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

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

I rise today to indicate that the Greens will be supporting the Tax Laws Amendment (2009 Measures No. 4) Bill 2009 but we will be moving some amendments. Senator Brown has some amendments that will be moved in the Committee of the Whole and I wish to now foreshadow an amendment that I will be moving in the Committee of the Whole in conjunction with Senator Joyce, the Leader of the Nationals in the Senate. I welcome the fact that Senator Joyce is joining me and that the Greens and the Nationals are again working together on the issue of carbon sink forests.

I remind the Senate that when the government determined to provide a 100 per cent upfront tax deduction for the planting of carbon sink forests in Australia I mounted a considerable campaign against that, as did the Nationals at the time. I indicated that the managed investment schemes had been a disaster for rural Australia and that carbon sink forests would essentially be managed investment schemes on steroids. Unfortunately, at the time the government and the Liberal Party combined to argue that the managed investment scheme and carbon sink tax deductions were warranted, in spite of the evidence to the contrary.

I alerted the Senate to the fact that every time a tax bill came before the Senate henceforth I would stand up and move the same amendment until such time as the parliament recognised the disaster that is happening in rural Australia because of the tax rorts that have been set up by successive governments. It was the coalition that brought in the managed investment scheme tax deduction and it is the Labor government that has brought in the carbon sink forest tax deduction. Together they continue to support what is effectively a completely failed scheme.

The reality is that plantation managed investment schemes have quadrupled the cost of growing wood in Australia. They are an unnecessary drain on the public purse. Plantation managed investment schemes are boom and bust by nature, because the investment in wood is driven by the demand for tax minimisation, not wood market realities. The combination of investment driven by demand for tax minimisation and highly profitable MIS plantation companies receiving their income upfront has generated a hardwood chip glut.

An investigation of late 1990s hardwood plantation prospectus documents—and this is according to Dr Judith Ajani—revealed a wide chasm between chip and paper market expectations and actual market realities. With prospectus company profits not pinned primarily to revenue from wood sales, there is little commercial motivation for them to invest in rigorous market research or to respond to wood market realities. Dr Ajani points out that, if the Commonwealth government decides to engage in tackling the woodchip glut and acknowledging its substantial hand in creating the arrangements that generated the glut, it will need to attend to the entrenched alliance between the bureaucracy and the forest lobby groups. In particular, it must rise above a handful of lobbyists who peddle perceptions of wood shortages, including on the domestic front, through misrepresenting the wood and wood products trade deficit despite the hardwood chip glut.

What she recommends is that the Commonwealth government terminate immediately the arrangements enabling plantation managed investment schemes. Further, she recommends that the Commonwealth terminates its policy of tripling Australia’s plantation estates by 2020, that the Commonwealth should engage in tackling the woodchip glut by stopping the logging of native forests in Australia, that plantation managed investment schemes should be investigated more deeply than has occurred in the parliamentary committees and that the carbon sink forest legislation be revisited in the light of the plantation MIS corporate and system failure.

That is what I am doing today. I am revisiting in this Senate the fact that the MIS schemes failed and that from one end of Australia to another—from the Queensland sugar fields to the Tasmanian dairy industry—there is ample evidence that agricultural land prices go up, water scarcity occurs with higher water prices in the water market, there is a loss of viability in rural towns and there is a loss of land to food production. And instead of addressing it and stopping it, we now have a Senate report saying that the 100 per cent tax deduction for managed investment schemes should stay and the carbon sink forests investment should say.

People might wonder why the Greens would be opposed to carbon sink forests. They are not carbon sink forests; they are plantations. There is no requirement for these forests to be biodiverse in nature—none at all. The regulatory framework is that of the states, and we have seen a complete failure of the states to regulate. We still do not have groundwater assessments in a state like Tasmania. We still do not know what the implications for groundwater are. We have seen catchments cleared of native forest and planted with plantations. Now, under the government’s Carbon Pollution Reduction Scheme, not only would you be able to get a 100 per cent tax deduction for planting a carbon sink forest but you would also be rewarded under the CPRS in terms of the credits that you would get—never mind what that might do to water in the community, food production, the viability of those rural communities or the whole ecosystem.

There is no doubt that there are parts of Australia that should be planted with biodiverse plantings for the longer term. But there are no specifications in these carbon sink forests provisions that the trees have to be in the ground for anything like 100 years, that they have to be diverse or that they have to be on marginal land. We hear the government say, ‘Oh, it’s not going to be very much in terms of hectares, therefore you’re worrying unnecessarily.’ Wrong—absolutely wrong. There is no restriction. What we know is that the best land with the best rainfall grows the best trees. If you want to maximise the carbon that you store in a carbon sink forest for the purposes of carbon trading then you will be putting those carbon sink forests on the land where you bulk up the carbon fastest. That is the reality. Just like with managed investment schemes, you will get a whole lot of sharks operating as middlemen in this market. You will see people operating in the carbon market and growing the trees for the carbon and not being in the least bit interested in what the ramifications are for the rural communities in which they operate.

I cannot emphasise enough that the government refused to negotiate on these matters and in relation to biodiversity in particular. Since the legislation came in, we have now had a whole analysis of greenhouse gas mitigation and carbon biosequestration opportunities for rural land use. It sounds great. But when you go into it you find that the estimates of area that could be covered in carbon sink forests are huge. If you look at this report, you see a figure of 20 million or 30 million hectares that they are proposing will be used for carbon sink forests. Where in Australia are you going to have the rainfall to cover 20 million hectares of land, that is not currently in some form of agricultural production, with these so-called carbon sink forests? And why would I assume for a moment that these plantings would be biodiverse? There is no substance at all in this claim. Yet again, the plantation industry companies have another rort coming. You would have thought that this parliament might have learnt something from the collapse of Timbercorp and of Great Southern. But, no, apparently we have learnt nothing and want to continue with 100 per cent tax deductions for planting more plantations while at the same time adding this on top of it.

The government says that it cannot be rorted like the managed investment schemes. Yes, it can, because it allows the aggregation upfront of all of the costs associated with establishing a carbon sink forest. Just as with managed investment schemes, you can include all of the costs, including water licences and land. The government says, ‘No, you can’t include land’, but, as the Senate will recall, I brought in advice from a senior tax barrister in Australia saying that the capital cost of land is included, plus the cost of water, plus the establishment costs—all of the costs associated can be put together and claimed upfront as a 100 per cent tax deduction. That is why I said that you will get exactly the same rorts appearing, along with the middlemen and the commissions being paid. All the costs will be aggregated upfront so that the 100 per cent tax deduction is there and so on and so forth. I cannot emphasise to the Senate enough what a terrible idea this is. I find it extraordinary. There is no rational explanation out there at all as to why this parliament is continuing with the 100 per cent tax deduction for MIS plantations and adding this on the back of it.

I note in today’s Financial Review that there is a push on from the Victorian and New South Wales governments to include offsets for a voluntary carbon trading system and offsets for agricultural land in terms of carbon stores. I say to these people: watch what you ask for, because you might get it—and, if you do, you are going to be in real trouble because a voluntary carbon market that allows people to opt in is going to continue to exacerbate this problem. And it is only going to be for a small amount of time because you will have to account for your emissions. It is all very well to say, ‘We will get a credit for the carbon sink forest upfront’, but you will also be given the cost of your emissions, and when there is a drought rural Australia releases huge amounts of carbon emissions. If people think that you can just get credit for the carbon you take up but you are not penalised for the carbon you release, think again because any accounting system that has any integrity has to have both sides of the equation. So be careful here because, if you want to rush in with half of it, you might get governments to be supportive of you in the short term but you will find that full carbon accounting is what is required. Therefore, you have to add up what your net emissions are likely to be in that balance and go out and get some assessment done of the real emissions coming out of rural Australia in the midst of a drought.

I think there are some very great issues to be considered here. That is why the Greens have said all along that we think agriculture should be out and there should be a parallel mechanism for green carbon, which is a fully autonomous system that rewards the right things and penalises emissions. It will actually provide some internal consistency and not just allow the opting in of plantations, which will drive investment in plantations in these carbon sink forests. Because the current accounting system does not account for the logging of forests you are going to end up with the plantations being grown for wood production ending up as carbon stores and the native forests, which ought to be carbon stores, are going to have logging driven deeper and deeper into them because the accounting system does not require you to account for the emissions from that logging. That is completely the reverse of what was supposedly talked about with this plantation vision. The whole idea behind it was that Australia would get its wood products from plantations and not from native forests—we would get out of native forests. That has not happened and this is going to drive a further complete distortion in the market.

I return to the point that I was making at the beginning in terms of profitability here. Everyone is rushing around assuming that these plantations are going to be profitable, either in the carbon market or in the wood market, in terms of managed investment schemes, and that there is absolutely no justification, when you have a look at what is actually happening on the global market, to substantiate the claims in terms of hard cash realities and returns.

I think it is time we had a very good look at who the government is listening to. We have a greenhouse mafia in Australia where people go in a revolving door from the coal industry into ministerial offices, then become lobbyists and then go into the department for a while—and round and round they go, giving one another the same advice. We have exactly the same thing here: from government to forest lobbying. Alan Cummine, for example, used to be an adviser to environment minister Ros Kelly. He went across to the forest lobbies through Australian Forest Growers, Treefarm Investment Managers Australia, and Australian Plantation Products and Paper Industry Council. Allan Hansard went from ABARE and DAFF across to the National Association of Forest Industries. Miles Prosser went from state forests in New South Wales over to NAFI, Plantations Australia and A3P. Richard Stanton from DAFF and state forests in New South Wales went over to NAFI and then A3P, the Australian Plantation Products and Paper Industry Council. Phil Townsend went from DAFF across to NAFI, to Tree Plantations Australia and then to ANU—round and round the revolving door goes. And what a surprise that they all give one another the same advice! Not only do they go round and round but they spin off occasionally into the carbon fossil sector, where you have Robin Bain, who used to work for NAFI, for Timber Communities, which used to be called the Forest Protection Society or whatever. She has gone across to be the chief lobbyist for the cement industry. It is a beautiful thing—round and round they go, giving one another the advice they want to hear.

I think it is about time the government actually had a look at the real economies that are facing people in the plantation sector. Contrary to the idea that we need more plantations, we actually have a glut of plantations. Isn’t it time someone actually had a look at the realities of that? We do not want to complicate matters further by giving people a 100 per cent tax deduction to drive the investment for tax minimisation purposes and not because they are the least bit interested in doing anything about the climate or ecosystem resilience. No, just as we have managed investment schemes, the primary interest is going to be tax minimisation. Once you take away the investor from the outcome by putting tax minimisation in the middle, you end up with rorting of the system, and that is exactly what is going to happen here. So I implore the Senate to join the Greens and the National Party in using this opportunity in this tax bill to get rid of the 100 per cent tax deduction for carbon sink forests. I would be more than happy to take an amendment from the government or the Liberal Party to amend it further to get rid of the 100 per cent tax deduction for managed investment schemes, while I am at it. I would be very happy to accommodate that should anyone decide to assist me in this process and move that.

Nevertheless, this is just adding insult to injury. I urge the Senate to support the opportunity that is given here to the people of Australia through their parliament to stop this rort and go back and recognise that, if we are to deal with climate change, and deal with it sensibly in terms of land use, the first thing we would do is stop the logging of native forests around Australia and rehabilitate native forest areas that are degraded. The next thing we would do is stop land clearance of native vegetation. The next thing we would do is build resilience in those ecosystems by getting connectivity in the landscape and creating jobs in rural and regional Australia in those rehabilitation activities.

You could give people on the land a payment for their stewardship of dealing with weeds and feral animals and restoring native vegetation on their properties. That could be a mechanism. Anything to do with green carbon needs to support people doing the restoration work that is needed to be done in rural Australia. So many people are already doing this through Landcare and voluntary programs, but if they were supported in doing it then they would be able to do it in a more comprehensive way than they currently are able to.

You would plant out some biodiverse areas as carbon in the longer term to give you improvements in productivity on your property and to improve biodiversity, but this is not the way to do it. A tax rort will not guarantee any environmental, biodiversity or carbon outcomes; all it will guarantee is more land being taken out of food production, exacerbating the problems that are already out there because of MISs. We will see them on an even grander scale because this continues to stand.

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

The National Party have been very clear on the measures pertaining to carbon sink forests. In fact, we lost Senator Nash from her shadow position because of our position on this. It is extremely important that we remain consistent in our opposition to carbon sink forests. We are not going to be fighting every time a TLAB comes up. We have put our position on the record twice. I think everybody can work out from that exactly where we stand. We do not intend for it to be used as a wedge in the future. In this instance we were happy to approach Senator Milne when we saw the amendment on sheet 5906 tabled because it does reflect our sentiments.

The amendment relates to tax deductibility for carbon sinks. I say to the people who sent us here that we will not be supporting—and we will do everything in our power to make sure this does not happen—taking prime agricultural land out of food production and moving it to a carbon sink. That is wrong. It works against market principles. It is against ethical principles. It is an infliction on the local economies where this comes about, and I refer specifically to Tully and other cane-growing areas. A mill needs certain tonnage for it to operate. Policies such as these put that under threat. Last time this came up we tried as hard as we possibly could to get an exemption for prime agricultural land, but it went nowhere. Therefore, we had no other option but to oppose it.

Unless humankind is going to evolve into a higher form of termite, there is no point in carbon sink legislation taking prime agricultural land out of production. There is the potential for 20 million hectares to become carbon sink forests. In the regular parlance of regional areas, that is 50 million acres. That is larger than our wheat crop. This is an absurd predicament for our nation to be put in.

We looked at the legislation at the start—and there was discussion around it—and it did say that capital expenditure was tax-deductible upfront for a carbon sink forest. Expenditure is either capital or income—there is no other place for it to be. Capital expenditure includes the price of the land. It is a capital item. It goes on the books as capital. We asked for that to be better prescribed in the legislation, but it was not, so it remains there. This remains a problem.

It is terribly important when people like Senator Nash lose their position over this that our position remains consistent. The National Party has no problems with carbon sink forests. If people want carbon sink forests, they can have carbon sink forests, but why do they have to have an upfront tax deduction for them? If they believe they stand the test of market principles then put them on the market with other things, such as sugarcane, pineapples, beef, wheat and sheep.

When you create an imperfection in the marketplace you put other people who live in the same district and have to compete with them at a distinct disadvantage. It is peculiar that on one side of a fence a person will be growing food to feed a very hungry world and be involved in the tax system like everybody else while on the other side of the fence a person will plant a forest and produce nothing for the hungry world but get an upfront tax deduction. That is bizarre. We have to bell the cat on this one and say, ‘If you want a carbon sink forest, go right ahead, but stand in line with everybody else and make sure that it stands the principles for which it is put forward.’

If this legislation achieves its objective of 20 to 30 million hectares of carbon sink forests, it could bring about the decimation of so many regional towns. Sugar mills will reach their critical mass of tonnage and shut down. All the rest of the sugar farmers will suffer because of the sins of some who exploit a perverse section of the tax act. People will go out of business not because of the global recession or global warming but because of a peculiarity in the tax act. That is not right. That is not just. Obviously, once the sugar mill closes, the chemist will leave and the school will close. The National Party will always fight for the people who are left behind, even though they are small in numbers, in these enclaves of poverty and destitution that are brought about by the unnecessary hand of government coming into their lives.

Similarly, the wholesale or complete purchase of water licences in a certain area causes massive problems. You can purchase some of a water licence from an area, but if you go into an area and purchase the whole of the water licence, then it is all very well for the person whose water licence is sold but it is not very good for all the people who live in the fibro-and-iron or weatherboard-and-iron houses in the towns that surround it. They are left with no hope and with no future. It is not a fair or a just outcome.

In the case of this legislation, it is not about purchasing the water licence; it is about a mechanism for turning the construct and the application of the land into something which does not support the regional economy in any way, shape or form. If it is a carbon sink forest, I imagine we are not milling it, therefore there are no timber jobs. If it is a carbon sink forest, therefore we are not cultivating it; therefore we do not need an economist, we do not need a sugar mill, we do not need a chemist, we do not need a school, we do not need the infrastructure. In the National Party we believe in the support of regional towns and we are the party of regional Australia, so as a core position we could not support a movement in the tax act that would be completely and utterly to the detriment of people living in that regional area. And, to add insult to injury, the benefactor of the carbon sink forest will possibly be someone living in an urban metropolitan area, maybe even overseas. It would be taking the wealth associated with that area that benefited the people in that area and, by a movement in the tax act, moving the benefaction of that area to a person in an urban area or overseas and, in the same breath, removing the capacity to produce food to feed a hungry planet. It just does not stack up as a piece of legislation.

We implored the government to be part of the process of moving strategic amendments so that that would not be the case. We were willing to find a middle ground. We said: ‘If you want to have a carbon sink forest on lesser agricultural land, sure, let’s work out how we can do that. If mankind can put a man on the moon, I am sure we can devise an amendment that will fulfil that proposition.’ But we ran up against an almost die-in-the-ditch mentality, one of: ‘Thou shalt not discern or describe prime agricultural land. We can’t go forward with this amendment because it’s too difficult.’ Apparently it is not too difficult to give people an upfront tax deduction, but it is far too difficult to excise prime agricultural land so that we can go back to these regional towns and say, ‘You are not at threat; this is going to be used on lesser agricultural land.’ Everybody always used as a metaphor that it was only going to use lesser agricultural land, that it was going to be used in deserts and up ridges and in caves which no-one goes to, and they would say, ‘Don’t worry, it’ll never affect you.’ The reality is that it does. The reality is that the application of the legislation has been and is being seen as applying to prime agricultural land. That is where it is going. Why? Because people want to utilise what provides the greatest capacity to increase their potential for a carbon credit by bringing about the greatest increase in the weight of carbon per acre of land. Where are you going to do that? You are going to do that in areas which enable the growth of carbon, which is seen in trees, and that is land with the appropriate soil, the appropriate rainfall and the appropriate area—and, ladies and gentlemen, that is prime agricultural land.

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

Senator Milne interjecting—

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

It is similar to MISs. To be honest, MISs have been a big problem in many areas. I can understand that there are arguments, and I will not disagree with the Greens on this, of the worth of MISs maybe in Tasmania, but in other areas they have been a huge problem. They are an unnecessary influence once more of the hand of government coming in and prescribing winners and losers and creating differentiation and opportunity by reason of a fence line—and that is strange. If people want to go to undeveloped areas in undeveloped markets, then maybe you have an arguable case. But to go to an area which is developed and has a developed market, and the effect of your legislation is to swamp the market with a product, then that just works against all the other people who have made sacrifices to be in that market. That is a kind of badness, but at least they are generally producing something that has an employment outcome or a food outcome. So it is the lesser of two evils because at least you have a food outcome or an employment outcome or some form of production coming off that land. What carbon sink legislation does is just throw the whole lot out the window. What you are left with is towns in the form of Hansel and Gretel destitution: the house in the middle of the forest is apparently the desired outcome. That is entirely unfair for the people who live in the area.

So today we will once more stand to repeal section 40J of the Income Tax Assessment Act 1997. That is the capacity for upfront tax deduction and the tax deductibility status of carbon sink forests. There are other amendments proposed by the Greens; with due respect, we will not be supporting those. But we are making a clear statement that will spell out once more to the Australian public that this is an issue that we brought up at the start and that we have been consistent about. We have voted in a consistent way and we will vote in a consistent way today. I acknowledge also the sacrifice that Senator Nash has made because of her stand on this. For the future it is on the record once we have dealt with this today and the Australian people will know where we stand. Every time this issue comes up we are not going to vote in this way because it then becomes a wedge and it is used as a wedge mechanism. By doing this today we are clearly saying to the Australian people and to this chamber: we must once more readdress this carbon sink issue. We are pleading for a more pragmatic and practical approach to this: go into it, find a definition of prime agricultural land, excise prime agricultural land so it is not covered by this and then you will solve so many problems. Once we have that definition of prime agricultural land then, yes, there are other areas in agriculture that could be utilised.

In the history of land tenure in such places such as New South Wales, once an area had been cultivated mining was proscribed. Provisions such as these, over a period of time, have been whittled away and whittled away, but we have a responsibility, as one of the great food-producing nations of this lonely planet, to produce food to feed people. We have a responsibility to make sure that those people who make the sacrifice to produce the food are looked after. We have a responsibility to promote that production of food as something that is morally good, just and right. The efforts of this chamber should be to engender a sense of support for the people who produce the food that feeds the planet.

But when we come up with legislation like this we might hear someone who is probably doing it extremely tough in a regional area saying: ‘I get up every morning and I work with my hands to fix the tractor—to put new pistons in it—and to feed the stock. I live on the barest minimum of a margin. My family’—it is the case in many instances—‘live at the lower end of the social spectrum because of the effort they put in.’ Instead of saying: ‘We know the sacrifice you make. What you are doing is incredibly just and good and should be promoted and we will stand by you because of that,’ we say to them: ‘We will give an upfront tax deduction to the person who does nothing but plants trees in the paddock next door so that that area can grow wild and be infested with pigs. We put more worth on that forest—that scrub or, in many cases, that mess—than we do on your getting out of bed in the morning and trying to achieve a just outcome by feeding Australia and the world.’ We make that statement when we put up pieces of legislation like this.

It is our job in the National Party to say, ‘No, that is not the metaphor that we will sell to the Australian people.’ We are saying that it is more just and proper to give a tax deduction to the person who feeds people—who puts food on the Australian table—than to have an arbitrary, uninspired tax deduction that has come out of the workshop of some inner-city accountants and found its way onto our nation’s books as legislation. That is not what this country is about. That is why the National Party today says: ‘No, we will reinvest in this message. We will sell it back to the Australian people. We will say, “For goodness sake, this is ridiculous.”’ As I said at the start, unless you believe that the Australian people will develop into a higher form of termite then you have nothing in this legislation but a problem for them.

It is unusual that the National Party and the Greens are as one on an issue but today is the day that I concur with their remarks. It just goes to show, also, the dynamism of this chamber and that this chamber has the capacity, on issues, to reflect the intent of those people who sent us here. It shows that this chamber has the capacity to make sure that those people who sent us here are supported through the way we vote. At a later stage, in the Committee of the Whole, I will commend this amendment and I will call on the government to see sense, to promote justice and not to stand by a proposition that a tax deduction for an urban constituent who will never actually see the farm is more just and worthwhile than supporting a person who works on the barest minimum margin and puts their family and their life in an area where they at an inherent financial disadvantage. We would be adding insult to injury to say, ‘Not only do we believe that you can live almost in poverty and destitution because your margins are so tight—you are being squeezed out by the margins of the major retailers and other such people who stand over you—but we believe that the government should be standing over you and rubbing your nose in it.’ The government will be saying, ‘If you did nothing but planted trees and wandered away, that would be an inherently better outcome than your producing food and feeding people.’

Fiona Nash (NSW, National Party) Share this | Link to this | Hansard source

Last year I crossed the floor on this issue because I absolutely believe that there should not be tax deductions for carbon sink forests. And over the intervening period of time I have not changed my view one bit. I fully support the amendment that is being put forward today and concur with all of the remarks that my leader, Senator Joyce, has just put forward to the chamber.

Colleagues, we need to have a debate in this country about whether or not we want a sustainable rural and regional Australia, because it certainly seems, from the actions that are being put forward through the instigation of the tax breaks for carbon sink forests, that we are completely ignoring the future of regional Australia. This is about the sustainability of regional communities. This is absolutely about having a viable future for rural and regional Australia. And we need that. As my very good colleague Senator Joyce has already pointed out, we are feeding not only ourselves but the rest of the world, and our capacity to be able to do that has to increase, not decrease.

When you look at what the legislation does you see that it is completely unfair and inequitable in how it treats regional communities. We are not saying, and we never have said, that there should not be carbon sink forests. We are absolutely supportive of them. What we have said is that there should not be a tax break to put those forests in that goes to the big end of town. Why on earth would we do that? Our role as the National Party is to make sure that we stick up for, and go into bat for, regional communities and make sure that there is fairness and equity for the people and the working families living in those communities. The legislation that is in place simply does not do that. Why on earth would we expect the taxpayers of Australia—the working mums and dads—to give a tax break to the big end of town to put in carbon sink forests?

These forests are on our prime agricultural land. This is one of the key issues. The population across the globe is going to increase by, I think, 50 per cent by 2030. We are one of the few countries that actually has the ability to increase its productive capacity. So not only do we have a responsibility to ensure that we can feed ourselves as a nation; we have a particular responsibility to provide for developing nations across the world also. Yet we have a piece of legislation in place which does precisely the opposite. As someone mentioned to me just a couple of weeks ago, we are at risk of becoming a nation of forests, energy plants and mines. We do not want that to happen. We need to ensure that the productive capacity is there. Why on earth would we put at risk our food security?

We are very supportive, obviously, of this amendment today to get rid of this tax break on carbon sink forests. As my good colleague Senator Joyce has already pointed out, we are not going to go on and on with this every time it comes back to the chamber, but it is extremely important that people across this nation, particularly people in rural and regional communities, know that we are absolutely rock-solid in our view that those communities need our assistance and know that we will stand up for them in this place time and again to make sure that they get the fairness and equity and the bright and sustainable future that they deserve. They are the ones that feed and clothe and provide for this nation, and it is about time the farmers across this nation got the respect they deserve for what they do. It is very easy to say, ‘We’ll whack in a whole lot of carbon sink forests; that prime agricultural land disappearing doesn’t really matter too much.’ But it does matter. Unless we want to become a nation that predominantly imports, we need to look after those farmers on the land who are producing for us.

Let’s look at the scenario if we did become a predominantly importing nation. There are two very clear and distinct reasons we should not do that. One is about security in the quality assurance of those foods that come into this nation. You only have to look at the melamine issue in China to know that we do not have the capacity here to ensure that quality assurance is going to be undertaken across the board 100 per cent of the time. There is also the issue of security of supply. If we become a predominantly importing nation, what security will we have in terms of supply into the future? They are key issues that we need to recognise, as we are doing today, to make sure that the productive capacity is there and that the prime agricultural land is there to do what it does best, and that is produce food and fibre for this nation.

We need to respect those communities that work so hard to provide for this nation. You only have to look at many of the regional communities that have gone through years and years of drought. That is by no means an issue that has fallen off the agenda. The drought that many of our regional communities have experienced continues in many areas. We know that a lot of our farmers have their backs against the wall. I was recently up in the North Coast of New South Wales with a group of farmers who very clearly and succinctly pointed out that they could not go on, that there was no future for them. What they wanted to know was that we would be in this place batting for them, making sure that we did everything possible to assist them to have a sustainable future.

That is exactly why we are standing here today with the amendment. It is not right and it is not fair to have a tax break for those people in the cities to put in carbon sink forests while at the same time potentially taking away that productive capacity from the regions. It is simply stupid, it is wrong and it lacks common sense. This is about having fairness. It is about having a level playing field. As I said at the outset, we are not against carbon sinks—not by any stretch of the imagination—but why on earth should our farmers in regional communities have to be pitted against a tax break for the big end of town? It is just not right.

Another interesting thing surrounding this is that no hydrological studies have been done on the impact of the interception. We all know that these forests are going to exponentially explode and yet there is no work being done at all. We have a government on the other side that consistently jump up and down about the importance of the Murray-Darling Basin, and yet they are prepared to stand there and support this legislation when they know that no hydrological work has been done. They are completely inconsistent and they have no understanding of how this is going to impact the regions. There has also been no work done on the socioeconomic impact of carbon sink forests and what they will do to regional communities—none whatsoever. And they are quite happy to sit in this place and let this remain in place when there is still no idea of the impact it is going to have.

It is about time that we stood up in this place for our farmers and our farming communities and that, as I said earlier, they get the respect they deserve. They should get the respect they deserve through support for the amendment that will get rid of this tax break on the carbon sink forests, because it is simply not right. If we want to ensure that we have the ability to feed this nation into the future then we need to ensure that we support amendments like the one we are putting forward.

I do not think people really think about the potential for our ability to feed ourselves to decrease or disappear. It sounds like something that it is not real. Let me tell you that this issue of food security is going to be one of the most significant this nation will face over the coming decades. We need to do everything we can to support our regions’ ability to be sustainable and viable in the future, not rip it apart and take it away.

This is a vitally important piece of legislation. We have been very consistent, and we will continue to be consistent, in our view on this. As I said, we are not going to stand up and do this again every time a tax bill comes through, but it is very important that particularly the people of regional Australia know that we will stand firm, whether on this issue or on the issue of going back to some kind of single-desk arrangement for orderly marketing for wheat. We will absolutely stand behind our farmers and our regional communities in what they need to have to have a sustainable future. We will not back away from this. When we get to the Committee of the Whole stage, this will go forward, and I implore senators on both sides of this chamber to give this the consideration it deserves. This amendment needs to succeed. There should not, by any stretch of the imagination, be a tax break available for carbon sink forests. It is simply wrong and it goes right to the heart of the viability of our regional communities.

Ron Boswell (Queensland, National Party) Share this | Link to this | Hansard source

This managed investment scheme issue is absolutely basic to the National Party. It is fundamental to the National Party. It is a question of life and death to the National Party. I will offer to take anyone on a tour of places where these managed investment schemes have eroded the viability of the sugarcane growers, the dairy farmers and the banana growers. We should have learnt our lesson. We developed an MIS and we thought it would help build industries. Everyone let it go through, but we saw what it did. We saw how it was impacting on rural Australia. I had the experience the other day of going to Tully. A big banana grower and sugar grower said that a block of land became available next door to him and he thought he would test the market. He was quite a wealthy man. The MIS tried to buy the block of land and it became a bidding war. He just got blown out of the market. He was a genuine farmer, farming sugar and bananas, and he could not compete. This is happening right across rural Australia.

It is bad enough with an MIS, where you give a tax break, if you actually include land in that tax break. I do not know if it is included, but Senator Joyce, who is an accountant, says it is, and Senator Milne has an opinion from a barrister who says land is included in the tax break. We will never know, I presume, until someone takes it to the High Court and has it tested. But if it is included, goodness help Australian farmers as there will not be any farming land left.

Australia is a huge empty land, and we do have lots of land. But we do not have lots of good land. In fact, we only farm about 20 million hectares. That is our total farming land. This measure has the potential for taking 20 million hectares out. Where are we going to farm? And where are we going to put the trees? We are told we will put them in land that is not highly productive. You put the trees where the trees grow fattest, and where they grow fattest is on productive land where it rains. Trees grow where it rains and they absorb more carbon. If you want to go and put trees out in the Simpson Desert I do not think we would have any objections to that. But putting them on prime agricultural land is just wrong. One of the other things that would happen—if people would ever care to go out—is that once you put those trees down next to a productive farm it becomes a haven for pigs, and—

Opposition Senator:

Feral goats.

Ron Boswell (Queensland, National Party) Share this | Link to this | Hansard source

I have never seen feral goats, but I believe that could be the case where you come from, Senator. Certainly where I come from you would then have to set up traps and have shooters go in to shoot them out. The pigs and feral goats go through the fences and destroy crops, and put mud in the rivers and the creeks. All those things do happen.

Today, the Greens and the Nationals find themselves in alignment. It is slightly different though, as I think the Greens are actually concerned about monoculture taking over the land, and it is a legitimate argument. Where the National Party is coming from is a bit different but we end up at the same place. We are concerned about very scarce good farming land in Australia being taken over. We have seen this happen in MISs. I was very disappointed the other day when the Senate brought down a report virtually giving the MISs a bit of a free kick, or a tick. Now we are just going to make it worse—100 times worse.

I cannot support something that will see people marooned, as in Tully. I talked to a guy the other day who had been a fourth-generation unionist. He was a fitter and turner in Tully and he was a fourth-generation mill worker. He appeared in the Australian. He said, ‘There will not be a fifth-generation worker in the Tully mill, as much as I would like to see my children being involved in the tools and work on the mill. I don’t think there will be one.’ He is not only a mill worker and a fitter and turner, but also a union rep in the factory who is saying that this is wrong. I suppose it is another indication of the Labor Party not being particularly worried about the blue-collar worker. But these people are worried about their jobs. As has been said before, we actually export about 60 per cent of our primary product and that feeds the world. The world is becoming more populated, and there is less and less land to feed the people. Why, in the name of goodness, are we going to do this? This is stupidity at its highest level and it should be opposed. We opposed it last time. In fact, it is only the second time we have crossed the floor on this, and we do not enjoy doing that as we understand the problem it causes.

We, the National Party, have to run up our banner and fly our colours. We have to say to the people in rural Australia: ‘We are not going to let this happen to you. If our vote means anything, it will not happen to you.’ We can only cast our vote; we do not expect to win. But at least it says to the people: ‘If you back us and give us your vote, we will back you in return.’ That is what we are doing today. I saw this coming when the bill was first introduced, and I think someone said at the time that this was an MIS on steroids—and it is. Senator Milne is right, we do not need this and, in fact, we should oppose it. We will be opposing this bill.

John Williams (NSW, National Party) Share this | Link to this | Hansard source

I would like to add a few words to those of my colleagues, Senator Joyce, Senator Nash and Senator Boswell. I said on 15 September last year in my maiden speech to this parliament, ‘Do not ever take the supply of food for granted,’ and I meant it.

I just want to relate a brief story. I live in Inverell in northern New South Wales and our parish priest is Father Joe Adriano. I got to know Father Joe in 1995 when he first came to Australia from the Philippines. We were fishing in the creek on my property one night and he said to me: ‘John, you’re so lucky here in Australia. You walk into your supermarkets and all the shelves are full. You walk around to the butchers’ section and there are all sorts of lamb, steak and pork.’ Of course, I was pig farming at the time. He was simply amazed at the stocks of food that we had in our supermarkets in Australia. He said that back in the Philippines the shelves are mostly empty. That is why I say, ‘Don’t take our supply of food for granted.’ We are lucky. The nation was built by our farmers and now we have policies that do their utmost to destroy our farming sector.

Life is about fairness, and when you have a situation where a large company with a pocketful of money can go in and buy up agricultural land, inflate the prices and prevent the traditional farmer from buying the land, that is wrong. As Senator Boswell just pointed out, when farmers want to expand their acreage, perhaps because their son has just left school and wants to go onto the land to keep the generations going, they get done over in a bidding war. That is wrong. Inflating the price of land is keeping the genuine farmers from producing food for feeding not only Australian but the rest of the world as well, because we are a major food supplier for many areas of the world. The laws as they stand are simply wrong and that is why we are going to support the amendments put forward by Senator Joyce and Senator Milne.

The upfront tax deductions of planting down good agricultural land with trees are simply wrong in every way. We cannot eat trees, we cannot eat bark and it is simply wrong for the future. My fear arises when I hear statistics and forecasts that in the next 30 to 40 years the world is going to have to double its food production to meet the demand for human consumption. How are we going to do that when our nation is being planted down with trees? It is ridiculous. That is why a commonsense attitude should be brought to this whole debate.

The Nationals have stood by their argument all the way through this debate. We are not going to continue this debate for years to come, day in, day out.. Senator Joyce has made that quite clear. We stand by what we believe in and we stand by our regional communities. We do not want to see this huge tax incentive for these turbocharged managed investment schemes, known as carbon sinks, to continue when the genuine farmers are squeezed out. The genuine people who actually feed our nation, who put the food on our table every day, are the people we need to support and who we will continue to support. That is why we find ourselves in this position in this upcoming vote.

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

I seek leave to table a correction to the explanatory memorandum relating to the Tax Laws Amendment (2009 Measures No. 4) Bill 2009.

Leave granted.

In summing up this second reading debate on the Tax Laws Amendment (2009 Measures No. 4) Bill 2009 I thank the members who contributed. It would probably benefit people who have been listening to this debate and those in the gallery, who might be wondering what this piece of legislation is all about, if I revisit for a minute and explain that the debate that we have heard from the National Party senators today goes to an amendment that is being proposed to this large piece of legislation.

Schedule 1 of this bill lifts the expenditure cap for access to the existing research and development tax offsets from $1 million to $2 million with effect from 1 July 2009. This measure provides a further boost to small pre-profit companies in research-intensive industries ahead of the introduction of the new R&D tax incentive in 2010-11. It also mitigates the incentive for firms to keep their R&D spending below the current expenditure cap.

Schedule 2 of this bill honours the government’s 2008 budget commitment to improve the integrity of prescribed private funds and to provide the trustees of such funds with greater certainty as to their philanthropic obligations. The government has recently consulted on draft guidelines, which will be shortly made into a legislative instrument. Following a thorough public consultation process, this schedule amends the Income Tax Assessment Act 1997, the Taxation Administration Act 1953 and A New Taxation System (Australian Business Number) Act 1999 to improve the integrity of prescribed private funds.

Schedule 3 of the bill amends the income tax law to provide relief from capital gains tax to members and insured entities of friendly societies that have either a life insurance business, a public health insurance or both and the society demutualises to a for-profit entity. Depending on how the friendly society chooses to demutualise, these entities do not easily fit within existing demutualisation regimes. These amendments will provide a broadly equivalent capital gains tax outcome for members and insured entities of these friendly societies relative to what members and policyholders of a stand-alone life insurance or private health insurer would receive if the insurer demutualised.

Schedule 4 amends the Income Tax Assessment Act 1997 to ensure that losses transferred to the head company of a consolidated group or a multiple entry consolidated group by a joining entity that is insolvent at the time of joining are not wasted. The head company will be able to apply the transferred losses in one of three ways. The loss can be applied to reduce a net forgiven amount under the commercial debt forgiveness rules. Alternatively, they can be applied to reduce a capital allowance that is adjusted under the limited recourse debt rules or to reduce a capital gain that arises when the joining entity subsequently leaves the group. As the amendments have been official to taxpayers, they apply from 1 July 2002—that is, from the commencement of the consolidation regime.

Finally, this bill includes minor amendments to the tax laws. The amendments ensure that the laws operate as intended by correcting some technical or drafting defects, removing anomalies and addressing unintended outcomes. The minor amendments are part of the government’s commitment to the care and maintenance of the tax law. Minor amendment packages now include addressing minor legislative issues raised by the public through the recently introduced tax issues entry scheme, or TIES for short. I commend this bill to the Senate.

Question agreed to.

Bill read a second time.