Helen Coonan (NSW, Liberal Party, Shadow Minister for Human Services) Share this | Link to this | Hansard source

The opposition opposes schedule 2 in the following terms:

(1)    Schedule 2, page 19 (line 1) to page 20 (line 25), to be opposed.

I also move opposition amendment (2) on sheet 5556:

(2)    Clause 2, page 2 (table item 2), omit “Schedules 1 and 2”, substitute “Schedule 1”.

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 amendments moved by Senator Coonan on behalf of the opposition to remove the schedule 2 family trust changes from the bill. It was part of the 2008-09 budget process. The government made difficult decisions to ensure disciplined budget management and the integrity of the tax system. The family trust amendments address the concern that the current definition of ‘family’ and the ability of family trusts to make one-off variations to their test individuals provide significant scope for family trusts to transfer the benefits of tax losses to future generations. These changes will reduce the scope for family trusts to be used to lower income tax by utilising losses, delivering on the government’s commitment to disciplined budget management. The measures are expected to provide savings of up to $19 million over the next four years.

The majority report of the Senate Standing Committee on Economics inquiry into TLAB No. 4 and evidence given by Treasury officials stated that it is anticipated that the savings associated with the amendments will grow over time beyond the forward estimates period and could realise significant cost savings. Opposing this bill also represents yet another example of the opposition blocking government saving measures. Fiscal discipline is a key part of this government’s five point plan to fight inflation. This family trust measure is one of the decisions to ensure disciplined budget management and the integrity of the tax system. I note that the majority report of the Senate Standing Committee on Economics recommends that this bill be passed, including the family trust measure. The majority report states that the family trust measure in schedule 2 will achieve the government’s stated objective of cost savings and fulfil its election commitment to tighten family trust arrangements.

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

Through you, Madam Chair, could the minister specify exactly how they came up with the $1 million, $6 million and $6 million in savings, what areas those savings pertain to and how they formulated those amounts? We did not manage to get that explanation in the Senate Standing Committee on Economics, so could the minister tell us now how those figures came about?

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

My understanding is that Mr Brown did give evidence to the committee around some of these issues about the normal Treasury processes that are used to generate these figures. Reference was made to the changed behaviours from a higher tax rate. It is a simple Treasury calculation. If you want more detailed information I am happy to try to get it for you, but I do not know if you are going to get much more today.

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

So your proposition—through you, Madam Chair—is that these savings come by reason of changed behaviours?

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

It is simple economics, Senator Joyce: if you are going to pay a higher tax rate and you cannot avoid it then there is more money for the Commonwealth. If there is a capacity to move to somewhere with a lower threshold and if that is removed, then people usually behave rationally. You may be aware of people who do not, but usually tax revenues are estimated in that way: people change their behaviour to changed tax rates.

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

I am aware of changed behaviours. I am also aware of floundering. I have seen a bit of that lately, too. So you acknowledge, therefore, that these changed behaviours are by reason of the fact that they will be paying more tax. Therefore, it becomes an appropriation issue and you should be able to be a lot more specific about where these $1 million, $6 million and $6 million figures come from. To the best of my knowledge, they look like they have been plucked out of thin air.

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

I think that is more of a statement of opinion than a question, Senator Joyce. If there is more information, I am happy to gather it for you. But, as I said, I am not sure you are going to gain any more information than you have gained by asking these questions previously. If there is more information I am happy to get it, but I am not sure that that was a question.

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

So you would be able to direct us as to who may be able to give us specific modelling on where these $1million, $6 million and $6 million figures came from and you would be prepared to table it for us?

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

I said I would seek to find out if there was any more information and if there was any more specific information in relation to your question I would be happy to provide it. But I do not believe that will be available before this bill is voted on.

Helen Coonan (NSW, Liberal Party, Shadow Minister for Human Services) Share this | Link to this | Hansard source

While we are dealing with simple economics, could the minister give us some precise information on the compliance costs of this proposed measure?

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

As explained in the EM, the compliance costs are considered to be relatively minimal due to the fact that a nomination has to be made. But it is still made, irrespective of the change. What this does is limit the number of nominees, so the process of distribution comes through nomination, and this just reduces the pool of potential nominees.

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

For further clarification, could the minister please describe what ‘relatively minimal’ means in financial terms? Just give us a rough approximation in dollar terms. Are we talking $1 million, $10 million, $100 million, $25.50? Can you describe ‘relatively minimal’ to us?

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

As Senator Joyce is aware, there is no figure attached in the EM. For the reasons I have outlined in terms of the distribution process, which I am sure Senator Joyce is familiar with, what happens is a narrowing of the available distribution pool. The fact that the nomination takes place is still the same.

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

I will try and be more specific. Is ‘relatively minimal’ a million dollars in a trillion dollar economy or possibly $6 million in a trillion dollar economy? Could it be in excess of, let’s say, a figure of $6 million in the 2009-10 year? Would the government determine $6 million to be a relatively minimal figure? Is the ‘relatively minimal’ that they are discussing relatively more than the amount we are saving?

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

As I have indicated, there is no specific figure attached. If there is any more information that I can get for the senator I am happy to get that. But at this stage there is no more information readily available.

David Bushby (Tasmania, Liberal Party) Share this | Link to this | Hansard source

Is the government supportive of the principle that the entity that incurs the loss should enjoy the taxation benefits of that loss? Does the government support the principle that that special concession for family trusts should continue to apply? If so, is the government of the opinion that the FTE rules, or family trust election rules, which basically give effect to the special concession should be so composed as to allow the special concession to operate properly?

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

That is a question that goes well beyond the scope and intent of this bill. I appreciate it is a political debating point.

David Bushby (Tasmania, Liberal Party) Share this | Link to this | Hansard source

It is the nuts of this bill. It goes to the heart of this bill.

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

No, it is not the nuts of this bill at all. But if you want to ask questions beyond the scope of this bill I am happy to consult the Treasurer’s office and come back to you to respond to what is quite a broad question. This bill is quite specific about its intent. You are asking a general principle question, which I am happy to get you more information on, Senator Bushby—happy to—but you are not going to be able to get that before this bill is voted on. You have actually asked about a tax policy principle rather than the specifics of this individual legislation.

David Bushby (Tasmania, Liberal Party) Share this | Link to this | Hansard source

I am very happy for the minister to get me more information about the general principle and the approach of the government to that issue. But the fact is that making these changes undermines the ability of the special concession provided to family trusts to operate, so this does go to the heart of this bill. Schedule 2 actually implements changes which will completely undermine the special concession and actually raise the value of it in overall terms. So I would appreciate an answer today if possible. If not, please take it on notice.

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

When information is available, I am happy to provide it as quickly as possible.

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

This is my final question. Is the minister aware of any forward figures that pertain to the moving of the capital gains tax event horizon back towards the time of the set-up of the trusts? What would be the possible revenue stream to the Treasury from turning a capital gains tax exempt asset into a capital gains tax asset? Does the government have any proposed figures about that? Also, what will be the take to the Treasury from changing pre-1985 assets to post-1985 assets by the extinguishment of the trust? What will be the capital gains tax event there? I premise this question around my strongly held belief that this is another form of probate by deception.

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

There are no estimates along the lines that Senator Joyce is seeking.

Alan Ferguson (SA, Deputy-President) Share this | Link to this | Hansard source

The question is that schedule 2 page 19 (line 1) to page 20 (line 25) stand as printed.

Alan Ferguson (SA, Deputy-President) Share this | Link to this | Hansard source

The question now is that amendment (2) on sheet 5556 be agreed to.

Question agreed to.

Bill, as amended, agreed to.

Bill reported with amendments; report adopted.