reduce their superannuation guarantee charge liability for the quarter; and where the election is made within four years after the original superannuation guarantee assessment date for the quarter.

Schedule 3 also amends the act in relation to the calculation of the general interest charge on an unpaid amount of the superannuation guarantee charge where an employer elects to use the offset. The offset takes effect from the original superannuation guarantee assessment date. From the original superannuation guarantee assessment the general interest charge accrues on the remaining shortfall component of the unpaid superannuation guarantee charge amount after the offset has been applied. Where an employer is eligible to use the offset for a quarter for an employee and does elect to use the offset, the offset takes effect on the employer’s original superannuation guarantee assessment date for the quarter.

Schedule 4 of this bill makes various minor amendments to the taxation laws. The amendments deal with issues such as incorrect terminology, grammatical punctuation errors, missing asterisks from defined terms, inoperative material, ambiguities in the law and the realignment of policy with the original policy intent. More significant amendments to this schedule include extending capital allowance rollover relief for depreciating assets to the case where a fixed trust is converted to a company, allowing funds that make payments to dependants of deceased estates to still be approved worker entitlement funds and so retain the fringe benefit tax exemption for payments to them, and giving trustees and beneficiaries of employee share trusts a choice to backdate recently inserted capital gains tax provisions that prevent taxing both trustees and beneficiaries when the employee becomes absolutely entitled to shares held in a trust after exercising a right under an employee share scheme. These amendments will apply from the date of royal assent unless otherwise stated.

Schedule 5 is designed to ensure that assistance can be provided to individuals and communities affected by the Victorian bushfires and North Queensland floods. The government has moved decisively to assist the Victorian and North Queensland communities in their time of need. The fires in Victoria are estimated to have cost in excess of $1 billion. It would be appropriate to once again acknowledge the courage, commitment and resolve of the firefighters who risked their lives in the face of horrendous firestorms. It is almost impossible to appreciate the horrific task undertaken by our bushfire volunteers and our police force when they had to attend after the fires. I also express my condolences to the family, friends and firefighting colleagues of David Balfour, who tragically lost his life while selflessly serving the Victorian community in the time of need. David Balfour was a local Canberra resident and I am sure he is remembered with great respect. The dignity with which he carried out his task will be remembered for a long, long time in the Canberra community.

So many other citizens, community groups and charities mobilised to provide emotional and physical support to the survivors of the Victorian bushfire and to North Queenslanders, who faced devastation and disruption through flooding. I would like to place on record my appreciation for the terrific efforts of everyone involved in this bushfire fight and in the relief after the bushfires and the North Queensland floods. Many Commonwealth and state public servants worked around the clock to assist in the national mobilisation, with the resources of many departments, both state and federal, stretched to the limit to deal with the unprecedented demands arising from the two major disasters. I also congratulate the member for Maribyrnong, the Hon. Bill Shorten, in being appointed Parliamentary Secretary for Victorian Bushfire Reconstruction. Knowing Bill, I am sure he will bring a huge amount of energy, commitment and intellect to the task before him, and I am sure we all wish him well in the task of reconstruction in Victoria.

Part 1 of schedule 5 to this bill amends the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997 to make the income recovery subsidy exempt from income tax and to ensure the subsidy is not included in separate net income for the purposes of calculating an entitlement to certain tax offsets.

Part 2 of schedule 5 to this bill amends the Income Tax Assessment Act 1997 to provide that the Treasurer may declare an event a disaster for the purposes of establishing Australian disaster relief funds. The declaration of a disaster by the Treasurer will allow Australian disaster relief funds to receive tax deductible donations and provide money for the relief of people in Australia in distress as a result of the disaster. Public benevolent institutions, which must normally operate for direct relief effort, will also be able to establish Australian disaster relief funds for long-term recovery and community reconstruction efforts.

Part 2 of schedule 5 also specifically lists the 2009 Victorian Bushfire Appeal Trust Account as a deduction gift recipient in division 30 of the Income Tax Assessment Act 1997. This will ensure that the fund can use tax deductible donations for a wide range of activities, including recovery and community reconstruction efforts in communities affected by the 2009 Victorian bushfires as well as the provision of direct benevolent relief to affected communities. The Prime Minister announced the income recovery subsidy to parliament on 10 February 2009. The income recovery subsidy is administered by Centrelink and is equivalent to the maximum rate of the Newstart allowance. A payment received by a taxpayer as replacement for salary, wages or income is generally taxable. A legislative amendment is required to make the payment exempt from income tax. Such payments would also normally be included in the calculation of separate net income. The calculation of separate net income can affect a taxpayer’s eligibility to certain tax offsets. Exempting these payments from income tax and separate net income will lessen the financial hardship experienced by those individuals and communities affected by the 2009 Victorian bushfires or North Queensland floods.

It is quite clear to everyone in parliament that these steps being taken by the government are absolutely essential in providing the appropriate support to Australians who are suffering great hardship as a result of the Victorian bushfires or the North Queensland floods. I like to think that the response has been absolutely professional on the part of government departments and the response has been absolutely courageous on the part of the volunteers who have gone into those bushfire areas, at risk to their own lives, to help other Australians.

Not a lot has been said about the North Queensland floods, but the North Queensland floods have been a real problem in terms of individual families in North Queensland dealing with their day-to-day activities and being able to operate normally. It is clear that the North Queenslanders were very supportive of the Victorian bushfire victims. It was amazing to see people in North Queensland, who were isolated and not able to go about their normal business, providing funds to the Victorian bushfire appeal. These amendments are about making sure that the funds are tax-effective. (Time expired)