Kay Hull (Riverina, National Party) Share this | Hansard source

I rise today to speak on the Tax Laws Amendment (2006 Measures No. 3) Bill 2006 and the New Business Tax System (Untainting Tax) Bill 2006. I will speak on one area in particular, due to the shortage of time allocated for this debate. I wanted to speak in the context of the changes in the legislation relating to an inconsistency in the taxation treatment of payments received by drought affected farmers. In September 2002, the government answered the call—and, I might add, a very needy call in the Riverina—and we introduced an interim income support payment for farmers in areas like the Riverina where an exceptional circumstances application lodged by the state had demonstrated a prima facie case for full exceptional circumstances assistance. The payments were always considered to be a temporary measure, but the long, protracted disabling of the longest drought in at least 100 years has seen drought relief rolled over on a continual basis. Again, my electorate now finds itself back in a drought and in a declared drought position.

We had two measures by which people were able to claim some kind of relief. We had what we call an exceptional circumstances relief payment. This payment is paid under the Farm Household Support Act 1992, and the payment is taxable. But, as the payment is defined as being able to be a rebated benefit, it entitles the taxpayer to a beneficiary tax offset on the amount of the payment. This payment is made after all exceptional circumstances criteria have been established. Then we have what we call the emergency and general assistance payment. This payment is made as an interim income support or reimbursement compensation for lost salary—for example, it may used where a volunteer firefighter fights a fire. This payment is made in lieu of the income that they would have been paid when they were on the job. It gives relief to the employer, in that they do not have to pay for the volunteer to go out and do such a thing as firefighting. It gives the employee the opportunity to commit themselves to community service—a much needed community service, as we have seen during the devastating bushfires of the last few years. This payment was designed to ensure that, if there was salary lost due to volunteering, that salary was made up. It was also used in the case where an interim, prima facie exceptional circumstance condition had been established but there had yet to be validation of the entire EC process and criteria.

So we had a mechanism that would enable a relief payment to be given to a farmer in a time of crisis, in the event that they had not completed the establishment of the criteria, and the payment was looked at as a reimbursement of their lost salary or earnings. But it was also looked at in the context of the case of a rural firefighter or volunteer firefighter where the payment was in lieu of lost earnings, thereby it was a taxable payment under the EGAP system. Then we had the disaster relief payment. This one-off payment is to provide short-term financial assistance to victims of a major or widespread disaster and it is exempt from tax. So of those three payments there is one payment that is taxed: the payment that is made in lieu of salary. Of course you do have your salary taxed, so you have a tax on the emergency and general assistance payment.

However, we had an inconsistency in the way in which the Australian Taxation Office was treating the EGAP. This was brought to my attention by a firm of accountants called Bush and Campbell. In particular, Geoff Watson and Anna Powell brought to my attention the way in which two of their clients had been treated differently over the same particular payment. Once I started to investigate this issue, I found that it was simply inconsistent treatment, primarily because the EGAP, as I have explained, was an interim measure used in exceptional circumstances for farmers, but if they actually rolled over into receiving the exceptional circumstances relief payment then part of the income that they had received in the interim period, the prima facie period, was taxable. For that payment they had to meet exactly the same criteria and process as those with the exceptional circumstances relief payment, yet their payment was being treated differently by the ATO.

Having investigated this issue, I thought that this seemed to be an anomaly in the system: if you were getting interim relief and then you rolled over into receiving the exceptional circumstances payment, surely the same tax treatment should apply to it as applied to the emergency and general assistance payment. Rather than having accountants dealing with two forms of income with exactly the same criteria and delivered by exactly the same people for exactly the same purpose, the payments were being treated in two different taxation ways, one being taxed and one not being taxed. So I undertook to see if I could remove this anomaly and restore the balance of good commonsense. Sometimes rocket science is not required when dealing with taxation issues and the many other issues which come before the parliament. Indeed, what is required is the will to put in place what seems to be consistent commonsense to deal with a payment that is designed to achieve exactly the same objective and to fulfil exactly the same criteria. While it is exactly the same amount of money for all of the same purposes, some of it will be given a different tax treatment.

Having seen in February the anomaly in two people being dealt with differently on the same issue, I followed the issue up with the accountants in June and decided that I would pursue this issue to get some commonsense into the equation. I brought this to the attention of the former Minister for Revenue and Assistant Treasurer, the Hon. Mal Brough, and then I went to the Minister for Agriculture, Fisheries and Forestry, the Hon. Peter McGauran, on Wednesday, 17 August 2005, when I explained what I saw as being a significant problem as to the treatment of tax. I think he suspected that I did not have my facts right, because it was commonsense that these treatments should be the same, when in fact the payments were being treated differently. He asked me the question, ‘Why hasn’t anyone else raised this issue?’ to which I said that perhaps nobody was actually picking this up. To his great credit, he went to the Hon. Mal Brough and had some discussions with him as to why this was the case.

We are seeing significant commonsense in the treatment of this tax. When a farmer rolls over he is getting that emergency general relief payment because all of the criteria for EC have not been met, but he requires it. Prima facie we look at it and say, ‘To all intents and purposes this is going to roll over into EC.’ Thankfully, commonsense has prevailed. Peter McGauran approached the former Minister for Revenue and Assistant Treasurer, Mal Brough, who determined that certainly there was an issue to be dealt with. Given that he wanted to see this changed so that it would be consistent, the former Minister for Revenue and Assistant Treasurer wrote to the Prime Minister in December 2005 to seek consistent treatment for exceptional circumstances relief payments and for any gap payments on reaching EC.

In front of us now we have a bill that will put in place what is sensible and what needs to happen—that is, consistent tax treatment under our tax rules for two forms of relief payment which are primarily the same. Sometimes when you are but a mere backbencher in the House you feel that maybe you do not have a lot of persuasive abilities on different things. But you can find that a simple, well-thought-out process that is well established, well argued and well documented—I have a file that is extremely large—will come to fruition with some commonsense and well-thought-out legislation.

As I said, our time to speak on these bills today has been limited. I congratulate the Minister for Agriculture, Fisheries and Forestry, the Hon. Peter McGauran, the former Minister for Revenue and Assistant Treasurer, the Hon. Mal Brough, and the current Minister for Revenue and Assistant Treasurer, the Hon. Peter Dutton. I am also thankful to Geoff Watson, to Anna Powell and to Bush and Campbell for raising this issue through their local member to ensure that an injustice in the tax system in the treatment of stressed farmers in particular has been rectified. I thank all ministers involved and I commend the bill to the House.

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