Ursula Stephens (NSW, Australian Labor Party, Parliamentary Secretary for Social Inclusion and the Voluntary Sector) Share this | Hansard source

Thank you, Senator Fifield, for your comments and your support for the Tax Laws Amendment (2009 Measures No. 6) Bill 2009. As Senator Fifield will discover, we spend a lot of time in this chamber dealing with tax laws amendment bills, usually with a number of schedules, all of which reflect the complexity of our current tax framework. That is a reason why the Henry review is so important and should not be rushed. Senator Fifield has gone through each of the schedules and made a few observations about them. I want to touch on them quite specifically because it is quite important to understand the intent of the changes that are contained in the schedules.

Schedule 1, as he suggested, abolishes the exemption to capital gains tax events E1 and E2, known in the industry as ‘trust-cloning’ exemption, which is quite consistent with the policy principle of taxing capital gains that arise where there is a change of ownership of an asset. This schedule also provides a limited capital gains tax rollover for the transfer of assets between fixed trusts with the same beneficiaries, each of which has the same interests in each trust. This will ensure that capital gains tax considerations are not an undue impediment to the restructure of those trusts but will ensure that the subsequent changes to manner and extent to which beneficiaries can benefit from the trusts are also subject to appropriate tax consequences.

Schedule 2 amends the tax law to remove significant income tax impediments to mergers between complying superannuation funds by permitting the eligible entities to roll over capital losses and revenue losses under the merger and to transfer previously realised capital losses and revenue losses. This will preserve the offsetting value of the losses, thereby removing a potential barrier to superannuation fund consolidation. The loss relief will be available for complying superannuation funds that merge with another complying superannuation fund with five or more mergers, which will assist in maintaining a robust and safe superannuation sector. This is a temporary measure in the light of uncertain conditions in the global economy and the global financial market turmoil that existed around the time the measure was introduced. It has a limited period of application, from 24 December 2008 until 30 June 2011. There is no evidence or indication that any delay in releasing the Henry review will have any impact on merger plans between superannuation funds.

In relation to concerns regarding the operation of the provisions in respect of directly held assets, I can confirm that the amendments permit merging superannuation funds to access loss relief for losses in respect of directly held assets where the fund also holds assets that are a complying superannuation first home saver account, life insurance policy or units in a pooled superannuation trust. The government certainly appreciates the contributions of industry stakeholders and the Senate committee in developing those provisions.

Schedule 3 amends the Income Tax Assessment Act 1997 to clarify the operation of the income tax law for life insurance companies that conduct immediate annuity business. Life insurance companies are exempt from tax on income derived in respect of immediate annuity policies that satisfy the annuity conditions. These conditions are designed to prevent the unreasonable deferral of income, so the amendments clarify the operation of the annuity conditions and ensure that they are consistent with the former annuity conditions in the 1936 tax act. Immediate annuity policies offered by life insurance companies often provide for superannuation income streams and the amendments will ensure that the annuity conditions do not apply to policies that provide superannuation income streams. As a consequence, life insurance companies will be taxed on this business in the same way as all other superannuation income stream providers.

I would like to focus a little more comment on Schedule 4, which amends the Income Tax Assessment Act 1997 to make certain organisations deductible gift recipients. Taxpayers can claim an income tax deduction for gifts to organisations that are registered as deductible gift recipients. This schedule, as Senator Fifield said, makes the Green Institute and the United States Studies Centre deductible gift recipients and changes the name of one organisation currently listed from Dymocks Literacy Foundation Ltd to Dymocks Children’s Charities Ltd. Making these organisations deductible gift recipients will assist them in attracting public support for their activities.

Senator Fifield might have enjoyed a moment of glory in commenting on the work of the Green Institute, but organisations who apply to the government for specific listing as a DGR are subject to a rigorous assessment process prior to receiving ministerial approval. There is a longstanding practice of research organisations associated with major political parties being listed in the tax law as DGRs. Under this convention the Menzies Research Institute, which is the research arm of the Liberal Party of Australia; the Chifley Research Centre, which belongs to the ALP; the Page Research Centre, which is the research organisation of the National Party; and the Don Chip Foundation have been listed as DGRs. The Green Institute is in fact a think tank associated with the Australian Greens, and it is equitable to list that institution alongside the other party affiliated research organisations. The institute will provide a forum for education exchange, research and debate on subjects related to its founding principles of environment, social justice, nonviolence and democracy.

Schedule 5 makes the income recovery subsidy payments for the north-west Queensland floods of January and February 2009 income tax exempt. Those payments were made to people affected by the floods early last year, including Australian resident employees, small business persons and farmers who experienced loss of income as a result of the floods and who received those payments. The government is certainly pleased to be able to remove any potential tax burden from the recipients, consistent with the others who have received disaster payments in the same spirit.

Schedule 6 maintains the status quo for importing high-strength spirits. Senator Fifield gave us chapter and verse on why all of that was so important. It ensures that when imported product is blended with domestically produced high-strength spirits the blends will remain free of duty. I commend this important bill to the Senate.

Question agreed to.

Bill read a second time.