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

I table a supplementary explanatory memorandum relating to the government amendments to this bill. The memorandum was circulated in the chamber today. I seek leave to move government amendments (1), (2) and (3) on sheet QG466 together.

Leave granted.

I move:

(1)    Clause 2, page 1 (line 7) to page 2 (line 6), omit the clause, substitute:

2 Commencement

                 This Act commences on the day on which it receives the Royal Assent.

(2)    Schedule 1, page 3 (before line 4), insert:

A New Tax System (Goods and Services Tax) Act 1999

1A  Amendments of the A New Tax System (Goods and Services Tax) Act 1999

The provisions of the A New Tax System (Goods and Services Tax) Act 1999 listed in the table are amended as set out in the table.

1B  Section 195-1

Insert:

Australian legislature has the same meaning as in the Income Tax Assessment Act 1997.

1C  Section 195-1

Insert:

concessional entity means:

             (a)    an entity, gifts or contributions to which can be deductible under Division 30 of the Income Tax Assessment Act 1997; or

             (b)    a political party that is registered under Part XI of the Commonwealth Electoral Act 1918 or under a corresponding ^*State law or ^*Territory law; or

             (c)    an ^*independent candidate; or

             (d)    an ^*independent member.

1D  Section 195-1 (definition of gift-deductible entity)

Repeal the definition.

1E  Section 195-1

Insert:

independent candidate: an individual is an independent candidate at a time if, at that time:

             (a)    the individual’s candidature in an election for members of an ^*Australian legislature has been declared or otherwise publicly announced by an entity authorised under the relevant electoral legislation; and

             (b)    the individual’s candidature is not endorsed by a political party that is registered under Part XI of the Commonwealth Electoral Act 1918 or under a corresponding ^*State law or ^*Territory law; and

             (c)    the earliest of these has not occurred:

                   (i)    the time when the result of the election is declared or otherwise publicly announced by an entity authorised under the relevant electoral legislation; and

                  (ii)    the time (if any) when the individual’s intention to no longer be a candidate for the election is publicly available; and

                 (iii)    the time (if any) when, after the election is taken to have wholly failed under the relevant electoral legislation, candidates for the replacement election are declared or otherwise publicly announced by an entity authorised under that legislation.

1F  Section 195-1

Insert:

independent member: an individual is an independent member at a time if, at that time:

             (a)    one of the following applies:

                   (i)    the individual is a member of an ^*Australian legislature;

                  (ii)    the individual’s election as a member of an Australian legislature (including as a result of an election that is later declared void) has been declared or otherwise publicly announced by an entity authorised under the relevant electoral legislation, in a case where the individual has not yet started serving as such a member;

                 (iii)    the individual has ceased to be a member of an Australian legislature because the legislature, or a house of the legislature, is dissolved or has reached its maximum duration, because the individual comes up for election or because the relevant election has been declared void, in a case where candidates for the resulting election have not yet been declared or otherwise publicly announced by an entity authorised under the relevant electoral legislation; and

             (b)    the individual is not a member of a political party that is registered under Part XI of the Commonwealth Electoral Act 1918 or under a corresponding ^*State law or ^*Territory law.

The government also opposes schedules 2 to 6 in the following terms:

(3)    Schedules 2 to 6, page 6 (line 1) to page 23 (line 21), to be opposed.

Government amendments (1) and (3) remove schedules 2 to 6 from the bill and revise the commencement table to reflect these changes. These schedules were inserted into the Tax Laws Amendment (2008 Measures No. 2) Bill 2008 as a House amendment on 14 May 2008. The amendments are necessary to ensure that certain measures in the Tax Laws Amendment (2008 Measures No. 1) Bill 2008, which are of benefit to taxpayers, are passed before the end of the income year.

Bill Heffernan (NSW, Liberal Party) Share this | Link to this | Hansard source

I do not think there is anyone who disagrees that there is a fundamental flaw in the carbon sink part of this legislation. Is there some way it can be extracted and sorted? I realise it has passed through, but there has to be some way parliament as a whole could do it. There is no-one to blame; it has just been an oversight. This is fundamentally flawed. Is there some way we can retrace our footsteps and fix it?

Michael Ronaldson (Victoria, Liberal Party, Shadow Special Minister of State) Share this | Link to this | Hansard source

The comments from Senator Heffernan were in relation to, I think, some matters that the Greens have some amendments on later on. I want to address this first amendment. We will of course, as I said before, be opposing this at the third reading. There may be a question about why we would let the second reading proceed to this stage. We need to do that to make sure that schedules 2 to 6 are removed from this bill because, if we were not to do so, clearly there would be two competing pieces of legislation. I am no constitutional lawyer. I am sure the clerks, as always, have a far better idea of these things than I do, but we would have had two bits of conflicting pieces of legislation on the books. That is why we are enabling this matter to go into committee—to address these issues.

The interesting part is that we had the amendment yesterday because the government had not even realised what was being done. So we had an amendment prepared yesterday and, about half an hour before this bill was due to be debated, the government realised what had happened and tried to move the amendments which we support.

As I said earlier, this has been quite extraordinary. This bill has been around for a long, long time now and, at the eleventh hour, this government is showing its inexperience and its incompetence by not having been able to address these matters earlier. They are quite substantial issues. While we do not agree with this bill, it would be churlish for us not to support amendments (2) and (3). In relation to amendment (1), clearly the opposition supports the removal of schedules 2 to 6 because there is already now legislation on the books which supports that, in the Tax Laws Amendment (2008 Measures No. 2) Bill 2008.

Why the government, when we had flagged it very early on, waited until the eleventh hour to address this is quite frankly beyond us. They actually, quite rightly, got squeezed by people who were going to suffer if schedules 2 to 6 were not implemented before 1 July. So, at the eleventh hour, these changes were made. A lot of people went through a lot of pain for a long period of time before this decision was made. Why did it take until last week for this measures No. 2 bill to come in to address a situation that the government was acutely aware of? It has been shambolic. This week has been shambolic. The left hand and the right hand, quite frankly, have not even been introduced—let alone forgotten what each other looks like. This government have got a lot to learn and they need to learn it very quickly because this place will become shambolic if they do not so.

Guy Barnett (Tasmania, Liberal Party) Share this | Link to this | Hansard source

I will put the questions separately. The question now is that schedules 2 to 6 stand as printed.

Question negatived.

The Temporary Chairman:

The question now is that government amendments (1) and (2) be agreed to.

Michael Ronaldson (Victoria, Liberal Party, Shadow Special Minister of State) Share this | Link to this | Hansard source

As I said earlier, I think the minister needs to trust the judgement of everyone, including the clerks, in relation to how this is best dealt with. I can assure him that the decision that was made was indeed the right decision, Senator Conroy, so your heart fluttering need continue no further. But, in relation to these two amendments, we will not be opposing them. It is done to address what we believe is fundamentally a bad piece of legislation in principle, but we will not be opposing these particular amendments.

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

Amendment (2) amends schedule 1 to the bill; schedule 1 removes income tax-deductibility for political donations. Without this amendment, the bill has the consequence that political parties, independent members and independent candidates no longer meet the definition of gift-deductible entities in the A New Tax System (Goods And Services) Tax Act 1999. As a result, political parties, independent members and independent candidates are unable to utilise certain GST concessions in the GST legislation that are available to gift-deductible entities. Amendment (2) restores these GST concessions for political parties, independent members and independent candidates and will prevent increased GST compliance costs for political entities. Full details to the amendments are contained in the supplementary explanatory memorandum.

Michael Ronaldson (Victoria, Liberal Party, Shadow Special Minister of State) Share this | Link to this | Hansard source

Can I just reinforce the point I made earlier that these are very substantial amendments. This bill has been around for a long, long time. What is going on with this government, where they cannot get these most basic of amendments correct? Why is it, Minister, through you, Mr Temporary Chairman, that it has taken month upon month to address these particular issues? This government is, quite frankly, out of control. It has lost control of the legislative process. I do not know where it is getting its advice from, but it is bad advice. And it needs to start moving very quickly to stop putting people who are quite innocent in this whole process at some sort of risk. That is what bad legislation and bad advice will do.

Question agreed to.

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

I move Greens amendment (1) on sheet 5489:

(1)    Page 23 (after line 21), at the end of the bill, add:

Schedule 7—Safeguards on the establishment of carbon sink forests

Income Tax Assessment Act 1997

1  After paragraph 40-1010(2)(c)

Insert:

           (ca)    the trees are a mixture of species that approximate the local native vegetation or, if not available, from an ecologically similar location;

2  After subsection 40-1010(3)

Insert:

     (3A)    The guidelines provided for in subsection (3) must ensure that:

             (a)    any property claiming a carbon sink forest expenditure has an environmental management system audited to conform to ISO14001 in place; and

             (b)    forests over 100 Ha require an ecosystem evaluation to develop recommendations for appropriate planting; and

             (c)    the owner is required to enter into an easement agreement with the Department of Climate Change preventing any development or modification of the property which would result in the property no longer meeting the conditions specified for a carbon sink forest; and

             (d)    an easement agreement entered into in accordance with paragraph (c) remains in force for a period of not less than 100 years, or until the Commonwealth determines that the forest no longer requires protection, whichever is the earlier.

3  After section 40-1015

Insert:

40-1016 Ecosystem evaluation

Ecosystem evaluation means an ecological assessment and report prepared by a suitably qualified person which includes, but is not limited to:

             (a)    an assessment of impact of the carbon sink forest on the hydrology of the catchments within which it is situated;

             (b)    an assessment of the local and regional linkage and connectivity values of the site, including potential links in relation to any other remnant vegetation areas;

             (c)    identification of constrained areas such as steep land and land adjacent to waterways which are likely to have particular management requirements;

             (d)    an assessment of fire risk within the site and in relation to adjacent premises including areas of native forest;

             (e)    identification of any other environmentally sensitive areas which may potentially be impacted by the proposed use;

              (f)    identification of any likely conflicts between the proposed carbon sink forest use and any adjacent or nearby premises or places;

             (g)    identification of a selection of suitably benign species for planting.

As I said in the second reading debate, there is no requirement that these so-called carbon sink forests are a mixture of species. You can put in a monoculture and call that a forest under this legislation. That is quite wrong, if the proposal is supposed to be sequestering carbon for a long period of time. Surely, if you were going to put in a carbon sink forest you would be putting in mixed species that approximate the local native vegetation or that from an ecologically similar location. And you would be doing that by having an ecosystem evaluation to look at issues such as the impact of the carbon sink forest on the hydrology of the catchment; an assessment of the local and regional linkage and connectivity values of the site; identification of constrained areas, such as steep land and land adjacent to waterways; an assessment of the fire risk; identification of other environmentally sensitive areas which may be impacted by the proposed use; identification of any likely conflicts between the proposed carbon sink forest or any adjacent or nearby premises or places; and identification of a selection of suitably benign species for planting.

If you were really serious about trying to put in a biodiverse forest that had benefits for habitat as well as sequestering carbon then you would have some of these specifications. You would also have a stipulation that it could not be cut down. Instead of that there is nothing. As I have said before, and as Senator Heffernan has now agreed, there is nothing at all in this particular legislation that requires these trees to be in the ground for any length of time. You can get a 100 per cent tax deduction up-front. Then they can be cut down, and you do not forfeit your tax deduction once you have achieved it. What is the point of that? Without a requirement that they stay in the ground for any length of time, you do not have a sequestered forest; you have another plantation. That is absolutely the point. And if you choose to tax-deduct it over 14 years, which is your other option, that happens to coincide with one rotation of a plantation. So you can tax-deduct it over 14 years and then you can cut it down at the end of that. If, however, you could tax-deduct it and have it there as a carbon sink and sell the credits from it, then I would need to know that there was some scheme in place that required you to make good. Presumably that will occur under some emissions trading scheme, but it is not there now. We are being asked to forgo $24 million worth of revenue to the Commonwealth: $24 million for the public hospital system, $24 million to implement public transport, $24 million for public schools—whatever you want to spend it on. We are forgoing $24 million, as yet another rort, to establish forests. As I said, it is like a managed investment scheme on steroids.

You can also drain a wetland and still get a tax deduction. It says there, ‘Oh no; you can’t’—but no; it does not. What it says is that you cannot tax-deduct the costs of draining the wetland. It does not say that after you have drained it you cannot get the tax deduction for planting whatever you like on it. So, depending on the costs associated with draining a low-lying-area wetland, you can just do that and then claim the tax deduction for the establishment of the plantation. And what about clearing savanna across Northern Australia, which does not meet the current definition of what can be on the land before? Why can’t you just clear that, lose all the carbon from it and put in a teak plantation, a mahogany plantation or something like that, not use the MIS but use this, then say, ‘I wanted it as a carbon sink,’ and then, in 14 years time, when you have deducted it, work out whether there is more value for you in flogging the carbon credits from it or in cutting it down for sawn timber or whatever other use you might have?

This is not about a carbon sink. I have some particular questions for the government that we should have answers to. How much carbon is stored in one-fifth of a hectare of native tall eucalypt forest in southern Tasmania? How much carbon is stored in that standing forest? And how long will a monoculture plantation take to store the same volume of carbon, once it has its 100 per cent tax deduction? The government is paying people to cut down one and lose all that carbon to atmosphere, lose all the soil carbon and burn the residue, and then at the same time paying people to put in these plantations that will never, ever—in 15 years, 20 years or even 50 years—sequester the same volume of carbon as is released. It will take hundreds of years for the take-up of carbon to get the equivalent of what you are cutting down now. If you were serious about reducing greenhouse gas emissions, you would give a tax rebate right now for purchasing standing native forests, standing stored carbon in vegetation, and pay people to protect it and covenant it. You would then have it permanently and you would not be taking agricultural land out of production. If you were serious, that is what you would do.

To actually pay people to cut down carbon stores and burn them, simply because Kyoto accounting does not count the emissions from doing that now—whereas you can get counted sequestering, or taking up, under the convention—is a complete distortion of reality. The atmosphere does not understand the niceties of clever little accounting system tricks. The atmosphere understands volumes of carbon going into atmosphere now and volumes of carbon being taken out of atmosphere now and the time frame is everything. If you had hundreds and hundreds of years for the plantations to catch up with what you are logging, then it would ultimately be in balance. But we do not have hundreds of years; we have less than till 2015. We have to get real on reducing carbon emissions to atmosphere, and all this is going to do is provide another nice little rort.

So the particular thing I would like to ask the minister is: where in the legislation does it say you cannot cut down or remove the vegetation that you are getting tax-deductibility to establish? Firstly, where does it say that? Secondly, where does it say the trees have to be in the ground for any length of time at all? Where does it refer to that at all? Thirdly, what are the volumes of carbon on a fifth of a hectare of Tasmanian old-growth forest compared with a fifth of a hectare of plantation established under this? What volumes of carbon are we talking about within a decade? My amendment seeks to do the things that government ought to have done to stop this being a rort. As it is, it is a rort. As I said, it is going to drive farmers off their land. I can see coal companies going in and buying the water rights from the whole of the Murray system or any other system. They have got the money to buy up the rights, take on the land, put in their offset whilst doing nothing at the power station to reduce their emissions but trying to say, ‘I have put in so many thousand hectares of plantations to offset the emissions,’ and we have driven people off the land and we have lost food security.

These are real issues that have to be dealt with here. I am more dedicated than just about anybody in this place to reducing emissions. If I seriously thought this was going to get anywhere in terms of reducing emissions, I would be supporting it. But, the way it stands, it is a rort. It is an absolute rort and will guarantee more carbon is lost to atmosphere than is sequestered because of the perverse reality that you pay people, you subsidise people to cut down and destroy carbon stores and you are now going to subsidise people to put in trees which are not guaranteed to be there for any length of time. So I am anxious to hear what the government has to say on that.

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

The government will not support the amendment moved by Senator Milne of the Australian Greens in relation to carbon sink forests. I note that the carbon sink forests measure was passed by the Senate on 17 June 2008 as it was incorporated into the Tax Laws Amendment (2008 Measures No. 2) Bill 2008. I am advised that this amendment is unworkable. For example, it is impractical to guarantee that the carbon sink forests will remain for 100 years, considering there could be multiple changes in ownership over time. Enforcement would place an unrealistic burden on the tax office and effectively result in an unlimited period of review for tax affairs, which conflicts with the situation for the majority of taxpayers, who will have their tax affairs for a particular income year finalised within four years. It also adds a further compliance burden to the businesses who seek to claim a deduction in relation to eligible expenditure. The legislation already requires that carbon sink forests align with the relevant criteria under the Kyoto protocol, and the government will shortly produce a green paper outlining the proposed arrangements for an emissions trading scheme. It is premature to legislate requirements of one type of abatement activity ahead of the release of the green paper.

Barnaby Joyce (Queensland, National Party) Share this | Link to this | Hansard source

It is very rare, to be honest, that I would agree with the Greens. But tonight is going to be one of those nights. This is a peculiar piece. I am a little old bush accountant. I can assure you that an idea where you plant a crop, get an up-front tax deduction and get a turbocharged MIS that gets planted in prime agricultural land will drive out the local hardware store, drive out the local agronomist, drive out the local schoolteacher and drive out the local sugarcane producer. And we are going to sit here and let you plant this on us because of some little quirk that you have stitched up with someone? This is a load of rubbish, and the duty of any senator here tonight is to call it for what it is. This is a load of rubbish and you have to be pulled up for this. I cannot work out, for the life of me, how you have managed to get this far without this being pulled up. Now you have got some foreshadowed amendment in the future, in the never-never, where you are going to fix this up. I will remain a sceptic on the whole environmental issue but, I tell you what, I know dead set what you are up to with this. What you are up to with this is the stitch up of a whole heap of agricultural farm area and also the stitch-up, for whatever purposes, of a piece of legislation that is out there to help certain vested interests in certain corners get a turbocharged MIS.

Bill Heffernan (NSW, Liberal Party) Share this | Link to this | Hansard source

Senator Heffernan interjecting—

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

Senator Joyce—and I know Senator Heffernan keeps interjecting from afar—there is only one problem; this is your bill, which is actually unamended. This is your bill that you tabled, and we have not changed it. I do not mind Senator Milne having a go because Senator Milne would have raised this no matter who was standing here moving this bill. I absolutely understand. Senator Joyce, Senator Heffernan and Senator Boswell are muttering up the back about what an evil plot this is. It is your bill: you tabled it, you moved it. It was your bill to start with, so if you have a problem you should have had the courage to stand up in your own party room when it was first—

Barnaby Joyce (Queensland, National Party) Share this | Link to this | Hansard source

Mr Temporary Chairman, on a point of order: the statement was made ‘You did nothing about this,’ and I want to draw to your attention that there was quite an abundant amount being done about this.

Guy Barnett (Tasmania, Liberal Party) Share this | Link to this | Hansard source

There is no point of order.

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

I appreciate Senator Milne legitimately raising what would always have been the concerns of the Greens on this matter, but for those opposite to suddenly be decrying this is really a little entertaining.

Bill Heffernan (NSW, Liberal Party) Share this | Link to this | Hansard source

There are some times in democracy when we have to put aside the politics. We are talking about the future. Do not roll your eyes, Senator Conroy. I was away last week, through circumstances out of my control. I was unaware of this legislation. This legislation is fundamentally flawed, and I know that the advice to the government agrees with me on that.

Jacinta Collins (Victoria, Australian Labor Party) Share this | Link to this | Hansard source

What about last year?

Bill Heffernan (NSW, Liberal Party) Share this | Link to this | Hansard source

I am not interested in that. I am saying that collectively we have made a mistake with this legislation and I am appealing to the government of the day to forget about the politics. You can slag me as much as you like and I will take the blame for the stupidity of the previous government that put this legislation together. The previous government would have been advised by the same department that is advising you today that there is a flaw in this legislation, but because of a complication with the tax act from now until 2011 they do not have a solution. I appreciate the fact that the Assistant Treasurer’s office talked to me today. I am appealing that we put aside the politics and find a mechanism to deal with what is a fundamental flaw. I agree with Senator Joyce, the Greens and the department that we have to fix it, because this will become a disgrace. It will become an absolute flaw.

As you know, Senator Conroy, we are going to look into the future at how a farmer that is viable can produce food that is affordable for the consumer and sustainable to the environment. This legislation flies in the face of all that logic. It allows a bottom-of-the-harbour type of tax rort to be put in place with the full knowledge of the government and the opposition. The opposition obviously did not think this through when they were in government because it is a complete mess. I am appealing that we put aside all the bloody bullshit of politics—

The Temporary Chairman:

Order! Senator Heffernan, I ask you to withdraw that.

Bill Heffernan (NSW, Liberal Party) Share this | Link to this | Hansard source

I withdraw that. I ask that we put aside the baloney of politics and sort it out, because this will become an entrenched rort which will act against the best interests of the community. It will act against the best interests of food production. It will just become an accountants’ goldmine. There is absolutely no way in this legislation, Minister, that you can prevent me from planting trees and, the year after I collect the tax deduction, ploughing them in. It will be a national disgrace if we allow this parliament to pass this legislation in the full knowledge that it is completely and fundamentally flawed. Put aside the politics, put your thinking caps on and let us fix it.

Bob Brown (Tasmania, Australian Greens) Share this | Link to this | Hansard source

The fact is that this legislation, which Senator Conroy now says was the legislation of the previous government, and which is so seriously flawed, is now the legislation of the Rudd government—this government. And the best that Senator Conroy can do is say: ‘We essentially didn’t look at it, or at least we didn’t find anything wrong with it. We’ve brought it into the Senate without having had any decent review of it.’ But, as members contributing from the opposition benches and the crossbenches are pointing out, it is seriously flawed. This legislation is effectively opening up a rort whereby millions of dollars of tax deductions are going to be spent, including the takeover of food-producing land in Australia—

Bill Heffernan (NSW, Liberal Party) Share this | Link to this | Hansard source

It’s got to be. It’s part of the legislation.

Bob Brown (Tasmania, Australian Greens) Share this | Link to this | Hansard source

Absolutely! The tax deductions are not available to food producers. They do not get it. Corporations based in cities are going to get an offset and a massive windfall from the tax department for a program that is not going to achieve the aim of storing carbon. As Senator Heffernan has been saying, there is no guarantee, once you have planted the trees with the intention of getting the massive tax deduction, that those trees are going to grow to maturity, or grow at all. You do not have to grow them. The legislation is seriously flawed whichever way you look at it. There is a serious debate taking place in the chamber and it is enlightening. I think we all need to take a breath here. I think we need to take the time to at least have a look at how we can solve the inherent problems in this. Therefore I move:

That the committee report progress and ask leave to sit again.

I think that would give us the time, tonight, to at least get further counsel, and for this to be talked about by the various entities, including—and this is essential—the government. One of the problems here is that the opposition, which has the numbers, wants to oppose this bill on the matter of tax-deductibility but is caught in the position—and so are the Greens—that it therefore knocks out the amendments which would fix the problems of the tax-deductibility. We need to be able to find a mechanism to get around that problem and I suggest that we take overnight to do it.

Guy Barnett (Tasmania, Liberal Party) Share this | Link to this | Hansard source

Order! Senator Brown, I have a question for you. Were you moving to report progress? If you were, then no further discussion can be had on that particular motion.

Bob Brown (Tasmania, Australian Greens) Share this | Link to this | Hansard source

That is correct. I was waiting for you to pull me on up on that.

The Temporary Chairman:

Well, you have done that; you have moved to report progress. There is a motion before the chair. There can be no further speakers. That motion must now be put. The question is that the motion be agreed to.

Question agreed to.

Progress reported.

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

I move:

That the committee have leave to sit again on the next day of sitting.

Question agreed to.