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

I rise to speak on behalf of the coalition on the Tax Laws Amendment (2009 Measures No. 2) Bill 2009. This bill was introduced at the end of the last sitting and contains eight schedules that deal with various technical aspects of amending taxation law. At the outset, I would like to indicate that the opposition will be supporting this bill, but I do want to briefly run through each schedule within the bill.

Schedule 1 amends several acts, including the Banking Act 1959, the First Home Saver Accounts Act, the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997. It removes the unintended tax implications arising from a failed authorised deposit-taking institution’s relationship with the Australian Prudential Regulation Authority, or ARPA, with respect to payments made under the financial claims scheme. The schedule will ensure that payments made under the scheme are treated as if they were made by the failed authorised deposit-taking institutions, or ADIs. It also prevents tax implications from arising for farm management deposit account holders who have their account with failed ADIs when they start a new account with a separate authorised deposit-taking institution.

For individuals with retirement savings accounts with a failed authorised deposit-taking institution, this schedule will ensure that the payments made by APRA into a new retirement savings account in a separate ADI will have the same tax treatment as a rollover superannuation benefit. Similarly, a payment made by APRA into a new first home saver account will be treated as a transfer from one provider to another. This will prevent individuals from claiming the government contribution twice. This schedule also contains certain reporting and withholding requirements for APRA in the case where an ADI fails and payments must be made under the scheme.

Schedule 2 of this bill makes amendments to the Income Tax Assessment Act 1997 and other ancillary legislation to provide greater accessibility to small business capital tax concessions for owners of a capital gains asset used under a passive asset structure. In 2007 the previous coalition government introduced a range of capital gains tax concessions for small businesses. At that time, changes were also made to the small business entity test and the net asset value test. Businesses in situations where an entity owns a CGT asset but another related entity uses the asset in carrying on a business will now have greater access to those capital gains tax concessions for small businesses.

The coalition welcomes these amendments. Indeed, we have advocated for the small business capital gains tax concessions to be expanded further. Our approach was first outlined by the former Leader of the Opposition, Dr Nelson, in his budget-in-reply speech a little over a year ago. This would be pursued, of course, under an elected coalition government. It will further expand the small business capital gains tax concessions by reducing the active asset test down to five years, giving small business access to these concessions.

Schedule 3 proposes changes to clarify the law with respect to capital gains tax. It amends the Income Tax Assessment Act 1997. This is, I have to say, a highly technical area. The schedule is seeking to remove beyond any doubt what could be a technical interpretation of the law that might, in a worst case scenario, see taxpayers having a capital gains tax liability on receiving a tax offset and the like. This schedule removes any doubt of unintended consequences occurring, which can only be positive.

Schedule 4 provides a refundable tax offset for certain projects approved under the National Urban Water and Desalination Plan. The offsets are to be available for the 2008-09 to 2012-13 income years by way of issuing certificates. Taxpayers who qualify through eligible projects will be able to receive up to 10 per cent of the capital costs, up to a maximum of $100 million per project. I am supportive of these changes, as water supply is very important to everyone. As the government tries to improve the security of water supplies to major cities, this measure will help, I believe, both small and large businesses to ensure that projects proceed as we would want to see them proceed.

Scheduled 5 amends the Income Tax Assessment 1997 to update the deductible gift recipient list to include four new entities and extend the eligible time period of three organisations. The four new entities are Australasian College of Emergency Medicine, ACT Region Crime Stoppers Ltd, the Grattan Institute, and Parliament of the World’s Religions Melbourne 2009 Ltd. The three entities whose eligible time period will be extended are Bunbury Diocese Cathedral Rebuilding Fund, St George’s Cathedral Restoration Fund, and Yachad Accelerated Learning Project—and I can see Senator Sherry over there; maybe he can tell me if I have got that pronunciation right!

Schedule 6 of the bill would expand the operation of the Australian Business Register. The ABR was established by the former coalition government to reduce administrative costs for small businesses by reducing the number of times a business would be asked for the same information by different agencies. Schedule 5 will expand the operation of the ABR by using certain contact information provided by a business to a government agency for updating information at other government agencies. This schedule also allows the ABR to act as the Multi-agency Registration Authority to facilitate electronic dealings with businesses.

Schedule 7 removes the requirement for a business to be a member of the Greenhouse Challenge Plus Program to be eligible to claim more than $3 million of fuel tax credits. This requirement was included by the former coalition government to encourage large fuel-consuming businesses to reduce their emissions. However, this program will cease operation on 30 June 2009; therefore, businesses would not be able to claim more than $3 million of fuel tax credits after 30 June 2009. Schedule 7 will ensure that larger fuel-consuming businesses will still be eligible to claim fuel tax credits.

Finally, schedule 8 will provide a tax exemption for payments made under the clean-up and restoration grants scheme. On 18 February 2009 the Australian government and the Victorian government announced a $51 million assistance package to assist small businesses and primary producers affected by the Victorian bushfires. I think this has been a good package. It includes a $5,000 clean-up and restoration grant, which can be increased up to $25,000 if the sustained damage is significant. What this schedule does is ensure that these grants are not treated as assessable income, and the exemption will apply to 2008-09 and 2009-10 income years.

In conclusion, the Tax Laws Amendment (2009 Measures No. 2) Bill deals with a number of necessary and technical tax matters to ensure the correct operation of the law. The opposition does support these efficiencies and clarifications being made to allow the better operation of the tax law. The capital gains tax changes are valuable. The changes to the Australian Business Register, I think, are positive and assist. The amendments to the Fuel Tax Act on fuel tax credits will no doubt be very useful. For small business involved in the clean-up and restoration in Victoria after those horrific bushfires, the exemption from tax on those grants will certainly be well received. The bill was referred to the Senate Standing Committee on Economics on 19 March 2009 and no submissions were made to the Senate inquiry, which means that there must be almost a full score of support for these particular measures. The committee reported on 7 May and recommended that the bills be passed. I see absolutely no reason to take a different view and I commend the bill to the Senate.

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

I rise this evening to make a few comments on Tax Laws Amendment (2009 Measures No. 2) Bill 2009. In particular I want to speak to schedule 7 of the bill. Schedule 7 amends the Fuel Tax Act 2006 to remove the requirement for business entities to be members of the Greenhouse Challenge Plus Program in order to claim fuel tax credits above $3 million.

The Greenhouse Challenge Plus Program will cease operation from 1 July this year and we need to remind ourselves that the Howard government introduced fuel tax credits in 2006 for business on the proviso that they became members of the Greenhouse Challenge Plus Program. That condition was intended to encourage large fuel users to monitor and reduce their emissions. Sadly, that has not happened and I would be very interested to know from the government what their assessment is on the effectiveness of the Greenhouse Challenge Plus Program in encouraging large fuel users to monitor and reduce their emissions. They may well have monitored them but I would be interested in knowing what they say about the actual total of emissions, because from my reading of it emissions from fuel transport and fuel use is a fast-growing area of greenhouse gas emissions in Australia.

A few weeks ago the World Business Summit on Climate Change called upon political leaders to agree to an ambitious and effective global climate treaty in Copenhagen in December, including a call that:

Governments should strive to end the current perverse subsidies that favour high emission transport and energy infrastructure and promote deforestation.

They particularly said in the Copenhagen call that governments should end subsidies for fossil fuel use. I would be very keen to hear from the government what the justification is for continuing the subsidies that they have here. For a technical reason this is removing the linkage to the Greenhouse Challenge Plus Program, and I would like to know what the justification is for ongoing fossil fuel subsidies. The Copenhagen call came from a mainstream summit. It was organised by the Copenhagen Climate Council and the participants came from a wide range of business, government and NGO organisations including HSBC, Unilever, McKinsey, Swissray, Coca-Cola, Greenpeace International, Carbon Disclosure Project, Business for Social Responsibility and so on.

As I understand it, the government spent $4.7 billion during 2007-08 on providing subsidies to fossil fuel users right across the economy. This represents a nine per cent increase in fuel tax subsidies from 2006-07. Government statistics do not allow for a proper analysis of who is and who is not receiving the fuel tax credits, but by way of example they do reveal that in 2007-08 the mining industry received $1.5 billion, about 30 per cent of the total. I will repeat that: the mining industry received $1.5 billion in fuel tax credits. Anyone who thinks that there is a serious attempt being made at transformation to a low-carbon or zero carbon economy needs to look very carefully at that, because we are still spending billions in Australia subsidising fossil fuel use.

If you were to assume that fossil fuels were unlimited, infinite in their supply, and that there was no problem with climate change, you would still have to ask: what is the excuse for this level of corporate welfare? There is no excuse in a climate constrained world where we have reached peak oil. While we have President Obama talking day in, day out about the need for America to develop its own energy security policy, to get off foreign oil, to make the transition out of fossil fuels and to invest in public transport and so on, we have this government, the Rudd government, talking about the climate challenge with, at the same time, no intention whatsoever of getting rid of the fuel tax credits act. We should be abolishing the fuel tax credits act and directing the forgone revenue towards clean transport and production technologies. When is Australia going to have a plan for peak oil? When are we going to wake up to the fact that this dependence on fossil fuels, particularly in the mining industry, is going to mean we suffer major dislocation?

We had what constituted an oil price spike—or minor shock, if you like—when prices started going through $100 and higher last year. Because oil prices have come down it is assumed that that will continue. It will not. ABARE has it wrong. It has had it wrong in relation to oil prices for generations. The reality is that we are going to see oil prices go up again. If the government actually took the time to look at who owns the oil in the world they would find that it is owned by national regimes that can switch off the oil if they choose to do so. There is plenty of evidence to show that the reserves being touted are inflated, that those reserves are not there.

When I was elected to the Senate in 2005 we had the inquiry into Australia’s future oil supply and alternative transport fuels. I do not know how many times the government has to be presented with evidence that we are running out of oil. Now we have a subsidy for ongoing fossil fuel use, and in the next tax bill to come before the Senate we will be providing subsidies to go out and find more oil. We will have a subsidy to use more oil and a subsidy to find more oil. At what point are we going to realise that it is running out, that we need to be getting off it and that we need a strategy to move away from our oil dependency, not one to subsidise its use to make it cheaper, assuming that by subsidising exploration we are suddenly going to find oil?

We need a national strategy which looks at not only oil depletion but energy security in Australia. I am surprised that the mining industry in particular has not realised its own vulnerability. I can only assume it is because the government’s next step will be to say that it is okay to liquefy coal. That has been ABARE’s answer up till now—that it does not matter if we run out of foreign oil because we can always liquefy coal. If we liquefy coal we will accelerate global warming. We know that is exactly what would happen with liquefied coal because carbon capture and storage is not real and, if it is ever going to be real, will not be real within the next 15 to 20 years.

So what are we going to do? Where is Australia’s plan? My colleague Senator Ludlam put this question yesterday to Mr Conroy, who squibbed it by saying: ‘Yeah, the government’s got a plan in here. It’s somewhere under the environmental provisions.’ I am talking here not about environmental provisions but about energy security provisions. I am asking how this economy is going to cope when oil goes through $150, if not $200, per barrel. What are we going to do then? What possible justification could you have then for providing this level of subsidy to force increased use of oil by making it cheaper, at the same time giving out subsidies—as we will see in the next tax bill that comes through—for imagining you can find more?

The oil companies themselves will tell you that they are now in deeper, more dangerous waters; that it is more and more difficult; that they are into areas where there is less certainty of being able to pump at an economically viable level. It is utterly and totally irresponsible to be continuing the fuel tax credits act. Rather, we should be getting rid of that and not the Greenhouse Challenge program.

Having said that, of course, we have always been sceptical about the Greenhouse Challenge program. It was a Howard government initiative and relied on voluntary action by industry to achieve abatement. It was an inadequate response to the challenge posed by climate change, because it was a purely voluntary scheme. Yes, it was a good idea to have it but, being voluntary, it was never going to end in the kind of systemic shift that you would expect. For too long it was used as an excuse not to implement effective policies on climate change. I assume that the reason behind the timing for its abolition is that the government thought its Carbon Pollution Reduction Scheme would be passed and that the start times for the changes were meant to be complementary. However, the government’s capitulation to business and to the very industries that benefit massively from the subsidies I have just been talking about means that the legislation the government imagined would be there will not be there and we will not have the CPRS or the Greenhouse Challenge program.

While we thought, and still think, that the Greenhouse Challenge program, because it was voluntary, was not as effective as it might have been, it was one of only two programs that compelled large-scale industries to implement any kind of abatement activities. Removal of this membership requirement and the abolition of this program mean that, until the current uncertainty with the CPRS is resolved, there will be no government program that engages with large-scale emitters on abatement issues. That is because the government has refused to force these emitters to implement the energy efficiency opportunities that they have been required to identify under the Energy Efficiency Opportunities Act and because they have not required them to implement it. So they get off the hook on that front as well. It is notable that for many other issues the government is seeking to extend the life of a program until relevant inquiries are completed. As I mentioned, the Tax Laws Amendment (2009 Measures No. 3) Bill 2009 seeks to extend the life of current exploration tax incentives under the Petroleum Resource Rent Tax Assessment Act until the Henry review reports in December and that future tax policy can be clarified. So it is notable that the government is prepared to extend programs that subsidise fossil fuel use by industry but not programs that are focused on delivering any kind of environmental benefit.

This raises the question of whether the government will now indicate whether it is going to extend the life of the Greenhouse Challenge program until agreement is reached on the Carbon Pollution Reduction Scheme and the date for implementation is finalised. I am particularly keen to hear from the government what the justification is—when we are trying to reduce fossil fuel emissions and are faced with peak oil—for continuing a fuel tax credit act that gives to the mining industry, which had one of the biggest booms of all time in the last decade. In 2007-08 we gave them $1.5 billion as a result of these subsidies. We gave the transport, postal and warehousing sectors $1.2 billion, another 25 per cent. The construction industry received $226 million, and the manufacturing industry received $276 million. The mining industry and the transport, postal and warehousing sectors received 55 per cent of the total. I come back to the fact that a total of 30 per cent went to the mining industry while it was making record profits. It made its record profits, it paid a lower level of company tax and then it had huge amounts sent back to it in fossil fuel subsidies. Under the CPRS it would receive its permits. The coal fired generators would be receiving yet more corporate welfare in terms of one-off payments, and emissions-intensive trade-exposed industries will be getting massive numbers of free permits.

This is precisely why the Greens criticise the government. The government constantly talks about a whole-of-government approach to climate change, yet what we see is an entirely counterproductive, internally inconsistent policy position. It is a silo position. You have the minister for the environment or the minister for climate change saying the government wants to do something on emissions, and you have the minister for resources and the Treasury giving subsidies and undermining anything you might be doing on emissions reduction by saying: ‘Don’t worry about them. Just use more oil—we’ll subsidise it. Build more roads—we’ll subsidise it. Build a bigger coal port—we’ll subsidise it. Get those emissions out there. Get them flowing faster.’ It is internally contradictory. It is counterproductive, and I am very keen for Minister Sherry to inform the Senate, from the government’s perspective, how the tax office and the Treasury are facilitating a reduction in greenhouse gas emissions and energy security for Australia, particularly in terms of transport fuels. Explain to me how this initiative helps on the greenhouse challenge that we face and how it helps on the energy security challenge that we face. Minister Sherry, I look forward to some creativity in your answer.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

I indicate my support for the second reading of the Tax Laws Amendment (2009 Measures No. 2) Bill 2009, and I note in general terms that tax offsets are allowed for urban stormwater and desalination, which I think is an unambiguously good thing. I note that the stormwater offsets start at $4 million, which was one of the outcomes of the stimulus package, and it is a good thing to encourage those sorts of projects. I want to focus on one particular aspect of this bill, the Greenhouse Challenge Plus and fuel tax credits, so that I can put my concerns and questions on the record so they can be responded to in the committee stage. My first question is in relation to Minister Bowen’s second reading speech on 19 March, specifically the comments made by the minister in relation to the amendments detailed in schedule 7 noting that the Greenhouse Challenge Plus program will cease after 30 June 2009. With these amendments, businesses will still be able to claim fuel tax credits that previously relied on participation in the Greenhouse Challenge Plus program. These arrangements, as I understand them, allowed large fuel users to claim fuel tax credits in excess of $3 million in the financial year as an incentive to reduce carbon emissions.

My questions to the minister in relation to this are as follows. What environmental criteria will large fuel users no longer be required to meet after 30 June, while still being eligible for fuel tax credits? Further, as I understand it, Minister Bowen has indicated that the government believes that the CPRS will better achieve the carbon emissions reductions required for fuel tax credits, given that it is unlikely that the current version of the CPRS will pass the Senate by the end of next week, or is it true that large fuel users will still be able to claim fuel tax credits for little to no environmental benefit? Does the minister agree that in the absence of Greenhouse Challenge Plus the standards for large fuel users to claim fuel tax credits are not onerous and are too easily met? Those are my questions and concerns in relation to this particular aspect of the bill. I think I told the minister that I would be speaking for no more than three to four minutes and I think I have done it in under three.

Nick Sherry (Tasmania, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

Thank you for your three-minute time limit, Senator Xenophon. It is just as well you did not mention superannuation or we might have been here for a while. I would like to thank Senators Coonan, Milne and Xenophon for their contributions in this debate. I will cover the concerns raised by Senator Xenophon and Senator Milne a little later in my contribution. They were essentially the same issue; although I think Senator Milne was a little more broad ranging than you, Senator Xenophon, in her themes and contributions.

Schedule 1 makes amendments to a number of acts which are required as a result of payments which might be made under the Financial Claims Scheme which this parliament enacted in October last year. Under the scheme, APRA can make payments to claims under general insurance policies with failed insurance companies and to account holders in failed financial institutions. These amendments ensure that no inappropriate tax consequences will occur if payments are made under the scheme.

Schedule 2 amends the tax law to expand access to the small business capital gains tax CGT concessions for taxpayers owning passively-held CGT assets whose circumstances mean they are currently ineligible. This will extend access to taxpayers that own a CGT asset used in a business by an affiliate or entity connected with the taxpayer and partners owning certain CGT assets used in the partnership business. These taxpayers will have access to the small business CGT concessions via the small business entity test from the 2007-08 income year. Schedule 2 also refines and clarifies aspects of the existing small business CGT concession provisions so that they operate flexibly and as intended. This is done via a number of minor amendments.

Schedule 3 amends the law to provide a general exemption from CGT for capital gains or capital losses arising from a right or entitlement to receive a tax offset deduction or similar benefit. This amendment will ensure that the value of these benefits is not reduced by the possible application of the CGT in these circumstances, or where taxpayers have a right or entitlement to other similar taxation benefits.

Schedule 4 amends the 1997 Income Tax Assessment Act to provide a refund tax offset in relation to certain projects approved under the National Urban Water and Desalination Plan. Under the plan, the government will provide assistance to large infrastructure projects which assist cities and towns to meet future water demand. Eligible projects may receive assistance at a rate of 10 per cent of eligible capital costs, up to maximum of $100 million per project. This financial assistance will be provided as refundable tax offsets for private sector applicants. The plan finishes in 2013-14. Accordingly, the provisions are repealed with effect from 1 July 2014.

Schedule 5 amends division 30 of the 1997 Income Tax Assessment Act to specifically list four new organisations and extend the listing of three organisations as deductible gift recipients—DGRS. Taxpayers can claim income tax deductions for certain gifts to organisations with DGR status. DGR status will assist the listed organisations to attract public support for their activities. The schedule specifically lists or extends the listing of the Australian College for Emergency Medicine; the Grattan Institute; ACT Region Crime Stoppers Limited; PWR Melbourne 2009 Limited, which is the Parliament of the World’s Religions; Yachad Accelerated Learning Project Limited, and apologies if I have mispronounced that; the St George’s Cathedral Restoration Fund and the Bunbury Diocese Cathedral Rebuilding Fund.

The amendments in part 1 of schedule 6 assist the registrar of the Australian Business Register to prepare to take on the role of the multi-agency registration authority and they improve the integrity and efficiency of the Australian Business Register. The amendments in part 2 of schedule 6 establish the role of the multi-agency registration authority to facilitate the standard business reporting program, which will enable businesses to streamline their reporting to government agencies through the use of the Australian Business Number. The amendments assist the registrar to identify representatives of businesses for the purpose of online reporting to multiple government agencies. The program is designed to reduce reporting burdens by eliminating unnecessary or duplicated reporting.

Schedule 7 deals with some issues raised by Senator Xenophon and Senator Milne and I will come back to that at the end. Schedule 8 amends the 1997 Income Tax Assessment Act to exempt from tax the clean up and restoration grants which form part of the government’s assistance to small business and primary producers affected by the Victorian bushfires in February this year. This exemption applies to the 2008-09 and the 2009-10 income years and involves a cost to revenue of less than $7 million.

I will now deal with the issues raised in respect of Schedule 7. Senator Milne took the opportunity—as many of us do—to enter into a reasonably wide-ranging commentary and debate. That is not a criticism. She has long had concerns about peak oil and she took the opportunity to raise a range of issues which, without being critical, are not integral to the matters we are dealing with here in this bill. However, she, like Senator Xenophon, raised some issues around what is known as the Greenhouse Challenge Plus program. In schedule 7, amendments to the Fuel Tax Act 2006 and related provisions elsewhere in the tax law to remove the provision that businesses must be a member of the Greenhouse Challenge Plus program to claim more than $3 million of fuel tax credits in a financial year will have effect from 1 July 2009. The Greenhouse Challenge Plus program will cease after 30 June 2009. This bill is not bringing it to an end; the program known as Greenhouse Challenge Plus ceases automatically.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

So what is the compliance?

Nick Sherry (Tasmania, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

I will get to that in a moment. The Greenhouse Challenge Plus program provision in the Fuel Tax Act was originally included so that large fuel users would monitor and take measures to reduce their carbon emissions. This outcome will be better achieved through the government’s Carbon Pollution Reduction Scheme. Without this amendment—this is a cross-reference amendment—business would be unable to claim fuel tax credits in excess of $3 million in a financial year after 30 June 2009. This would be inconsistent with the policy intent of the fuel tax credits system. As I have mentioned, a condition that businesses may not claim more than $3 million worth of fuel tax credits in a financial year unless they are a member of the Greenhouse Challenge Plus, GCP, was included in the Fuel Tax Act 2006 so that large fuel users would monitor and take measures to reduce their carbon emissions.

In November 2008, Minister Garrett advised that Greenhouse Challenge Plus, GCP, will lapse after 30 June 2009. So this was announced some seven months ago. The GCP commenced in 1995 and was always scheduled to finish and lapse in mid-2009. There is no legislation required; it lapses automatically. The lapsing of the GCP was supported by the Wilkins review of Australian government climate change programs. The key elements of the Greenhouse Challenge Plus program—emissions, inventory reporting and assisting companies in reducing their greenhouse emissions—have been superseded by the National Greenhouse and Energy Reporting System, NGERS, and the Climate Change Action Fund, CCAF, respectively. So that is what has replaced it, Senator Xenophon. This is a removal of a cross-reference to the Fuel Tax Act. This act does not bring to an end Greenhouse Challenge Plus. That is coming to an end via another mechanism. The GCP required reporting on (1) emissions and (2) any reduction programs from 1 July 2008. Large fuel users are required by the National Greenhouse and Energy Reporting System to report on these emissions.

So that is the explanation. I thank Senator Xenophon for his brief and probing question and I thank Senator Milne. I acknowledge her longstanding interest in, particularly, peak oil. I have heard her contributions on many occasions—and she has a perfect right to raise them. I understand the reasons she has done so; however, the particular concern around Greenhouse Challenge Plus lapsing—not being brought to an end by this legislation—is not directly relevant to any actions that flow from this particular piece of legislation. I thank senators for their contribution and commend the bill to the Senate.

Question agreed to.

Bill read a second time.