Michael Keenan (Stirling, Liberal Party, Shadow Assistant Treasurer) Share this | Hansard source

We are debating a bill today that was introduced by the Treasurer into this House last night at about 10 minutes to seven. That is less than 24 hours ago. This bill makes 17 amendments to taxation legislation: five amendments to the fringe benefits tax legislation and 12 amendments to the Income Tax Assessment Act 1997. The Tax Laws Amendment (Budget Measures) Bill 2008 will raise over $1.4 billion in revenue over the next four years—one of the high-taxing measures contained in last fortnight’s budget.

I have to say that I think it is with extraordinary audacity that the government is prepared to bring on this debate less than 24 hours after this bill was introduced. I think it is a tactic of a government that is under pressure, a government that is desperate to divert parliamentary attention away from its woeful attempt and lack of a plausible policy to help struggling Australians—singles, families and pensioners—cope with climbing fuel prices. The move to debate these bills at this time is clear evidence that, within the short space of six months, this government has become arrogant and drunk on power.

The Keating government introduced fringe benefits tax legislation in 1986. I think anyone with any passing knowledge of the tax code in Australia will be prepared to concede that it is extraordinarily complex legislation. Over the years, it has rightly been roundly criticised for its density, its language and its tortuous syntax. I might enlighten the House with some examples of this difficult and tortuous legislation. This is complex legislation and we have been given less than 24 hours to have a look at these amendments. Let me give you an example from section 136 of the Fringe Benefits Tax Assessment Act 1986. It is a definition and a central matter for Australian employers to understand in working out their liability for FBT. I will quote directly from it, and I think this is probably a good example of what I am talking about:

“business journey” means:

(a)

for the purposes of the application of Division 2 of Part III in relation to a car fringe benefit in relation to an employer in relation to a car—a journey undertaken in a car otherwise than in the application of the car to a private use, being an application that results in the provision of a fringe benefit in relation to the employer; or

(b)

for the purposes of the application of sections 19, 24, 44 and 52 in relation to a loan fringe benefit, an expense payment fringe benefit, a property fringe benefit or a residual fringe benefit, as the case requires, in relation to an employee in relation to a car—a journey undertaken in the car in the course of producing assessable income of the employee.

This is the sort of material that the House is dealing with in this FBT legislation, so I think it is fair to say that amendments to this legislation require careful analysis. They warrant more than 24 hours consideration.

This is hardly an example of new leadership. What happened to these promises of greater accountability and transparency? We are seeing a desperate government desperately trying to change the story of their failure, to do anything about the rising price of petrol and spin their way out of the situation they find themselves in by dint of their own actions. So they come into this chamber and ram through complex legislation without giving the opposition the courtesy of a sensible amount of time to properly assess it.

There are three FBT amendments contained within this legislation. The first relates to meal cards. In his second reading speech—a speech, as I said, made less than 24 hours ago in this chamber—the Treasurer stated that the intent of this measure is to tighten the law applying to arrangements for work related items and for property consumed on an employer’s premises. These meal card arrangements rely on the exemption given in the FBT legislation for property consumed on business premises on a working day. There is no suggestion that the meal card arrangement has been an exercise in avoidance—far from it. The Australian Taxation Office has issued a number of class rulings that sanction meal card like arrangements.

The change will mean that the exemption for on-site consumption of business property will no longer apply to salary sacrificed food or drink. Salary sacrifice arrangements are widely used by employees wishing to have additional superannuation contributed from their salary package—something you would expect the government to be in favour of. This budget has changed eligibility criteria for many entitlements and payments. For example, for holders of the Commonwealth seniors health card the eligibility test now takes into account salary sacrificed superannuation. This from a party, the Labor Party, that likes to claim it is the father of superannuation—perhaps a more accurate description is the godfather of industry superannuation. You have to wonder whether the government is determined to stop salary sacrifice arrangements.

This FBT measure, like so many other measures contained within this high-taxing budget, is a tax increase. It is yet another case of the government promising one thing and, upon gaining office, doing another. Prior to the election Peter Garrett explained what was going to happen, and this government is living up to his comments.

I note that the explanatory memorandum claims that the cost impact of this measure will be minimal. Certainly there will be a financial impact on the many small businesses that sell food and drink under meal card deals. A great example of that was aired in the media last week. A person who runs a small cafe—for example, on the ground floor of a larger building in one of our major capital cities—relies on this sort of business to keep their doors open. The government shows a pattern of behaviour that demonstrates that it just does not understand the consequences of the decisions it takes. Those small businesses are going to be casualties of this ill thought out measure. The explanatory memorandum also states that the measures restore the original policy intent of the exemption being given for ‘modest benefits’. I would say that sustenance through food and drink is in fact a modest benefit.

The second amendment applies to work related items. In addition to computer software, a briefcase, protective clothing and a tool of trade, there will be an FBT exemption for a portable electronic device. No doubt there will be numerous rulings and determinations from the tax office in the months and years ahead that seek to clarify what is meant by ‘a portable electronic device’. For example, guidance will be required by employers in deciding whether a portable electronic device does or does not have substantially identical functions to another portable electronic device. This is the sort of absurdity that the ATO will have to rule on. In a world of fast-changing technology, they are going to have to decide whether a portable device does or does not have substantially identical functions to another portable electronic device. What a ridiculous waste of time for the ATO. This provision gives little certainty to employers in working out the FBT liability. As has been noted by many commentators, those employers who have been providing benefits like meal cards, salary packaging, laptops and PDAs will have to consider their strategies to attract and retain scarce talent in this tight labour market.

Regarding employee share schemes, the opposition supports action that prevents employees from making a late election for up-front taxation where the taxpayer does not have an acceptable explanation. That is the current policy. To remove the commissioner’s discretion to accept late elections in any situation suggests that the government considers that the ATO has been ineffective in its administration in this area of the law. There is no public evidence that supports this implication. Indeed, the tax office was successful before the full bench of the Federal Court in a recent challenge to its determinations in relation to taxation of employee share schemes. It would be helpful to be provided with the assumptions underlying the revenue impact, estimated at $77 million over the forward estimates—another tax slug for the Australian people. Another point is that there are numerous elections throughout the tax legislation. Numerous discretions are given to the commissioner throughout the legislation. These are features of the self-assessment system that has been in place for more than 20 years.

The Treasurer should inform this House of whether the taxpayer behaviour that apparently justifies this measure included in item 12 of the bill has implications for the self-assessment system more broadly. Will the self-assessment system be part of the root-and-branch Henry tax review? If not, evidently it can quite readily be added to the scope of that review—a review that does seem to be growing on a daily basis. Since the announcement of the Henry review, the government has been madly flapping around, including on subjects like the interaction of the excise on fuel and the GST—that was very convenient for them—and the interaction of the GST and the luxury car tax legislation just rammed through this House. Indeed, it seems that the review will undertake a comprehensive analysis of the GST as a value-added tax—something, of course, that the Treasurer explicitly ruled out when he announced the review. Who knows where this review is ultimately going to end up?

We know that this is something that the Prime Minister seemed to realise when he was in opposition. On 16 January last year, in a radio interview, he was asked by a journalist:

Would you at least remove the GST component on petrol?

The Prime Minister said:

No, I don’t think you can go that far.

The journalist said, ‘Why not?’ and the Prime Minister—the then Leader of the Opposition—responded:

I think you’ve got a system when it comes to the application of GST across the general economy you start gouging out more exceptions, I think the taxation system becomes ungovernable.

What a difference a year and a half makes. Then the journalist went on to ask:

So, what do you mean, it would cost you too much?

The Prime Minister said:

I think you’ve got to be very careful about carving out exemptions and exceptions to generalised taxation arrangements and that applies to GST as well.

The Prime Minister might help out his Treasurer, help out his Assistant Treasurer and let his views on this matter be known to them. He should then go and tell Dr Henry that the review will rule out differential GST rates and the introduction of a retail sales tax—which, perhaps, the Assistant Treasurer has in mind for the sale of fuel—and, of course, rule out this old Labor favourite: the reintroduction of a wholesale sales tax; a position, of course, that the member for Griffith thoroughly embraced when he was first in this place when he infamously described the most fundamental tax reform that had been undertaken for a generation as ‘a day of fundamental injustice’. But this was in the days when he did not like economic reform. This was in the days when he was ‘Caring Kevin’ and he did not have his new persona as the hardcore economic reformer. This was in the days when he hated economic reform.

I will turn to in-house software. This measure contained within the bill is another tax hit on business, and small business in particular. Software is bought for operational, not tax, reasons. That is something that the government just does not seem to grasp. Software is a pretty fundamental thing that businesses need to conduct their operations. The measure in this bill defers deductions. The measure is estimated to raise about $1.3 billion over the forward estimates period. I note that the Treasurer’s second reading speech acknowledges that, where a business scraps software before the four-year write-off period has ended—which is something that, of course, can occur, as software is made redundant at a very fast pace—this business will still get an immediate write-off for the remainder under the existing tax law. I call on the Treasurer to inform the House about the assumptions that underlie this estimate of $1.3 billion, a substantial sum of money, given that businesses will be able to fully write off their expenditure in the circumstances outlined by the Treasurer and will still be able to self-assess an effective life that is shorter than the four-year write-off period.

I note that there is a measure in Treasury’s 2007 Tax Expenditure Statement described as ‘accelerated depreciation for software’, a tax expenditure in relation to software which has an effective life of greater than 2½ years, which estimates the concession to cost approximately $70 million per annum. Given this lower estimate in the tax expenditure statement, I call upon the Treasurer to inform the House why he is setting a slower depreciation rate than the effective life for software assumed or implied by Treasury in the TES.

These are just a few of the issues that the opposition has been able to raise about this legislation. Fringe benefits tax is, I think, by popular consensus an extraordinarily complicated and difficult area of tax for business to interpret. I think it is extraordinary, and symbolic of the way this government have now started to behave after just six months in office, that they would introduce a measure less than 24 hours ago in this House and not do us the courtesy—which we always gave to the opposition—of allowing us to fully assess this legislation on behalf of the Australian people.

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