Shayne Neumann (Blair, Australian Labor Party) Share this | Hansard source

I speak in support of the substantive Tax Laws Amendment (Budget Measures) Bill 2008 and against the amendment moved by the previous speaker, the honourable member for Stirling. We have just witnessed quite an extraordinary performance by the previous speaker. That the member takes issue with the speed with which this legislation has been put at a time when numerous frivolous and irrelevant points of order were taken yesterday—and there was also a dissent motion against the Speaker and a censure motion against the Prime Minister—is quite extraordinary. I just wonder: he was in this House for the last few years—was he aware of the Work Choices legislation? It was legislation that rivalled the tax act, yet thousands of pages of legislation were rammed through opportunistically by the previous government. It is quite extraordinary. We still do not know whether, in fact, they will ultimately support our substantive bill.

This bill is about equity for employees, consistency in the treatment of employees concerning employee share schemes, the removal of the double tax on ESSs and the alignment of the tax treatment of deductibility concerning computer hardware and software. It removes uncertainty and improves efficiency in the tax system and it restores, contrary to what the previous speaker said, the intention of the fringe benefits tax exemption first introduced in 1995.

This bill is integral to the Rudd Labor government’s budgetary process. It is a responsible bill and it is part of a responsible budget. It shows the true mantle of economic responsibility, if it were ever held by those opposite, has well and truly passed to Labor and I commend the Treasurer for the reforms in this bill—it is a Labor bill. It protects and enhances the integrity of the taxation system and it improves the economic prospects of our nation.

I wish to speak on four aspects of these reforms. The first measure relates to meals provided by employers on their premises as part of any salary sacrifice arrangement. This measure will restore the integrity of the fringe benefits tax scheme. It is about fairness towards those employees who purchase meals out of their after-tax income. It is not about ensnaring legitimate arrangements such as subsidised staff canteens which are not part of any salary sacrifice arrangement. Staff canteens and similar arrangements will not be affected.

Under a salary-sacrificing arrangement an employee with a meal card can purchase meals out of pre-tax income. Under this meal card arrangement the employer pays the employees’ meals, which are independently provided by a caterer on or delivered to the employer’s premises. These reforms in this measure will bring back the original intent of the legislation, which is that fringe benefits tax exemption for property consumed on an employer’s premises be limited to modest benefits and not geared to tax avoidance. This means that taxpayers will not be treated differently. Also, it has the benefit of removing any disincentives to employees to leave and purchase meals elsewhere that may be cheaper or better quality. This measure can simply be seen also to increase competition between retail outlets that sell food.

I turn to the fringe benefits exemption amendments applying to eligible work related items used primarily for work related purposes. The fringe benefits tax laws permit exemptions for eligible work related items, including laptops, briefcases, calculators, mobile phones, computer software, PDAs, electronic diaries et cetera. Since their promulgation in 1995, of course computer technology and its mobility have advanced enormously. Many people now use these items for private use extensively, yet the current law allows employees to enter salary sacrifice arrangements meaning that these items are purchased from income pre-tax. This means workers are treated differently.

The new measure will bring back the intent of the original law by restricting the fringe benefits tax exemptions to items primarily used for employment purposes. Further, it will restrict the fringe benefits tax exemption to one item of each type per employee per fringe benefits tax year unless it is a replacement. The current law is not fair to those employees who cannot purchase these items by use of pre-tax income. This measure will treat workers equally. Under the Rudd Labor government gone are the days when some workers are treated more equally than others, as in the Orwellian world of the Howard government. The meals tax measure will gain the Australian taxpayer $610 million and the work related items I have outlined, $530 million over the forward estimates.

I want to refer to the employee share schemes election requirements provisions. This amendment removes the ability for taxpayers to manipulate when they are taxed on the discount they receive for acquiring shares or rights from their employer to minimise their tax liability. This means that the value of discounts is properly included in assessable income, as it should be. An employee electing to be taxed up-front will have to include the value of the discount in the income tax return in the year of shares or rights acquisition under the employee share scheme.

Why are we doing this? We are doing this because, while the taxpayer currently must elect which concession applies to the discount in the year they received the shares or rights, they are not required to provide the election to the Commissioner of Taxation. Therefore, if the value of the shares or rights increases significantly, the taxpayer can decide retrospectively that it would have been beneficial for them to elect to pay up front, rather than defer the taxation. They can claim to have made the election but simply by inadvertence forgotten to tell the Taxation Office to include the amount in their assessable income in the income year of the shares or rights acquisition.

These reforms will mean that, if a taxpayer makes an election under the up-front tax method, the value of the discounts greater than the $1,000 tax exemption amount must be included in the taxation return for the year in which the shares or rights were acquired. However, contrary to what the member for Stirling said, the Commissioner of Taxation will still retain the ability to permit the taxpayer an extension of time to make the election. This measure will benefit the taxpayer to the tune of $77 million over the forward estimates.

With respect to the amendments concerning depreciation of computer software, the measure increases the period of time over which a taxpayer can deduct expenditure on in-house software from 2½ years to four years—the same period as the safe harbour period for computer hardware. The measure applies to in-house software held under a contract, developed, or held in some other way after 15 May 2008. Pre-existing software assets remain unaffected.

This measure will not affect small business, which can access special tax concessions. For example, small business still has the option of immediately deducting expenditure of $1,000 or less in this regard. For expenditure of more than $1,000, the option remains of pooling with other assets with effective lives of less than 25 years and depreciating at 30 per cent. There is a vast array of software packages on the market at less than $1,000—payroll, accounting, record-keeping and invoicing packages, for example. This measure will not affect the amount that is deductible. It is an alignment of the duration of deductibility. If the software is scrapped within the four-year period, there is an automatic write-off for the remainder. It will increase government revenue by about $1.3 billion over the forward estimates. One wonders why the previous coalition government did not fix these anomalies. But of course the opposition have always been on the side of just some taxpayers, not of all taxpayers. They do not want all taxpayers to pay, just some. Let others pay for schools, roads and the like. Hospitals should be paid for by some taxpayers, according to the former Howard coalition government.

In summary, these measures add billions to government revenue while improving the fairness and integrity of the tax system. These measures are important as part of an economically responsible budget crafted by the Rudd Labor government—a government which believes in consistency and fairness, a government which believes that all workers should be treated equally. No-one should be able to manipulate the Australian taxation system in the manner which was allowed under the previous coalition government. These measures help the Rudd government to meet its election commitments on tax cuts, child care, education and infrastructure. I commend the bill to the House and I congratulate the Treasurer on the delivery of a Labor budget that is both equitable and responsible.

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