Chris Bowen (Prospect, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

I move:

That this bill be now read a second time.

This bill makes a number of improvements to Australia’s tax and superannuation laws.

Firstly, this government is honouring its election commitment to remove tax deductibility for donations made to political parties, candidates and members. This commitment was made as part of ‘Labor’s $3 Billion Savings Plan’, which was announced by then shadow minister for finance on 2 March 2007.

Currently deductions are allowed for donations to political parties, members of parliament and candidates, including Independents, up to a maximum of $1,500.

Donations and membership fees used to be deductible up to a lower $100 threshold prior to 2006 when the former government implemented an increase up to the current $1,500 limit and expanded the deduction to donations to Independent candidates and members and to donations by business.

To ensure that there is no loophole for business to access a deduction for political donations, these amendments also remove general deductions for business taxpayers for contributions and gifts to political parties, members and candidates.

The previous government’s move—which was opposed by this government—came at a cost of $10 million per annum to Australian taxpayers, which will now be saved by the adoption of this measure. This measure forms part of the government’s commitment to overall efficiency in government operations.

Secondly, superannuation lump sums paid to persons with a terminal medical condition will now be tax free. This change assists in relieving financial stress which terminally ill persons and their families may be suffering due to their situation. The amendments have effect for payments made on or after 1 July 2007.

Under the existing law, the taxation treatment of a lump sum paid from a superannuation fund depends on the age of the person receiving it and whether or not the benefit has previously been taxed in the fund. A lump sum paid from a taxed fund to a person below the age of 55 is taxed at a maximum rate of 21.5 per cent (including the Medicare levy).

Under the proposed change, a superannuation lump sum paid to a person who has a terminal medical condition will be tax free. The details of what constitutes a ‘terminal medical condition’ will be prescribed in regulations which will be made following the passage of this bill.

I note that the previous government announced on 11 September 2007 that it would amend the tax law, with effect from 12 September 2007, so that superannuation lump sums paid from that date to individuals with a terminal illness would be tax free. That measure was supported by Labor in opposition and we are implementing it now in government. This bill, however, ensures that such superannuation lump sums will be tax free earlier, from 1 July 2007. This will ensure that more people with terminal illnesses will be able to withdraw superannuation tax free.

I would like to place on record my thanks to and recognition of the member for Grayndler, the Minister for Infrastructure, Transport, Regional Development and Local Government, for bringing this to the attention of the previous government and for campaigning on the matter on behalf of one of his constituents. As a result, this legislation is being implemented today.

Schedule 3, which like schedules 5 and 6, was introduced by the former government in Tax Laws Amendment (2007 Measures No. 6) Bill 2007, provides a concession for the costs of establishing a carbon sink forest. This measure will encourage the establishment of carbon sink forests and, in turn, make an important contribution to carbon sequestration and deliver natural resource management benefits. Establishment costs will be immediately deductible for trees in established carbon sink forests in the 2007-08 to 2011-12 fiscal years inclusive. After this initial period, establishment costs will be deductible over 14 years and 105 days at a rate of seven per cent per annum.

To be eligible for the deduction, the taxpayer must be carrying on a business and the carbon sink forest must meet environmental and natural resource management guidelines.

Separately to this bill, it is important to highlight that the government is developing a national standard for robust and transparent carbon offsets. The standard will ensure consumer confidence in the carbon offset market and include minimum standards and appropriate verification protocols.

Unlike the opposition the government takes the issue of climate change seriously. I am particularly proud to be a part of a government that signed the Kyoto protocol as one of the first actions of the new government.

The measure contained in this bill is a modest measure. It is a small step in the issue of climate change. It is, nevertheless, an important one.

Schedule 4 extends the beneficiary tax offset to the Equine Workers Hardship Wage Supplement payment.

This payment is made fortnightly to assist individuals who can demonstrate loss of their primary source of income, which is earned in the commercial horse racing industry, as a direct result of the equine influenza outbreak and its associated quarantine and movement restrictions. The amount of the payment varies depending on the applicant’s circumstances and may be equivalent to the single rate, couple rate or single with dependent child rate of the Newstart allowance.

Extending the beneficiary tax offset to the Equine Workers Hardship Wage Supplement payment will ensure consistent taxation treatment with the Newstart allowance, and applies to payments of the Equine Workers Hardship Wage Supplement payment received in the 2007-08 income year.

A number of workers and businesses in the horse racing industry have suffered financially as a result of the equine influenza outbreak of last year. Workers involved in commercial horse dependent industries, who have lost their job or most of their income, and sole traders whose incomes have effectively ceased, such as transport operators and riding coaches, have been eligible to receive the equivalent of the Newstart allowance. This will ensure that no tax is payable on the payment if the only income received by the recipient is the payment.

Schedule 5 provides tax free status to grants under the Tobacco Growers Adjustment Assistance Program 2006, to tobacco growers who undertake to exit all agricultural enterprises for at least five years. The grants are being paid following the loss of a market in Australia for domestically grown tobacco. This measure assists tobacco growers to adjust to the fundamental change in their market and to develop alternative businesses.

Tobacco growers can receive up to $150,000 under the Tobacco Growers Adjustment Assistance Program to assist them to exit the tobacco industry and move into alternative business activities. In 2006 legal tobacco production ceased in Australia. The last state in which tobacco production ceased was Victoria. Licences to produce tobacco can only be issued by the Australian Tax Office where a grower has formal arrangements to sell tobacco to manufacturers and there are currently no such licences on issue.

Ensuring these payments are tax free will ensure that tobacco growers receive the full benefit of the grants to help them move into other industries.

Schedule 6 makes minor technical amendments to the early withdrawal provisions to the Farm Management Deposits scheme. The changes will align the tax law with the current practice for declaring either all primary producers in a geographical area or specified primary producers within a geographical area, to be in exceptional circumstances.

This amendment will improve the farm management deposit scheme by ensuring that all primary producers, who are eligible for early withdrawal due to exceptional circumstances, will retain the tax benefits.

It is particularly important to assist farmers where we can who are suffering from the drought.

Full details of the measures in this bill are contained in the explanatory memorandum. I commend the bill to the House.

Debate (on motion by Mr Anthony Smith) adjourned.