Helen Coonan (NSW, Liberal Party, Shadow Minister for Finance, Competition Policy and Deregulation) Share this | Hansard source

I rise to speak in response to the proposed Tax Laws Amendment (2009 Measures No. 4) Bill 2009 and confirm that the coalition will be supporting this bill. It amends various tax laws and has five schedules. I want to address each of them briefly. The first schedule deals with increases to the research and development expenditure cap for determining eligibility for the R&D tax offset from $1 million to $2 million. It should be noted here that the R&D tax offset was an initiative of the Howard government in order to assist innovation amongst small businesses, a constituency we support, and to assist those small businesses that do not benefit from the R&D tax concession, especially those in a tax loss position. This is because we do understand very clearly the importance of cash flow to small businesses and the difficulties it can pose when small business is seeking to invest in R&D.

The second schedule improves the integrity of prescribed private funds. The changes effectively mean that such funds will now be treated similarly to other fundraising organisations known as public ancillary funds. To reflect this change, the prescribed private funds will be renamed as public ancillary funds. We note that within this schedule provisions exist for the Treasurer to issue guidelines governing the creation and regulation of these funds, and a range of administrative penalties have been introduced which may be applied to enforce the guidelines. However, we further note that the schedule does not provide for any changes to the mandatory distribution rate which many in the not-for-profit industry have been concerned about, as it does severely affect the ongoing nature of these funds. It is our understanding that Treasury has undertaken consultation relating to draft guidelines. I think it was during July of this year.

The coalition encourages the government to listen carefully to industry concerns regarding this matter in order to avoid any of the funds being frozen, as opposed to setting off on a course with their own policy prescriptions. We only need to look at the problems which arose from the changes to employee share schemes back on budget night as an illustration of the fact that not listening carefully to industry and to stakeholders can have very unintended and very adverse consequences.

The third schedule provides capital gains tax relief to members of friendly societies which demutualise. Such changes help to ensure that these societies are treated the same as standalone private health insurers or life insurers if they decide to demutualise. This schedule effectively means that friendly societies which demutualise into a for-profit entity will not be liable for capital gains tax on any shares they may receive; as well as providing amendments to ensure that those who receive cash through demutualisation are treated exactly the same as those who receive shares and immediately sell them.

The fourth schedule allows for the losses of an entity joining a consolidated group to be transferred to the head company of that group. It is interesting that changes to the consolidation regime just keep coming. I well remember kicking off the whole process of consolidation. With such a major change it is to be expected that there would be some need to continue finetuning, and that will happen with this amendment. It is a retrospective change to the consolidation regime which takes effect from 1 July 2002. The amendment will allow the head company to use the tax loss to reduce a net forgiven amount derived under the commercial debt forgiveness rules; any capital allowance that has been adjusted using the limited recourse debt rules; and any capital gain in the situation where a capital gains tax event L5 occurs when the joining entity then leaves the consolidated group.

The final schedule deals with minor amendments addressing some areas and anomalies within the existing tax legislation. It is a tidying up schedule. I again confirm the coalition’s support for the Tax Laws Amendment (2009 Measures No. 4) Bill 2009. It is a very sensible process, even though it sometimes can be difficult for those members of the public who are not closely engaged in some of the minutiae and technicalities of the operation of the tax law to understand the so-called TLABs. But it is a necessary ongoing process to improve the operation of the tax law and it has the coalition’s support.