Sussan Ley (Farrer, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

I am pleased to speak today on the Tax Laws Amendment (2009 Measures No. 6) Bill 2009 and in so doing cover some of the issues that are raised in the six unrelated schedules to the bill. Schedule 1 proposes changes to the capital gains tax provisions to abolish the trust cloning exemptions of the Income Tax Act 1997 and provide for the rollover of CGT when transferring assets between certain non-discretionary trusts. This is probably the most contentious schedule to the bill. Before I discuss the different measures, I should make the point at the outset that the former minister for finance, on behalf of the opposition, referred the bill to a Senate inquiry in November 2009. We await the deliberations of the experts on our Senate Economics Legislation Committee, which are due on 25 February. The opposition will tailor its response to the bill accordingly. As I said, there are some quite technical provisions and they raise some interesting questions.

It is fair to say—again in preliminary remarks—that in picking up the previous government’s tax reform agenda when they came to government just over a couple of years ago, the promise was that they would make very few changes. Therefore, it is substantially the previous government’s agenda that has gone forward. But when that arrives at the legislative stage—when the rubber hits the road—due to the responses by the ministers to the consultation, which was extensive and positive, we may see different legislative provisions than those we would have enacted. That is why we will scrutinise the final legislation very carefully. To maintain our support, we need a positive reform agenda that looks after business interests.

Schedule 1 talks about trust cloning, which I suppose is the vernacular for the process where a new trust is created over assets that have been transferred with the same terms and beneficiaries of the original trust. Generally, capital gains arising from the increased value of such assets are taxed when the economic ownership of the asset changes. But a change of economic ownership usually occurs where assets are transferred between trusts or where a trust is created over an asset. For example, where a family trust transfers one asset to another unrelated family trust, a change in economic ownership occurs and capital gains tax liability arises. Where a trust is created over a new asset for the first time, a change of economic ownership occurs and capital gains tax liability also arises. I guess the distinction is between the legal and the economic ownership changing, and that is probably one of the points of this provision. It is critical that we make sure that we do not introduce new capital gains tax provisions where there is not that change of economic underlying ownership and it is just a change in legal ownership.

At the moment under the law there are two exceptions to this general rule, and the provisions under those exceptions are that a capital gains tax event does not occur and therefore no liability arises when a taxpayer is a sole beneficiary of a trust that was created over the asset or into which the asset was transferred; the taxpayer is absolutely entitled to the asset in question against the trustee; the trust in question is not a unit trust; or, and the fourth provision is critical, where the asset is transferred from an existing trust into a new trust, whether the new trust was created by this transfer of the asset or was an existing trust and the beneficiaries in terms of both trusts are the same. The last point is where I suppose potential tax mischief may arise, and the government has stated that it considers that these exceptions are being used to allow the transfer of assets between individuals that result in less or no tax being paid in circumstances that would normally give rise to a much larger capital gains tax liability.

The last point I mentioned of the four allows the capital gains tax free transfer of assets between trusts that have many beneficiaries none of whom are necessarily entitled to the asset in question. These are discretionary trusts where it is up to the discretion of the trustee how those assets are distributed. It is quite possible for somebody to contribute an asset to the trust or have a trust purchase the asset with funds contributed by them and have other individuals receive the benefits arising from the asset, but of course the distribution can change from year to year so such benefits could be received free of any CGT liability. It has been noted that in extreme cases it is possible for an asset to be transferred into a new trust under these provisions and then immediately sold and that would completely avoid any tax being paid.

There is a need to review these provisions, and that is what this bill does, but I also note that in making submissions to the Senate inquiry various tax organisations and the industry have expressed quite serious concern. I imagine that that concern may well be reflected in the senators’ final report. Specifically, there is concern that the rollover provisions are too narrow and they will prevent the transfer of assets between trusts in circumstances where there actually is not a change in economic ownership and there is no way of justifying that that has not indeed happened. That would introduce uncertainty into the tax profession.

There are legitimate uses for trust cloning which this bill seeks to recognise, and that is good. We all recognise that there are legitimate uses of trust cloning that really do not have anything to do with the tax provisions; they would relate to family business succession planning, a business protecting its assets and diversifying its risks, and the need to restructure property within trusts. The proposed changes do address those non-tax reasons for trust cloning by stating that, where there is a sole beneficiary, that beneficiary is absolutely entitled to the asset in question and the receiving trust is not a unit trust, the proposed provisions may be used in succession planning for a family business et cetera. My concern at this stage is that the rollover provisions are in fact too narrow and may need to be reviewed. Capital gains tax considerations must not be an impediment to the restructure of trusts and there should not be inappropriate consequences.

The policy development for this particular provision and indeed the whole bill has been substantial and I acknowledge the work that all have done since this was first a paper delivered by the ATO in April 2008. There has been a long and iterative process since then. Industry submissions to the Treasury in response to release of the exposure draft generally did acknowledge that the current provisions were too wide and may well lead to avoidance of capital gains tax. That is not good, of course, but the submissions generally considered that the proposed changes to recognise that fact are too narrow and would prevent many particularly discretionary trusts from taking advantage of the proposed relief provisions upon the transfer of assets. So, once again, we will see what the Senate Standing Committee on Economics comes back with on 25 February.

The second schedule that I want to talk about in some detail is probably the other main one in the bill, and that concerns loss relief for emerging superannuation funds. The schedule inserts a new division into the income tax act to deal with the transfer of capital and income losses to funds when two separate superannuation funds merge. Typically if you transfer assets from one fund to another, that would trigger a capital gains tax event and of course the realisation of capital gains, or capital losses, for the receiving or transferring fund as appropriate. This new provision will allow the transfer of losses to a successor fund when two superannuation funds merge. We should note that the proposed changes are temporary measures applying to mergers that occur between December 2008 and June 2011.

I appreciate that the reason for that is that the government has stated that it will review this measure after it has considered the report of its Australia’s Future Tax System Review. Leaving aside all the points that I could make about the nonrelease of that future tax system review report, the fact that the industry does not know at this stage whether this particular measure is going to continue is surely going to act as a disincentive for any mergers that it might be contemplating. Certainly, if we look at figures provided by APRA about the number of mergers between superannuation funds, particularly the main ones, over the years between 2005 and 2009—corporate funds, industry funds and retail funds would be the three main sectors, and there is also the public sector—we see that there has been significant merging of superannuation funds. That excludes all of the small super funds, but the main funds are involved in very steady ongoing merging operations.

I think the reasons behind that are positive, because there are great advantages to members and fund providers, most particularly with economies of scale. Bigger funds, of course, have access to a much wider range of investment opportunity and can adopt a longer term, more stable approach in their investment strategies. The regulatory requirements of APRA, I think it is fair to say, can be quite onerous for a small fund. The other very important thing for everybody who has their money in super funds—and that is all of us—is, I think, that larger funds can demand lower service fees from service providers. There has certainly been quite a bit in the press this week about the quantum of fees that fund managers are asking. Some commentary I read this morning—I am sorry; I cannot attribute it—said that, if fund managers cut their costs by 50 per cent, we would all have more money in super. If this measure can assist, it is certainly a good one.

The commitment began in December 2008, when the Minister for Superannuation and Corporate Law announced that the government would provide an optional capital gains tax rollover for capital losses arising when funds with at least five members merged before 1 July 2010. Again, with this measure, there has been extensive consultation, and I think it has been a good consultative process. Generally, industry groups have welcomed the changes and noted that they will benefit the industry, but several groups have requested that the scope of the proposed changes be further extended to include a wider range of situations. It is important, if we are going to take these steps and make these changes for a particular purpose, that the legislation we put forward actually does achieve that.

Some of the concerns that have been raised in the context of the Senate inquiry include, as I have already mentioned, the sunset date coming up in 2011, which I believe is far too soon. It is not reasonable that the industry should bear the cost of uncertainty of the government’s dragging its heels on the Henry tax review. Other concerns are with the two different approaches for obtaining rollover relief, one of which is rollover relief in transferring the members and one of which is transferring the losses. The first option for rollover relief enables the new fund to take up the cost base of the assets as they applied in the fund which is winding up, but it is only available if the transfer of members in the winding up of that fund occurs in a single tax year, and transfers may often occur over two tax years for a variety of reasons. It may well be that the legislation needs to reflect that as an option. There will be circumstances where a transfer can legitimately occur over more than one tax year. If that were the case, the rollover relief would not be available.

The other approach is to transfer the losses from one fund directly into another. Apparently, under the legislation as drafted, losses arising after the last member transfers cannot be transferred. The recommendation, there, is that it should be possible for losses that are incurred by the old fund after the last member transfers relating to the realisation of assets and other costs associated with the transfer of members and the wind-up of the fund—which clearly would come after the last members transferred—to also be transferred to a continuing fund.

Another concern raised was that the bill should be clarified to ensure that rollover relief can apply to assets transferred to the continuing fund even if other assets have been sold to a third party. An example might be if assets were realised for cash and sold to a third party but there would be further transfer of assets remaining that would then be moved into the new fund. It is apparently not crystal clear that they would all be covered by the provisions of the bill, even though I am sure it was designed that they should be.

That is schedule 2, which deals with those transfers of losses between super funds. I think it is reasonable to say in summary that the changes probably do not go as far as the superannuation industry would like but they do remove significant impediments to the merger of funds over the set time period.

Schedule 3 concerns exempt annuity business of life insurance companies. It is fairly straightforward and non-controversial. I am not going to tie myself up in knots, because I know that anyone tuned into this broadcast is tuning out rapidly at the in-depth discussion of tax matters! Essentially, the third schedule is a clear legislative commitment to exempt all superannuation based income from income tax if the recipient is over 60 years of age and the benefits were previously taxed within the fund. Where annuities were paid, we have to clarify that they are in fact from a non-assessable, non-exempt source. Schedule 3 is totally uncontroversial.

Schedule 4 concerns deductible gift recipients. From time to time, the Assistant Treasurer adds different individuals or organisations onto the deductible gift register. Two are being added. One is the Dymocks charity and one is the Green Institute Ltd. I am compelled to state that I am concerned about an organisation as political as the Green Institute Ltd, which is—from checking its website—an arm of the green movement. It makes highly political statements. It is quite entitled to do that. It is entitled to carry out a political agenda, as is any organisation, but I do not know that it is reasonable that it should be ahead of so many others in receiving deductible gifts. It is certainly not in the same category as most of the other organisations on that list. As somebody who, as a local member of parliament, has tried—as we all have—to have listed our local organisations that, for example, are raising money for a family that has been left homeless or children who have been affected by the loss of parents and so on and are doing really good work in their local community, I know that they do not always get accepted onto this list, whereas an organisation as blatantly political as the Green Institute has been accepted. That is clearly a political decision by this government and one of which we do not approve.

Schedule 5 of the bill concerns the north-western Queensland floods. It is there to ensure that the particular amounts that were paid to the victims of the north-western Queensland floods in early 2009 are not subject to income tax and not included in separate net income of a person receiving these payments—in other words, there are no tax consequences of those payments.

The final schedule of the bill relates to spirit blending—these spirits, I hasten to say, are not consumer spirits. This schedule amends the Excise Act to ensure that the blending of certain high-strength neutral spirits—those with greater than 10 per cent volume of alcohol—are treated as excise manufacture to ensure that those spirits, when imported, qualify in the same manner as domestic spirits for the concessional spirits regime under the Excise Act. I should note that they are used for industrial, manufacturing, scientific, medical, veterinary or educational purposes.

In conclusion, can I thank the Parliamentary Library, in particular Leslie Nielson from the economics section, for the terrific work they do in assisting all of us who wish to speak on tax matters, and indeed economics matters, in the House, and for their help on this particular occasion. And may I again reiterate that the opposition will consider its position on the provisions of this bill following the Senate inquiry in the other place.

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

I rise to speak in support of the Tax Laws Amendment (2009 Measures No. 6) Bill 2009. Today in the Main Committee there is a long list of speakers on appropriation bills. Those are the bills that actually give out money on the expenditure side. Today in this chamber we are dealing with legislation that deals with tax laws—that is, the income that comes into government revenue. Government is like a business, in effect: you expend money and you get money in. As someone who was in business for more than 20 years before coming into this place, I know the challenges of small business—how to grow a business and how difficult it is. You need to be prudent, careful and efficient in the way you deal with things. The legislation that is before the House today is about improving not just the equity but the efficiency and effectiveness of our tax system.

I listened to the shadow minister in relation to schedule 1, and I do not share her concern with that. Schedule 1 does deal with trust cloning, which is a problem for us in terms of the mischief it can cause. People are entitled to engage in succession planning, in asset protection; but they are not entitled to change ownership in circumstances to avoid capital gains tax. People who can afford it, people with income and assets, people with access to good tax advisers, can make use of provisions in our Income Tax Assessment Act to avoid tax. No-one should be able to evade tax, but it is legitimate to minimise our tax arrangements. In fact, the Income Tax Assessment Act should effectively be used as a dumbbell it is so heavy—and it has been growing over the years. We need to make sure that our tax system is lean, efficient and simplified. We cannot have situations where people can make arrangements—using, say, discretionary trusts—to change ownership arrangements so as to minimise their tax in a way that evades it. Discretionary family trusts are fine; it is legitimate to use them. But you cannot make your trust arrangements in a way so as to effectively mean that you pay less than you ought.

I said today in the Main Committee that my electorate had received considerable sums of money in Regional and Local Community Infrastructure funding, and I outlined examples today. That is on the expenditure side. Money has been delivered in vital infrastructure. We cannot engage in the BER funding, we cannot engage in Regional and Local Community Infrastructure funding; we cannot build the roads, fix the ports, build the railways, pay social security or fix our health and hospital system unless we get our tax system right—unless we get it lean, efficient and effective. Schedules 1, 2, 3, 4, 5 and 6 are the methods by which we can contribute to making sure that the tax system is fair on all of us, making sure that those on low and medium incomes are not disadvantaged compared with those who are wealthy and can afford the best tax advisers. The meatworkers, the cleaners, the public servants in my electorate should not be disadvantaged compared with those who are wealthy—the millionaires and the billionaires in this country.

Schedule 1, as the minister has said, contributes to our tax system being more lean and efficient. It effectively abolishes the exception to the capital gains tax events, what are known as E1 and E2. These are known as the ‘trust cloning exceptions’. That is the process whereby someone who is smart, and probably business savvy, can create a new trust on the same terms, with the same beneficiaries as the original trust, so that assets can be transferred between those trusts without raising what we would call a capital gains tax liability. That does not mean to say that we should not effectively allow someone to use a fixed trust where there is no effective change of ownership, but what we must do is eliminate the possibility that there can be an effective ownership change without that capital gains tax liability arising.

There is, as I said, a limited CGT rollover for transfer of assets between fixed trusts—and that is the right thing to do, because people are entitled to restructure their trusts. But we cannot have a situation where those people who have the capacity to can arrange their affairs in a way where all the rest of us can suffer disadvantage and our consolidated revenue is disadvantaged such that our health system, our hospital system, our roads and our social welfare system are disadvantaged.

We want to make sure that people can engage in trust arrangements. We want to make sure that they can restructure their trusts. We want to make sure that, as the minister said, capital gains tax is not an undue impediment to the restructure of those trusts. I think the schedules as specified in this legislation do reflect what the Minister for Small Business, Independent Contractors and the Service Economy said—that this is very typical of the Rudd government’s busy work ethic when it comes to tax reform. It is important that we continue this while we wait for the government’s consideration of the Henry tax review and for the announcements that will follow.

Schedule 2 removes very substantial income tax impediments to mergers between complying superannuation funds. We have seen some pretty big superannuation funds merge. AustralianSuper is typical of that. The merger between the former Australian Retirement Fund and the Superannuation Trust of Australia took place in 2006. I believe that there will be future mergers in the sector. There have been other mergers, and the industry does want this change.

I think one of the greatest legacies of the Hawke and Keating governments is our superannuation industry. Superannuation allows our senior citizens—and we are all going to get older—to have economic security and dignity. It allows them to access the necessities of life, put a roof over their heads and not have to worry quite so much about their future economic security. Many people in this place would have parents—some even grandparents—who are in that situation.

There are economies of scale in the merger of superannuation schemes. Anything we can do to permit mergers to happen so that schemes do not have the terrible charges that so many smaller superannuation schemes seem to impose on their beneficiaries is good. Anything we can do to improve the superannuation industry is of benefit to the whole nation and those people whom we hope to represent to the best of our ability in this chamber.

Schedule 2 removes significant income tax impediments to mergers, as I said. It permits the rolling over of capital losses and revenue losses realised under the merger and the transfer of previously realised capital and revenue losses. That loss relief is going to be available for a complying superannuation fund which merges with another complying superannuation fund with five or more members. If we did not do this, there would be an impediment to such mergers. The industry wants this change to take place. Submissions made in relation to this matter after it was announced that this would take place indicate clearly that the industry is in favour of what we are doing in this regard.

The third schedule deals with exempt annuities. An annuity is really a right to receive a payment over a period of time. It is very common for that to take place in the form of an income stream from a life insurance company. They market these annuities. It is very common for people to engage in these arrangements, and they are entitled to do so. Schedule 3 clarifies the circumstances in which an income derived from a life insurance company qualifies as non-assessable and non-exempt income. It is a very technical change. It is of benefit, as it does make certain the situation in relation to this matter. I do think, however, that at some stage we need to look at an amendment to the wording of what is an ‘exempt annuity’. There is no technical definition of that in the legislation. I think we need to look at that in the future. That would clarify the situation and help people to understand the legislation.

The amendments in schedule 3 also make it clear that superannuation income streams offered by life insurance companies are not subject to annuity conditions. Therefore, life insurance companies will be taxed on the superannuation income stream in the same way as any other superannuation income stream provider is. Unlike the previous provisions with respect to annuity conditions, which have a retrospective aspect to 1 July 2000, those changes in the latter amendment that I referred to operate from the 2007-08 income year, so the retrospectivity is not so great.

Schedule 4 helps our community to be more charitable. It lists two new organisations, the Green Institute Ltd and the United States Studies Centre, as income tax deduction beneficiaries. Under the current law, an individual can claim income tax deductions if they give gifts to certain organisations which qualify for the status of a charity. This will help philanthropy in the country. I do not share the concerns of the shadow minister with respect to the Green Institute. There is another provision that changes the name of one of the organisations from the Dymocks Literacy Foundation to Dymocks Children’s Charities. The law of charities goes back to the Elizabethan era. It is one of the great initiatives of that time. I recommend to anyone a thesis that was written by the brother of the member for Leichhardt on that particular era and area of law as it has developed. If anyone is interested in reading that, I suggest they contact Matthew Turnour. I think this amendment is good. It will help people to contribute to those organisations and will allow the organisations to have a tax-deductible status.

Schedule 5 deals with other changes which are of benefit to our society, particularly to Queenslanders. I represent an electorate in South-East Queensland. In my personal life, my family suffered terribly in the 1974 floods when the house in which I lived as a child was eight foot under water. The devastation which my parents and my whole family suffered at that time will never be forgotten. It was the end of my childhood and I saw what my parents and their neighbours went through. I saw the economic challenges that they suffered and the emotional and psychological damage that was done to family and friends when a third of the city of Ipswich, which I now represent, was underneath the water. The support given by the Army in physical assistance, in getting furniture out of houses, and the assistance given by Social Security, churches and charities will never be forgotten by me as long as I live. Anything we can do to help our fellow Queenslanders who have suffered terribly from the devastating floods in north-western Queensland will be of benefit. Schedule 5 exempts from income tax the income recovery subsidy paid to those people affected. North Queensland suffered terribly and this legislation will help employers, employees, small business operators and the many farmers in North and north-western Queensland who suffered devastating consequences to their businesses, their farms, their homes and their livelihoods. This exemption will assist, and we must do everything we can to assist them, in their recovery. Recovery does not happen in a week, a month or a year—it can go on forever. What we do here, in exempting from income tax the income tax recovery subsidy paid, is a small step. Eligible recipients, as I said, are employees, small business persons and farmers who were in the devastated area within the designated time period. It means that those people are put in the same category as those who suffered such devastation in the bushfires in Victoria.

The final schedule is very uneventful. It deals with the excise on the manufacture of spirits. It is just a technical amendment preserving the status quo for the concessional spirits regime. I will not speak further about that, as it is self-explanatory. It really makes very little difference, as it is just a technical amendment that allows the system to operate more effectively in relation to the excise on the manufacture of spirits.

This is a complex piece of legislation, but a worthy one. It benefits people in my home state of Queensland and it will benefit the people in my electorate. It will benefit the recipients of superannuation and people who wish to be philanthropic by contributing to charity. Whilst it is a very technical piece of legislation, it is an important one and I commend the bill to the House.

Graham Perrett (Moreton, Australian Labor Party) Share this | Link to this | Hansard source

I too rise to speak in support of the Tax Laws Amendment (2009 Measures No. 6) Bill 2009 and commend the member for Blair for his contribution and the member for Farrer, who preceded the member for Blair. This might be a bit of a newsflash to the chamber, but this is not the most exciting piece of legislation we have had in the House since we were elected back in November 2007. It is a bit of a sure sign that something is not particularly exciting when those in the advisers boxes outnumber the members of the public seven to one. That is a bit of an indication that it is probably not the most exciting piece of legislation; nevertheless, it is an important piece of legislation.

The member for Blair went through some of the schedules in great detail. I am going to focus on one schedule, but for the benefit of the people of Moreton who might receive this speech I want to touch on a couple of parts in the schedule. Schedule 2 basically removes the potential barrier to superannuation fund consolidation. We all know how important it is that we get the superannuation balance right and give superannuation funds every opportunity to decrease their expenses. That is a commendable part of the legislation. Schedule 4 lists two new organisations as deductible gift recipients. I have a couple of concerns about the Green Institute Ltd. Nevertheless, I am sure it will contribute to Australian democracy and to the environmental cause, particularly the Greens political party. The United States Study Centre Ltd does great work. I see a change of name from the Dymocks Literacy Foundation Ltd to the Dymocks Children’s Charities Ltd. I have had my problems with some of the board members from Dymocks when it comes to books, but overall I am sure that the Dymocks Children’s Charities Ltd does great work. I think Dymocks still stocks my books in certain areas, which is a good thing.

I particularly want to focus on the measure to exempt from income tax the income recovery subsidy paid in response to the north-western Queensland floods. My electorate of Moreton is nearly 2,000 kilometres from the bits of Queensland that were most affected by the floods. Those bits are part of the electorate of Kennedy. However, I have a particular interest in this area, as my wife is from Mount Isa and as I went to Mount Isa many times in my role working in the mining industry. Betty Kiernan, the member for Mount Isa, who is a very hardworking member, said that she would like me to take an interest in Mount Isa when I am down here and complement the great work done by the member for Kennedy, Bob Katter. I am from country Queensland, nowhere near the gulf and the bits of the north that were swamped by the rains.

I mention particularly when we are talking about tax that I am from St George, because obviously this side of the House takes the economy and tax very, very seriously. In fact, I loved studying economics at St George State High School and after that. But we have somebody else in Parliament House involved with economics who also comes from St George, so I just want to make sure that this speech restores some of the town’s credibility when it comes to economics. I have written fiction about the town, but Senator Barnaby Joyce speaks fiction about the nation and he speaks fiction about the economy. Unfortunately, I think Barnaby Joyce is doing to economic responsibility what Ivan Milat did to backpacker holidays. He is not making a great contribution.

Anyway, I will return to the Tax Laws Amendment (2009 Measures No. 6) Bill 2009. Early last year rain soaked much of Queensland. For many in South-East Queensland it was an incredible relief as our dams filled and our gardens became greener. But in the north-west of the state it was a very different story—unfortunately, a tragic story. Early in January 2009 ex-Tropical Cyclone Charlotte dumped rain on the far north. Floodwaters rose through the gulf region and by the end of the month the area was completely cut off. Early in February, ex-Cyclone Ellie dumped even more rain on the low-lying gulf region, and it stayed that way until March, when the floodwaters finally started to recede.

The floods affected 62 per cent of the state, or one million square kilometres. I will just try to put in context for people what one million square kilometres is. Imagine if you jumped in your car in Sydney, drove north up the Pacific Highway to Brisbane, drove past Brisbane to the Sunshine Coast on the Bruce Highway, turned west and drove on the D’Aguilar Highway, the Moonie Highway and the Balonne Highway way out west past Cunnamulla to Thargomindah, turned south and drove down the Silver City Highway all the way to Mildura, and then drove from Mildura east along the Sturt Highway, the Hume Highway and the freeways until you got back to Sydney. That is a million square kilometres—1,000 kilometres by 1,000 kilometres. It is a massive area. I just wanted to put that in context. That is the area that was affected by these floods—a gigantic area, a gigantic piece of Queensland.

During that phenomenal rain, places like Normanton and Karumba were isolated for two months. We tend to think that with rain like that the farmers must have been saying: ‘Send her down, Hughie! Thank you for the water.’ Unfortunately, because the gulf producers had pastures under water for more than eight weeks, it caused significant medium-term damage to the pastures and their land. In fact, we heard in question time today, in an exchange between the member for Kennedy and the Minister for Agriculture, Fisheries and Forestry, that the pasture was dead and the seed was washed away. It went to the gulf. The seed washed into the water, so instead of having lush grass come back after the rain it was like a desert landscape, like there had been a drought. Obviously, when you have that sort of water you also need to rebuild the physical farming infrastructure like fences. Unfortunately, because the grass had been washed away, there was also then a threat from weeds. So the results of all of the good farm management techniques that had taken place over the last 20, 30 or 40 years were wiped out because the pasture was wiped out.

Patrick Secker (Barker, Liberal Party) Share this | Link to this | Hansard source

Member for Moreton, could I ask you to withdraw those remarks about Senator Joyce—the reference to Ivan Milat.

Graham Perrett (Moreton, Australian Labor Party) Share this | Link to this | Hansard source

Okay, I withdraw. Just returning to the matter, in response to the flooding the Australian and Queensland governments and the Australian public all worked together. They made $3 million available for fodder drops to prevent further stock losses, and I think more than 400 bales of fodder were delivered. So even though the first priority was to feed the townsfolk, the people who were on the properties, they tried to get as much fodder through as possible so that the herds were not decimated too much. There were also other initiatives. As at 4 December 2009, 10 concessional loans and 93 clean-up grants of $15,000 for the gulf region had been approved under the National Disaster Relief and Recovery Arrangements, worth a total of $1.626 million and $1.34 million respectively. The Australian and Queensland governments also funded $610,000 in fodder drops, as I said. The income recovery subsidy, equivalent to the Newstart allowance, was available from 29 January 2009 to 12 April 2009.

It was obviously devastating for those communities. Around 6,000 Queensland families lost their homes, their cars, their possessions and infrastructure associated with agriculture. It is estimated that up to 100,000 livestock perished. In all, the damage bill was more than $200 million. The Queensland and Australian governments responded, escalating disaster responses, as I said.

I would also like to point out, since we have just commemorated the Victorian bushfires, that Australians gave generously to the Queensland Premier’s disaster relief appeal, raising more than $8 million for Queenslanders in the north and north-west to help them get back on their feet. Through our Natural Disaster Relief and Recovery Arrangements, the Queensland government received funding to provide grants for food, clothing, accommodation, emergency housing repairs and also for expenditure on public infrastructure restoration. The Australian Defence Force helped deliver ration packs to isolated families. The Rudd government also provided $1,000 for each adult and $400 for each child to help support the recovery of those affected by the floods.

It was interesting that the floods received media attention around the world. Even the Times of London reported it:

It’s the Australian nightmare. Never mind the floods and the poisonous snakes and crocodiles swimming through the town centres. Pubs in some of Queensland’s inundated towns are down to their last few kegs of beer.

So it really is dire straits when you have pubs with no beer in North Queensland.

In addition to the payments I have mentioned, the Rudd government also made an income subsidy payment for residents over the age of 16 years who lost income as a direct result of the floods. The payments were made to employees, small business owners and farmers. This bill will ensure that those payments are not subject to income tax. Obviously, the last thing we need is for those who are just starting to get back on their feet a year after the floods to be slugged with a tax bill for the payments that they needed at a time of crisis. This schedule is the last one that I particularly wanted to cover in detail. I commend the legislation to the House.

Darren Cheeseman (Corangamite, Australian Labor Party) Share this | Link to this | Hansard source

It is with great pleasure that I take the opportunity to speak to the Tax Laws Amendment (2009 Measures No. 6) Bill 2009. It gives me a chance to talk about the specific measures contained in the bill, a number of which are very important to many Australians and of course to many in my electorate of Corangamite. It also gives me a chance to say a few words about taxation policy in a broader sense, including Labor’s commitment to a progressive taxation system that enables this country to fund the services that we critically need.

This bill is another example of how Labor is committed to having an efficient and effective taxation system to support this country. It is an example of how the Rudd Labor government is getting on with the job of improving and refining our taxation system. It is an example of how we are always trying to develop fair and balanced taxation law. That is unlike the opposition, whose economic credibility has gone out the window, particularly in the last few days with respect to comments made by Senator Joyce. We are trying to develop a tax system that works for working families and, importantly, for our industries. We are undertaking this process through this legislation.

Schedule 1 of this bill abolishes the capital gains tax trust cloning exception. Previously taxpayers could use the exception to change effective ownership of an asset, potentially eliminating tax liabilities on accrued capital gains, undermining the equity and integrity of the tax system. This measure also provides a limited capital gains rollover for the transfer of assets between trusts, with no material discretionary elements, sometimes referred to as fixed trusts, with the same beneficiaries. This will ensure that capital gains tax considerations are not an undue impediment to the restructure of those trusts, while ensuring that subsequent changes to the manner and extent to which those beneficiaries can benefit from the trusts are subject to appropriate tax consequences.

Many people in the Australian community are concerned by trusts. Many people do believe that often it is a mechanism by which people can avoid their taxation liabilities. Trusts are not always set out in that way, but often the Australian community believe that they are. There are occasionally loopholes within the tax system that are exploited inappropriately by people, and the Rudd government is closing off some of those loopholes here today with these measures.

Schedule 2 of the bill is a measure which removes significant income tax impediments to mergers between complying superannuation funds by permitting the rollover of capital losses and revenue losses realised under the merger and the transfer of previously realised capital and revenue losses. This measure is aimed at assisting the superannuation industry, which was one of the great triumphs of the Hawke-Keating governments. I know that many people on the other side will disagree with this measure. They fundamentally hate to see the success of Australian superannuation reform because it was an idea born out of the Australian trade union movement and of course implemented via the last Labor government. Not only has the Australian superannuation industry been brilliant for working Australians; it has been fantastic for our economy.

I would like to take the opportunity in this debate to address a couple of particular areas of interest to me. Superannuation reforms put in place by the previous Labor government and by the Australian trade union movement have been fantastic for our economy and I believe are playing a significant role today in assisting our economy out of the worst global financial crisis. These changes reflect Labor’s ongoing commitment to superannuation and economy-wide reform.

Schedule 3 amends the Income Tax Assessment Act 1997 to clarify the circumstances in which income derived by life insurance companies with respect to immediate annuity business qualifies as non-assessable, non-exempt income. Schedule 4 amends the Income Tax Assessment Act 1997 to specifically list two new organisations as deductible government recipients, and changes the name of one organisation. In order for an organisation to qualify as a deductible gift recipient it must fall within one of the general categories set out in division 30 of the Income Tax Assessment Act 1997, which is a very important mechanism for Australians, particularly in terms of giving gifts to appropriate charities. I believe that these changes are fair and prudent measures that will assist with the efficient management of the taxation system.

Schedule 5 exempts from income tax the income recovery subsidy for the north-western Queensland floods of January and February 2009. The member for Moreton so eloquently took us through those consequences, and the member for Kennedy also raised these very important issues in question time. I believe a fair tax system is fundamental to Australia and to enable us as a government to deliver the services necessary for Australians. It enables us to continue to drive much-needed reform of our economy.

Schedule 6 of this bill relates to high-strength spirits that are used in a broad range of industries such as the pharmaceutical, chemical, manufacturing and food sectors. Examples include mouthwash and antibacterial hand sanitiser. This measure enables those types of things to be appropriately taxed within the meaning of the act. The Rudd government has approached the taxation act with a real reform zeal. Later this year we will have the release of the Henry taxation review, which will set out the Rudd Labor government’s agenda in the taxation area for the coming decade. I commend this bill to the House.

Alan Griffin (Bruce, Australian Labor Party, Minister for Veterans' Affairs) Share this | Link to this | Hansard source

Firstly, I thank those members who contributed to this debate on the Tax Laws Amendment (2009 Measures No. 6) Bill 2009. Schedule 1 of the bill abolishes the exception to capital gains tax events E1 and E2, widely known as the trust cloning exception. This is consistent with the policy principle of taxing capital gains that arise where there is a change in ownership of an asset. This schedule also provides a limited CGT rollover for the transfer of assets between fixed trusts with the same beneficiaries, each of which has the same interests in each trust. This ensures that CGT considerations are not an undue impediment to the restructure of those trusts whilst ensuring that subsequent changes to the manner and extent to which beneficiaries can benefit from the trust are subject to appropriate tax consequences.

Schedule 2 amends the tax law to remove significant income tax impediments to mergers between complying superannuation funds by permitting eligible entities to roll over capital losses and revenue losses under the merger and to transfer previously realised capital losses and revenue losses. This preserves the offsetting value of the losses, thereby removing a potential barrier to superannuation fund consolidation. The loss relief will be available for complying superannuation funds that merge with another complying superannuation fund with five or more members. This assists in maintaining a robust and safe superannuation sector. This measure has a limited period of application from 24 December 2008 until 30 June 2011.

Schedule 3 amends the Income Tax Assessment Act 1997 to clarify the operation of the income tax law for life insurance companies that conduct immediate annuity business. Life insurance companies are exempt from tax on income derived in respect of immediate annuity policies that satisfy the annuity conditions. These conditions are designed to prevent the unreasonable deferral of income. The amendments clarify the circumstances in which the annuity conditions apply. This ensures that the annuity conditions in the 1997 tax act are consistent with the former annuity conditions in the 1936 tax act. Immediate annuity policies offered by life insurance companies often provide for superannuation income streams. The amendments ensure that the annuity conditions do not apply to superannuation income streams so that life insurance companies are taxed on this business in the same way as all other superannuation income stream providers.

Schedule 4 amends the Income Tax Assessment Act 1997 to make certain organisations deductible gift recipients. Taxpayers can claim an income tax deduction for gifs to organisations that are deductible gift recipients. This schedule makes the Green Institute and United States Studies Centre deductible gift recipients. It also changes the name of one organisation currently listed in the act from Dymocks Literacy Foundation Ltd to Dymocks Children’s Charities Ltd. Making these organisations deductible gift recipients will assist them to attract public support for their activities.

Schedule 5 makes the income recovery subsidy payments for the north-western Queensland floods of January and February 2009 income tax exempt. These payments were designed to provide immediate financial assistance to persons affected by the flooding in north-western Queensland in January and February of this year. They were made available to Australian resident employees, small business persons and farmers over 16 years of age who experienced a loss of income as a direct result of the north-western Queensland floods in January and February 2009. Recipients must also have derived an income from, or resided in, the affected area within the designated time period.

Schedule 6 makes it clear that when imported high-strength spirits are blended with domestically produced high-strength spirits the blends will remain free of duty under the concessional spirit scheme. This ensures the status quo is maintained. I commend this bill to the House.

Question agreed to.

Bill read a second time.