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

I am very pleased to rise to talk on the Tax Laws Amendment (2008 Measures No. 2) Bill 2008 because all the measures contained within it were announced by the previous coalition government. I think that is a very important point. It does not seem to be particularly well understood at this stage by the government, who seem to want to claim all the good work we did as their own. This bill provides a very grievous example of that. We have had press releases from Senator Sherry, the Minister for Superannuation and Corporate Law, saying that the now opposition failed to undertake some of the measures that are contained within the bill, even though they were clearly announced by the previous government, although we did not have a chance to implement them on account of the election intervening.

So the opposition is pleased to support these measures. The first of them, schedule 1, deals with amounts misappropriated by an employee or an agent. This measure fills a gap in the existing taxation laws. It is a measure that the coalition announced in May 2007. The measure, which is in schedule 1 of the bill, addresses the inequity of the taxpayer effectively being taxed on an amount that the taxpayer has not received. Typically, this situation could happen where the taxpayer sells an asset that has been depreciated for tax purposes. In broad terms, selling for a price that exceeds the asset’s adjustable or written-down value results in the taxpayer being assessed on the excess. That would be the case were it not for this much needed amendment, an amendment that I have previously noted—and I note again—was announced by the coalition when we were in government. Under the measure, the taxpayer still includes the excess in their assessable income but, in recognition of the fact that the proceeds have been misappropriated by the employee or agent, a deduction is allowed for the amount of the sale proceeds. Where the asset is not eligible for depreciation or similar relief but is taxed under the capital gains tax rules, a sale would ordinarily result in the proceeds being taken into account in calculating the amount of the gain. This is the result even where the taxpayer does not actually receive the proceeds due to the misappropriation.

Under the measure, the amount of the proceeds will be reduced by the amount that was misappropriated by the taxpayer’s employee or agent. A taxpayer who uses a depreciable asset for taxable and non-taxable purposes and whose agent misappropriates the sale proceeds on disposal of the asset will be allowed, under the measure, to reduce the proceeds by the amount of the misappropriation. Specific rules are being introduced to cater for the situation where the taxpayer has calculated their tax position as a result of the misappropriation but later recovered some or all of the moneys that were misappropriated. The opposition supports this measure.

Schedule 2 of this bill extends the superannuation guarantee levy late offset. As I have said, this measure was announced by the coalition last year—notwithstanding the fact that the current minister issued a press release in March of this year saying that Labor called on the then coalition government to fix the harsh treatment of employees but to no avail. This totally disregards the announcement that was made by my colleague the then Minister for Revenue and Assistant Treasurer in October of last year. I would like to table, for the benefit of the House, a document where he announced these changes. So the changes that are contained within this bill were announced by the then minister in October of last year—although that did not stop the new minister putting out a press release in March of this year saying that it was all their idea and the coalition government never took any action on it. We see in this place the government totally rewriting the history of the past 12 years of the coalition government and, of course, this is a particularly grievous example. Another example I note will be when the Treasurer claims the tax cuts that he is introducing in tonight’s budget as his own, when we all know that all they are is a copy of the coalition’s tax policy announced at the last election.

Returning to the bill: as I said earlier, this measure was announced by the coalition. The employer who is late in paying their compulsory superannuation contribution has a contribution shortfall. Where the employer is late by more than a month, the employer is liable for the superannuation guarantee charge, which comprises interest, an administration charge and the amount of the contribution shortfall. Currently, the employer who is late in paying a superannuation contribution for an employee must also pay the same amount to the Australian Taxation Office as part of the superannuation guarantee charge. Under this measure, the employer who pays a late superannuation contribution will be able to offset that payment against the liability for the superannuation guarantee charge. Thus, the employer pays the amount of the superannuation contribution only once, as opposed to doing so twice as is currently the case. The employer is still liable for interest and an administration charge for not making the payment of the employee superannuation on time as is appropriate. So they are still getting a sanction for not doing it but they are not being automatically charged double, which is, a lot of people would agree, particularly harsh. A deduction is not allowed for either the amount of the offset or the superannuation guarantee charge. So there are incentives for employers to make timely payments of employee superannuation contributions, as we would all expect.

The measure reduces the incidence of harsh penalties being incurred by some employers who attempt to do the right thing by their employees and incorrectly pay contributions for superannuation rather than pay the superannuation guarantee charge to the ATO. The measure will apply in respect of employers who elect to use the offset after the date of royal assent. Employers who have been assessed with the superannuation guarantee charge before this date can use the offset, provided the superannuation guarantee charge has not already been paid. As I have said, the opposition supports this measure.

Schedule 3 of the bill relates to the CGT market value substitution rule for interests in widely held entities and is another measure that my colleague the member for Dickson announced last year. It is a very sensible measure that will ensure that shareholders in widely held companies and unit holders in widely held trusts are not disadvantaged when their interests in the entity are cancelled. The disadvantage or unfairness can arise where capital gains tax event C2 occurs. This CGT event happens when ownership of an intangible asset, which includes shares and other equities, comes to an end. Typically, this CGT event is triggered on cancellation or redemption. The current position is that the market value substitution rule will replace the actual market proceeds received, say on cancellation, with the market value of the equity where the capital proceeds are more or less than the equity’s market value.

What the coalition wanted to ensure when we announced this measure was that the equity owner would be taxed on their actual capital gain based on the amount agreed to be paid to them, not on the other value that they did not receive following the cancellation. I think all Australians would agree that it is only just and fair that they pay the real capital gain that they actually received. Where the amount payable for the cancellation was set in advance of the cancellation occurring, there could be circumstances where the market value substitution rule required a different amount to be used in calculating the capital profit. The opposition supports the measures in this bill. It will give taxpayers a high degree of certainty as well as fairness. It will also simplify the current legislation that applies to transactions or dealings covered by this type of CGT event.

Schedule 4 of the bill, again a measure announced by the coalition last year, relates to Endeavour research fellowships and Endeavour executive awards. The Endeavour awards, as many in the House would know, are available to overseas citizens to study or to carry out research or professional development in Australia. These awards may also be provided to Australians to conduct similar activities abroad. Last year the coalition announced the decision to exempt from income tax any amounts received from a research fellowship under the Endeavour awards or from a fellowship award under the Endeavour executive award. The Endeavour awards offer participants the opportunity to build international linkages and networks and to develop their own knowledge and skills. There are Endeavour research fellowships for postgraduate students to undertake short-term research projects of approximately four to six months. The Endeavour executive awards provide Australians of merit in business, government and education the opportunity for professional development in a foreign country, whether through work placement, a short course or peer to peer learning.

The coalition’s decision sought to align the taxation treatment of a number of awards made under the Endeavour awards program. The taxation treatment differed depending on the recipient’s status. Some parts of the Endeavour awards program, whether a research fellowship or an Endeavour executive award, would be assessable if the recipient was not a full-time student. Both the research fellowship under the Endeavour awards and amounts received under the Endeavour executive award comprise a number of payments. In all cases, the monthly stipend com-ponent would be assessable income where the recipient was not a full-time student. Such a recipient may also have been assessed on certain allowances depending on their form. However, a full-time student was exempt from tax on all components of the research fellowship. I think everyone would agree that these taxation rules resulted in some unnecessary complexity. Under the measure contained in this bill, which the coalition supports and introduced, amounts received from research fellowships under the Endeavour awards or from the Endeavour executive awards will be exempt from tax from 2007-08, regardless of whether the recipient is a full-time student or not.

Schedule 5 of this bill deals with the early completion bonuses for apprentices. The coalition gave strong support to apprentices and technical education when we were in government and that support continues now that we are in opposition. In government, we recognised that a trade and a technical career should be seen as a highly valuable, satisfying and rewarding career. In the previous 13 years before that, the Labor Party talked down the trades. When we came to government in 1996 there were 154,000 apprentices in training. By March 2007, the number of apprentices in training had risen to 415,000, an increase of some 168 per cent. Not only had the coalition boosted apprenticeships but it restored the value of a technical education. So effective were the coalition’s policies that in 2007 there were around 160,000 people aged 25 or older who were undertaking apprenticeships. In other words, there are now more mature aged apprentices than the total number of apprentices under Labor. Men and women who are today in their late 20s and 30s who should have been undertaking apprenticeships or studying at TAFE in the late 1980s and early 1990s but, because of Labor’s denigration of a trade career did not, have left a major gap in our skilled workforce. This is particularly acute with unemployment being so low, thanks to the policies of the coalition government.

The coalition established 21 Australian technical colleges around the country. Australian technical colleges allowed students to complete their final years of high school while at the same time starting an apprenticeship that would put them on track towards a successful and rewarding career in the trades. This support for apprenticeships was backed by an increase in investment in vocational and technical education from $1.1 billion to $2.9 billion, which was an 87 per cent increase in real terms. As further evidence of this support, the coalition announced in 2007 that the first $1,000 of an early completion bonus paid to an apprentice would be exempt from income tax. The measure in schedule 5 of this bill will carry this decision into effect. Early completion bonuses are payable under schemes offered by a state or territory. The bonus serves to reward an apprentice who completes their apprenticeship more quickly than normal and should also go some way to reducing skill shortages in the trades. Regulations will prescribe what kinds of occupations are eligible for the early completion bonus tax exemption so that skills shortages and the relevant time frames for completing apprenticeships are addressed. Currently, an early completion bonus is available only from the Queensland government, but I would urge other state governments to take account of the Queensland example and institute these bonuses themselves.

To be eligible for the Queensland bonus, a full-time apprentice must complete their apprenticeship at least six months before the nominal completion date. Part-time apprentices have to complete their apprenticeship 12 months before the nominal completion date. I note that the government intends to list the Queensland early completion bonus scheme in regulations as soon as the bill receives royal assent. Further, I note that the measure will apply to assessments for the 2007-08 income year and subsequent years. In government the coalition was committed to raising the status of a technical and trade career to make sure that the current generation of school leavers see the trades as a valuable career and to encourage mature Aust-ralians to take up a technical or trade career. With these objectives in mind, the opposition supports this measure.

The final schedule of this bill, schedule 6, extends deductible gift recipient status to a number of organisations. The schedule amends the Income Tax Assessment Act 1997 by including nine new deductible gift recipients and extending the time period of four existing deductible gift recipients. I note that the decision affecting each one of these recipients was taken, again, by my colleague the member for Dickson when he was Assistant Treasurer. Under these arrangements gifts of $2 or more that are made to the recipients within the eligible period will be an allowable deduction. Each of the deductible gift recipients named in the schedule is worthy of public support: the Spirit of Australia Foundation, Ian Thorpe’s Fountain for Youth Ltd, the AE2 Commemorative Foundation, the Memorials Development Committee, Playgroup Australia, Australia for UNHCR, Wheelchairs for Kids Inc., World Youth Day 2008 Trust, the Amy Gillett Foundation, the Council for Jewish Community Security, the Dunn and Lewis Youth Development Foundation, the Finding Sydney Foundation and the Xanana Vocational Education Trust.

I will just make a brief comment about two of these organisations because their work is very well known to me. Wheelchairs for Kids supplies wheelchairs to disadvantaged people, particularly disadvantaged youth and especially in Indonesia, when they cannot afford such a necessary piece of equip-ment. I really do applaud what they do. I am very familiar with their work. I have attended functions that they have held. They do a wonderful job on behalf of the Australian community and they are very worthy recipients of this DGR status.

I am also very familiar with the work of the Council for Jewish Community Security. I have a large Jewish community in my electorate of Stirling and I am fully aware that they have particular security needs. The com-munities themselves go a long way to providing those needs and I applaud them for all of those efforts. They are a very worthy recipient, as are all the recipients that have been listed today for their DGR status. I acknowledge very much what they do around Australia but particularly within my electorate of Stirling. The opposition supports all the measures that are contained within this bill. We do so because they are our measures that were announced before the change of government and I therefore commend this bill to the House.

Michael Danby (Melbourne Ports, Australian Labor Party) Share this | Link to this | Hansard source

I am going to restrict my remarks to items affecting schedule 6 of this Tax Laws Amendment (2008 Measures No. 2) Bill 2008. But I also want to echo the previous speaker’s remarks about the people who have deductible gift recipient status: the AE2 Commemorative Foundation; Ian Thorpe’s Fountain for Youth Ltd; Wheelchairs for Kids Inc.; the Spirit of Australia Foundation; particularly the World Youth Day 2008 Trust, which, with the visit of His Holiness, is going to be a very worthwhile organisation; the Memorials Development Committee Ltd; the Council for Jewish Community Security; and Playgroup Australia Inc.

Schedule 6 of this bill amends the Income Tax Assessment Act 1997 to update the list of deductible gift recipients, some of which I have just read out, and particularly deductions for the Council for Jewish Community Security. The Council for Jewish Community Security was established to assist in the provision of security and protection for members and institutions of the Australian Jewish community. This is a process that began with the Sunday program which I participated in way back in 1999 soon after becoming a member. In that television program the producer, John Lyons, and I made a great effort to explain to the Australian public the necessity of establishing what kind of threat Jewish community schools particularly were under—though it also affects wider institutions—that this community security trust will look after. A great number of people contribute above and beyond what is necessary via Australian taxation to the wellbeing of these institutions, and I must point out that this is because they face national security threats, as the Channel 9 Sunday program pointed out, that are equivalent to the threat faced by the US embassy or the Israeli embassy in Canberra. This is an impost on religious and community organisations which puts a great deal of mental and physical strain on them. This measure in this bill will, as with the other charities, enable the organisations to be supported by volunteers who are paying money over to them in a way that will see that their security needs are strongly supported, as they should be. Mr Speaker, I am quite aware that we are coming up to the six o’clock deadline for this House. I seek leave to continue my remarks when the debate is resumed.

Leave granted; debate adjourned.