House debates

Monday, 13 February 2012

Bills

Tax Laws Amendment (2011 Measures No. 9) Bill 2011; Second Reading

4:00 pm

Photo of Tony SmithTony Smith (Casey, Liberal Party, Deputy Chairman , Coalition Policy Development Committee) Share this | | Hansard source

On behalf of the opposition it is my pleasure to speak on the Tax Laws Amendment (2011 Measures No. 9) Bill, and I indicate at the outset that the coalition will be supporting this legislation. Like all tax law amendment bills it deals with a number of substantive taxation issues, which I am going to run through fairly briefly. Madam Deputy Speaker D'Ath, you can probably tell I am losing my voice, albeit slowly, but I hope it lasts the rest of the week. I have picked up whatever it is my three-year-old son, Angus, has. I think you would agree it would be less than efficient for me to lose my voice on something we all agree on at the start of a sitting week.

This bill deals with some changes to superannuation, some changes to capital gains tax and some changes to GST. It adds to the deductible gift recipient list and, finally, as is nearly always the case, it corrects some unintended errors and makes some tidying up provisions within the tax law generally. Very briefly, as we know this legislation was introduced late last year on 23 November by the then Assistant Treasurer, Mr Shorten. He outlined in some detail in the second reading speech the changes and the reasons for those changes with respect to superannuation.

Schedule 1 will allow certain superannuation fund members with lost super to more easily consolidate their funds through the use of an electronic portability form. It is outlined both in the second reading speech and in the explanatory memorandum how that will operate, and we regard this as a sensible initiative. Schedule 2 in three parts deals with capital gains tax. The essence of those changes is to allow entities in a restructure to use share-of-interest sale facilities without failing a requirement of certain capital gains tax rollovers. Also, as is pointed out, it provides capital gains tax demerger relief and there is also a provision to expand capital gains tax rollover to entities changing their incorporation.

With respect to the goods and services tax, the bill outlines two things with respect to GST. It implements some aspects of the Treasury review of the GST of financial supply provisions. It is pointed out that some of the changes can be dealt with in this bill and some can be dealt with by way of regulation. I understand that my friend and colleague the member for Blair, who follows these tax law amendment bills, I am sure, will be across this issue in some detail. Also in a separate section the bill clarifies the GST treatment of new residential premises. Without going into all the details it is another case where, I think, the member for Blair will confirm legislation is required to confirm the original intent of the GST legislation, in this case, following a court decision.

Finally, schedule 5 adds the Rhodes Trust to the deductible gift recipient list. Of course the Rhodes Trust raises funds to augment the existing Rhodes Scholarship program at Oxford. I also noticed from the then Assistant Treasurer's second reading speech that there is also a name change to another organisation. As I said at the start, schedule 6 deals with some miscellaneous amendments to correct some unintended errors with some technical corrections. On behalf of the opposition I commend the bill to House. As I said at the outset, we will be supporting this bill through both houses.

4:05 pm

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

I speak in support of this TLAB legislation, the Tax Laws Amendment (2011 Measures No. 9) Bill 2011. This bill, like all bills that amend the tax laws in an omnibus way, does it by way of schedule. I want to focus particularly on schedule 1, which is the portability of superannuation and the implications there. By way of an example, I will describe my own electorate and how changes being made to superannuation will have an impact there.

Firstly, I will briefly go through the other aspects of the bill. Schedule 2 is part of the 2010-11 budget, where we announced that we were amending the capital gains tax provisions to make it easier for businesses to restructure. There are a number of provisions here. This amendment talks about certain business structures and broadening access to CGT rollovers. This is consistent with our commitment to streamline business to make it more flexible so that it can operate in a way that is not governed by regulation and the tax laws do not impinge in an adverse way. It extends the CGT rollover for the conversion of a body to an incorporated company—and that often happens. It is often the case that businesses change the way they are structured. That is a sensible provision. It broadens the range of CGT rollovers where entities can use a share or interest sale facility for foreign residents in a restructure and allows the CGT demerger relief for demerger groups that include corporations sole or complying superannuation entities which cannot access the relief. It is a sensible arrangement and really is good public policy.

Schedule 3 provides for the CGT financial supply provisions. It increases the first limb of the financial acquisition threshold from $50,000 to $150,000. The purpose of that is to follow recommendations that were made in the Treasury's review of the CGT financial supply provisions to make sure that we can take businesses out of the system. It means that we are excluding financial suppliers consisting of borrowings made through the provisions of a deposit account by Australian authorised deposit-taking institutions from the current concession for borrowings; and allows the taxpayer who accounts on a cash basis to treat an acquisition made under a hire purchase agreement as though they did an account on a cash basis.

The next provision I want to deal with is the CGT treatment for new residential purposes. This corrects an error made, I think in a court, in the case Commissioner of Taxation v Gloxinia Investments. This decision found that a sale of certain residential premises to owner-occupier investors was actually an input tax—which is a strange way of thinking about it—rather than taxable. I had a bit of a look at that. I do not profess to be an expert on tax, but I thought it was a very strange decision. The schedule amends what we call the GST act—or, to use its full title, A New Tax System (Goods and Services Tax) Act 1999—providing that a wholesale supply of residential premises is disregarded in certain circumstances for the purposes of determining whether a subsequent supply of a premise is the supply of new residential premise and thus taxable. There are additional changes that are made, but I will not go through them now.

The listing of deductible gift recipient status is also covered. A number of people on both sides of the political aisle have had the benefit of Rhodes scholarships. I understand the Leader of the Opposition was one. My good friend—and I was his campaign director—former Queensland Treasurer the Hon. David Hamill was also a Rhodes scholar. So we are listing here the Rhodes Trust in Australia to allow Australians who donate to the appeal to claim a deduction for the donation. There are some other miscellaneous changes, which I will not go into.

Schedule 1 is what I really want to focus on, because it is part of the package of superannuation that will make a difference, particularly in my electorate. As we know, a lot of people lose their super. By that, I do not mean that they put it away under the bed and cannot find it; they actually lose their super because they chop and change the businesses they work for. Then they forget they have it or they do not know about it and it is not pressing on their minds. The Australian Taxation Office runs a system that makes it easier and simpler for superannuation members and retirement savings account holders to consolidate their benefits. This scheme will introduce an electronic portability form that will make it easier for account holders and fund members to report funds as lost.

Just to show how significant lost superannuation is, at 30 June 2010 there were about 5.8 million lost superannuation accounts in Australia, with an accumulated balance of $18.8 billion. The then Assistant Treasurer in his second reading speech on this bill, on 23 November 2011, made the point that by 30 June 2011—a year later—that balance had increased to $20.2 billion. We just cannot keep going like that; that is money that belongs to Australians and that will help them in their retirement.

In my electorate alone, which covers the majority of Ipswich and the Somerset region, there is about $80 million waiting to be found by residents. That is according to the Australian Taxation Office. There are about 21,500 accounts that are, effectively, lost. I urge all residents in my electorate to use the SuperSeeker hotline during business hours—132 865—or go to the ATO superannuation website, www.ato.gov.au/super, because this is money that can be used. We are talking about lots of money. The average amount of lost super is about $3,500, invested over a 20-year period that would equate to about $12,500 that could be spent in retirement. That is a lot of money that could go towards a holiday after many years of work; that could go towards the purchase of a new car that someone might need in their retirement—it might be the last good car they actually buy; or that might be extra money spent for grandkids. It is a lot of money. So helping people find their lost superannuation is an important thing.

We on this side are very committed to making sure that people live in dignity and have financial security in retirement. That is why we are increasing the superannuation guarantee from nine per cent to 12 per cent.

Opposition Members:

Opposition members interjecting

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

I notice that those opposite have, of course, not supported that. That is a sad thing, because we are talking about a 30-year-old person having $108,000 more in superannuation when they retire. Just for the benefit of the member for Moncrieff, who is in the chamber, 43,500 people in my electorate will benefit from the increase in the superannuation guarantee from nine percent to 12 percent. I daresay that a similar number of people in his electorate will benefit. It is tragic that he did not support that legislation.

In March 2011, there was $1.36 trillion invested in superannuation. The market fluctuates, we know, but over the long term superannuation has delivered a very healthy return for investors and for Australians. That is a creation of a federal Labor government, because it is only we on this side of the chamber who are committed to doing that.

Increasing compulsory superannuation will benefit the retirement savings of all Australians. We think that is a particularly important thing, just as we think about the reforms associated with that legislation, like benefiting the 10,700 small businesses in my electorate that will benefit from the cut in the company tax rate. So there are a lot of important things that we are doing: superannuation, in terms of low-income earners—23,600 residents in Blair will get extra superannuation contributions. This government is adding to the superannuation nest eggs of people in my community as well as across the country. Schedule 1 of this legislation is about making sure that the people of Blair, and the people of Australia, get the benefit of the portability of superannuation, making sure they do not lose their superannuation, making sure they live their retirement with dignity and respect.

We are committed, on this side of the chamber, to high-skilled, good wages. And we are committed on this side of the chamber to small business. We are committed by reducing the company tax rate. We are committed by investing in infrastructure, in skills and in training. We have done that; those opposite have not.

It is almost a road to Damascus conversion experience from those opposite—actually now supporting good pieces of legislation, reforming the tax system and reforming superannuation. And if, like Saint Paul on the road to Damascus, this is when they have seen the light, we are very pleased and we support the legislation.

4:15 pm

Photo of Steven CioboSteven Ciobo (Moncrieff, Liberal Party) Share this | | Hansard source

I am pleased to rise in particular to speak on the Tax Laws Amendment (2011 Measures No. 9) Bill 2011—and follow the member for Blair, who I see racing from the chamber now! Can I just say, it was entertaining, to say the least, to hear the member for Blair provide as part of his contribution on this debate some attempt to draw a linkage between the so-called vision of this Labor government and what it means for the retirement incomes of Australia's working people.

Madam Deputy Speaker, at first blush, if you only listen to the member for Blair's contribution in isolation, you might think he had a point to make. You might actually think that Labor was concerned, through an increase in the superannuation guarantee from nine to 12 per cent, in providing for retirement of Australians into the future. The problem is, though, that this government's exceptionally poor track record does not match the rhetoric. The problem is that the bill before the House certainly contains beneficial initiatives—and that is why the coalition is supporting this bill—but the simple reality is that the rhetoric we heard from the member for Blair is not matched by action. Whilst it is crucial that there are opportunities for people to find and recover lost superannuation—and, to the extent that schedule 1 of the bill deals with that, that is beneficial; and that is the reason why, once again, the coalition is supporting government policy that is good government policy. Contrary to frequent assertions by Labor members that this is a coalition that only ever says no, the truth is that that not the case, and that this is just another example of the way in which that coalition supports. The reason why we are accused of saying no too frequently is simply that this is a government that bowls up such bad policy on such a continuing and frequent basis. But I am pleased to say, in a spirit of bipartisanship, that on this occasion we can all be united in our love for the Tax Laws Amendment (2011 Measures No. 9) Bill 2011.

But I will deal specifically with the issue of providing for retirement. The member for Blair went to some length in crowing about the Labor Party's track record. I have to say, Madam Deputy Speaker, that when you actually consider the key drivers of the manner in which a person is able to live their retirement in a comfortable way, there are two factors at play. One is of course the accumulation of wealth over time, in a lump sum form, that sits in a superannuation fund. There is no doubt about that: it is a crucial factor. But, just as importantly, the cost of living, and the extent to which that impacts on the lump sum necessary at the commencement of someone's retirement, is equally of value. And it has been this Labor Party that has driven up the cost of living at a level that, frankly, is almost unprecedented.

It has been the policies of this government that have driven up the expenses that Australians have to pay in terms of just their ordinary lifestyles and going about paying for those ordinary things that we all consume, be it groceries, be it utilities, be it medical insurance. On each of these factors this is a government that has betrayed the confidence of Australia's so-called 'working families', as the Labor Party commonly refers to them, but more broadly than that, the community as a whole. We know that the price of utilities, to give but one example, has risen in excess of 10 per cent in the past 12 to 18 months. And it is further forecast, as of 1 July under the carbon tax, to go up an additional 10 per cent. The reason that is crucial—bringing it back to the subject matter of the debate—is that those expenses go to the core of how much someone must provision for their retirement. And the faster the cost of living increases, the more you need to provide for your retirement. That is just an inescapable reality, and the reason why this government is so big on rhetoric but so poor when it comes to follow-through. The rest of this bill is fairly pedestrian. Part 1 of schedule 2 deals with capital gains tax in business restructures and part 2 of schedule 2 deals with capital gains tax demerger relief. Part 3 of schedule 2 deals with restructures in terms of their impact on capital gains tax for Indigenous corporations. Schedule 3 deals with GST financial supply provisions. That perhaps has some impact on a number of my constituents on the Gold Coast. Under schedule 3 the first limb of the financial acquisition threshold will increase from $50,000 to $150,000, effectively increasing the dollar value of input tax credits available for acquisitions related to the making of financial supplies—a good initiative and one that the coalition supports. That is the reason we are supporting this bill.

Schedule 4, which deals with GST treatment of new residential premises, also has an impact in some respects on a number of operations that are undertaken in my electorate of Moncrieff on the Gold Coast. It effectively seeks to ensure that sales or long-term leases of new residential premises by a registered entity are taxable supplies subject to the GST at the time of sale and that sales or long-term leases of residential premises other than new residential premises are input taxed supplies and therefore not subject to the GST at the time or sale under the goods and services tax legislation. Effectively this serves to clarify the intent of the law after the recent Federal Court decision in Commissioner of Taxation v Gloxinia Investments (Trustee), in which it was found that the sale of new residential premises using a developmental lease arrangement should be treated as input taxed—that is, not be subject to the GST. These outcomes are contrary to the general policy intent in relation to the taxation of property under the GST act. That is why the changes are provided for in this legislation.

The member for Blair and others have spoken about the Rhodes Trust being added to the deductible gift recipient list. We know that DGR status, as it is commonly referred to, is an important tool that helps to drive donations in some of these charitable trusts. It is a way to ensure the gift becomes a tax deductible gift. For that reason the application of DGR status to the Rhodes Trust is obviously going to be beneficial, given it is great enabler for many young Australians to travel and study at Oxford University. Schedule 6 deals with a grab bag of various amendments to tax laws.

I am pleased to associate myself with the bill. It is a bill that will clarify a number of matters in relation to taxation. At the outset I addressed very directly some of the spurious assertions that were made by the member for Blair and corrected the record with respect to the fact that there is another side to that coin about providing for Australians' retirement incomes, and that is to control the cost of living.

4:23 pm

Photo of Julie OwensJulie Owens (Parramatta, Australian Labor Party) Share this | | Hansard source

I am looking forward to speaking on the Tax Laws Amendment (2011 Measures No.9) Bill 2011. I have said in this place before that I quite like tax laws amendment bills. Some of my constituents have now found me out and approached me in the street and questioned my character over that, but I do admit it. Quite often in these bills that deal with so many aspects of other areas of policy in some ways you find the character of a government—you find the small details that put in place aspects of broader policy and you are reminded of policies that were implemented a year before that require a change to tax law. In this case, you find very real indications of the government's commitment to retirement income, to simplifying things for business and to clarifying and simplifying the law across a range of areas.

Before I get to the fun bit, which is the Tax Laws Amendment (2011 Measures No.9) Bill 2011, I do have to respond to the member for Moncrieff's opening remarks. I find it quite extraordinary that anybody would question the Labor government's commitment to retirement incomes. After all, it was Labor that fought so hard through those very difficult reform years back in the eighties and nineties to make super available to the general population and then to increase it to nine per cent. That was not a simple reform. It was perhaps one of the hardest reforms we have seen a government undertake for many years. It is the Labor government now that is committed to increasing super contributions to 12 per cent. I note the remarks by the member for Moncrieff about the cost of living. To say that working with an inflation rate in the band recommended by the Reserve Bank is the most outrageous increase in the cost of living in human memory, or he said something similar, is quite an extraordinary statement. Perhaps he should have a closer look at the real economic figures and pay a little less attention to his fantasy life.

There is a third element to retirement incomes and that, of course, is jobs. Perhaps it is the most important one because, without a job, you do not have much of a chance of accumulating retirement income at all. We have seen an opposition that has not supported this government's very strong commitment to retaining jobs and growing jobs. Through the global economic crisis, when this government put forward a stimulus package specifically designed to ensure that as many Australians as possible kept their jobs while the rest of the world were shedding theirs, we did not see support from the opposition. We have not seen support from the opposition for programs that strengthen the car industry in Australia, an incredibly important area of the Australian economy that not just keeps many tens of thousands of people employed but provides the skill base that flows through other manufacturing sectors. Similarly we have not seen support from the opposition for the aluminium industry, an extremely important part of our economy. So I would suggest to the member for Moncrieff that perhaps he could rethink some of his comments. I doubt that he will. I think that, again, the fantasy world he lives in is a far more interesting one for members of the opposition than reality. It was an unfortunate and rather misleading contribution.

Now back to the fun bit: the Tax Laws Amendment (2011 Measures No. 9) Bill 2011, which is so interesting that they even have the date in it twice. They always do and I cannot quite figure that one out, but I am sure the guys from Treasury will one day explain to me why all the tax laws have the date twice. There are six schedules in this bill. Schedule 1 is about portability of superannuation. We heard one of the earlier speakers talk at length about this. It is a particularly interesting area. At the moment, we all know that there are many Australians who have lost touch with their superannuation or their superannuation has lost touch with them—one way or the other. In other words, there is money out there that belongs to them but is, essentially, out of their grasp. The government has already created some easier pathways for people to find their super through the lost super website. In my electorate we have already been out with mobile offices all over the electorate, encouraging people to come in and logon and try to find their lost super. If you ever have tried to consolidate your superannuation, if you are a normal person in the street who does not follow these things closely, it becomes quite a complicated process.

Schedule 1 amends the Superannuation Industry (Supervision) Act 1993 and the Retirement Savings Accounts Act 1997—two fine bills—to enable certain superannuation fund members to electronically request the consolidation of their superannuation benefits through the ATO. It is referred to as the electronic portability form. Essentially it means that it will be much easier, through a phone call to the ATO and then logging on to an ATO website, to have their lost superannuation funds consolidated through the ATO.

It is quite a clever little device. It makes it much simpler and easier for lost superannuation fund members to consolidate their benefits. Essentially, that helps people to reduce the fees they pay on multiple accounts and to maximise their retirement benefits. Again, this is a seemingly quite simple improvement but it is one that reflects a longstanding commitment of this government to the development of the retirement incomes of everyday Australians. This measure was supported by both the Australian Institute of Superannuation Trustees and the Association of Superannuation Funds of Australia.

Schedule 2 makes improvement to the capital gains tax law to make it easier for businesses to restructure. Under current law, taxpayers can obtain the capital gains tax rollover for a capital gain or loss that arises from their interest in a company or a trust because of the demerger of an entity from the group of which the company or trust is the head entity. However, this is not available where the head entity is a corporation sole or complying superannuation entity and schedule 2.2 of the bill makes the situation more consistent, making the rollover available for both of those types of bodies. It removes barriers to business restructures of a certain type by broadening access to various CGT rollovers. The changes are absolutely consistent with the government's long-term objective of promoting flexibility for business. Once again, this is a small change that reflects an attitude in a broad policy area that this government has been working on now for nearly four years.

Schedule 3 concerns the GST financial supply provisions. It reduces compliance costs for small businesses by increasing the financial acquisitions threshold from $50,000 to $150,000. If a small business makes a financial acquisition below this amount it falls outside the financial supply regime and can claim input tax credits for its financial supplies. Increasing the threshold takes more small businesses outside of the financial supply regime. Many small businesses in my area will think that a very fine thing. The bill implements three of the seven recommendations agreed to by the government arising out of the Treasury's review of the GST financial supply provisions.

Something interesting that this bill does is amend the GST treatment of hire purchase, again something that is going to benefit a large number of small businesses in my electorate and around the country. There are two current credit arrangements, hire purchase and chattel mortgage. They have very similar credit arrangements. But they have very important differences which carry through to their tax treatment. In both cases, essentially the purchaser obtains the use of the asset upfront in return for a series of payments made in instalments. In hire purchase, ownership does not transfer until the final payment. In chattel mortgage, ownership transfers upfront.

All else being equal, hire purchase is usually preferred over chattel mortgage. Chattel mortgage has an increased risk for the lender because the title has already changed hands and if there is a default repossession is difficult and may not be possible. Hire purchase is far less costly to implement in terms of legal fees and stamp duties. You would normally expect to see, particularly in the small business area, hire purchase being used to a far greater extent than chattel mortgage. That is not the case in Australia since the introduction of the GST. In fact, since the GST was introduced chattel mortgage has largely replaced the use of hire purchase in small businesses, even though chattel mortgage is more expensive, more complex and involves greater risk for the finance company.

The reason for that is because the GST operates differently for the two systems, particularly if the small business runs its accounts on a cash basis. Small businesses with an annual GST turnover of less than $2 million can account for GST on a cash basis, whereas larger business must account on an accrual basis. Cash accounting is simpler and reduces compliance costs, which is why small businesses like it. But the tax effect is that the larger firms account for their GST liability and input tax credits for hire purchase agreements upfront whereas small businesses that account for GST with cash account for it when each payment is made.

Under this amendment, the treatment of GST for small businesses that account on a cash basis becomes the same as that for larger companies. That will result in a significant cash flow benefit for small businesses compared to the current situation. Again, that is something that appears to be quite a small change but it will reduce the compliance costs, the administrative burden and the risk for many businesses in Australia—quite a nice little change.

Schedule 4 involves the GST treatment of new residential premises. The amendments will essentially reverse the effect of the court case involving Gloxinia Investments, which found that, where a particular combination of strata titles and leases were involved, newly constructed residential premises were not subject to GST. The bill reaffirms the policy intent that newly constructed homes should be subject to GST and will also protect the revenue that funds government services that assist the whole of the community. The measure will ensure that GST is payable on the full value added to newly constructed residential premises by developers and builders. This is achieved by ensuring that GST is applied to the retail sale of new residential premises to homeowners and investors, as well as the wholesale supply of the premises to the developer or builder. Schedule 5 I am only going to speak about very briefly. It involves tax deductible recipients. Under the current law, taxpayers can claim an income tax deduction for certain gifts to organisations with deductible gift recipient status. This amendment lists donations to the Rhodes Trust Australia appeal to be claimed as a tax deduction. This is a fairly routine amendment, unless you happen to be the Rhodes Trust Australia or you happen to want to donate to them. It is a very good outcome for the Rhodes Trust.

There are a number of miscellaneous amendments in schedule 6 that I will not go into. They are mainly quite administrative—too administrative even for a person who loves tax or amendments. Again, it is a rather nice little collection of amendments that reduce complexity for small business, clarify tax law and have benefits for cash-flow management for small business. I commend the bill to the House.

4:36 pm

Photo of Scott BuchholzScott Buchholz (Wright, Liberal Party) Share this | | Hansard source

Before I address the issues before us I will pick up on a couple of the issues raised by my good friend the member for Parramatta. The member for Parramatta spoke briefly about cost-of-living pressures. I am on record as saying that my electorate of Wright is one of the weathervanes of the nation. I have no linkages into the resources sector whatsoever, so my hypothesis is that it is only a matter of time before the pain we feel at the moment flows through to the rest of the market. I reassure my colleagues that the cost-of-living pressures that are out there at the moment are absolutely horrendous, and for this government to be dismissive of the idea that those pressures exist in my electorate is uncalled for.

The member for Parramatta went on to criticise the coalition for not giving support to the car industry or the aluminium sector. Today I had the opportunity to read a couple of documents. I was trying to get my head around this whole car industry manufacturing process. I read some comments from a Holden executive. He had some scathing comments, saying that up to a third of his workforce struggled to roll up to work, for one reason or another. He said his ability to respond to that was hampered by union intervention. He went on to speak about the lack of efficiency in the car industry. That is one argument, but I will put that aside for a moment. I do acknowledge the impact of the increase in the Australian dollar on the industry. That has an impact on anyone who is trying to export products out of this country.

We have a car manufacturing industry which is non-productive, so the government is throwing some subsidies at it to try and get them over the line. In addition, the government is then going to put its hand in its other pocket for the car industry—between 2012 and 2020, carbon credit payments to the car industry alone will be in the vicinity of $450 million. Notwithstanding that, in 2012, in the year that the carbon tax is introduced, for Alcoa, which has two sites, that payment will be $40 million, and it will increase exponentially as the carbon price of $23 per tonne increases. I thought I would put that on the table. I would be quite happy to take it up with the member for Parramatta at a later stage. It just bewilders me when we talk about supporting an industry on the one hand and then the government puts its hand into the pocket of the same organisation and calls it support.

The Tax Laws Amendment (2011 Measures No. 9) Bill 2011 makes the following changes to the taxation laws. It allows certain superannuation fund members to electronically request consolidation of their super funds through the Australian Taxation Office. It allows entities in a restructure to use shares or interest sales facilities without failing a requirement of certain capital gains tax rollovers. It provides capital gains tax demerger relief. It expands capital gains tax rollovers to entities changing their incorporation. It implements aspects of the Treasury's review of the GST financial supply provision. Additionally, it clarifies the GST treatment of new residential premises, adds the Rhodes Trust to the deductible gift recipients list and, finally, makes other minor and technical changes.

In Schedule 1 it allows certain superannuation fund members with lost super to more easily consolidate their funds through the use of one or more electronic portable forms. The form is submitted electronically at the ATO, which can then verify the status of lost money and the eligibility of the nominated receiving account. The coalition believes this to be a sensible initiative to streamline the process of re-uniting lost super funds with their owners. There would not be too many people in this room who, before either entering politics or working in the government, did not have some other forms of employment. In particular, our youth below the age of 25 change their jobs often. It used to be that we had five major career changes in our life. People below the age of 25 are already up to their third career change. They are not staying in the workforce as long as our fathers did. As a result this measure makes it easier for those people who have chopped and changed jobs to get access to their superannuation.

While we are on the issue of superannuation: the member for Blair spoke about the increase of super contributions from nine to 12 per cent. The government take the position that this is a wonderful initiative that they are putting in place. When I speak to my businesses they are horrified because they cannot see where the relief from the federal government is coming from to assist them with the increase in super from nine to 12 per cent. Yes, there is a one per cent reduction in their company tax rate from 30 to 29 per cent but, even when questioned in estimates, the Real Estate Institute of Australia indicated that the three per cent increase in superannuation contribution by the businessperson, by the small mum and dad, was not going to be covered by the one per cent. You cannot have your cake and eat it too. You cannot call this a Labor initiative and say that you are out there helping business when really, at face value, you are again putting your hands into the pockets of businesspeople, mums and dads, who are trying to employ people and you are asking them to pay for the increased contribution.

Part 2 of the schedule is about the share sales facilities. These are entities used in dealing with foreign interests during the sale or restructuring of a company. The foreign interest holds ownership and transfers to the share sales facility, which deals with the holdings during the sale or the restructure and then returns the cash or the new assets for the foreign interest holder. The share sales facility is primarily used to avoid complex foreign tax laws and unintended taxation consequences in restructuring companies. The existing owners are given significant capital gains rollover relief where a structure results in those owners holding substantially the same interest in the new entity. However, where there is a sale facility that is required to be used, the CGT rollover is not available to the foreign interest holders because the actual sale or the restructure was completed by the facility rather than by the foreign interest holder. This has acted as an impediment to restructuring and what would otherwise have been of benefit to the company and its shareholders. The change in this bill will allow foreign interest holders, who are otherwise eligible for capital gains rollover, to relief. With the restructure of the company, where the share sale facility has been used to effect the actual restructure, the law will treat the share sale facility to track the actual ownership before and after the restructure.

Under the capital gains tax demerger relief in schedule 2, part II, taxpayers can choose to obtain a capital gains tax rollover for a capital gain or capital loss that arises in their interest as a company or trust, because of the demerger of an entity from the group of companies. This is not a bad one. Basically, when you speak about a merger, you have two entities that may have separate assets but for argument's sake may have a combined balance sheet. When those companies decide to demerger it allows ease for the capturing of the capital gain. It is not susceptible at that point. The main part of the business that is retaining the assets does not have a huge bill as part of their operational cost. That one does make sense.

Schedule 2, part III, 'Capital gains tax business restructures', will allow the Indigenous bodies to incorporate under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 without immediate capital gains tax consequences for the body members. As part of the Economics Committee we last year toddled up to the north of Queensland and caught up with a number of Aboriginal communities. It is hard to get them all in the one spot at the one time. They have different asset groups. This bill did not come as a result of that trip but I can assure you that this part of the legislation will assist those communities in trying to be more of a united front with reference to how they present themselves as a community. There is resistance in the north for that to happen at this point in time. There are some significant assets held by different communities and under the current taxation rulings transferring assets from one body to another does include some capital gain. This gives the capacity to merge those assets without any unintended consequences.

Schedule 3, the GST financial supply provision, increases the first limb of the financial acquisition threshold from $50,000 to $150,000. This increases the dollar value of the tax input credits available for acquisitions related to the making of financial supplies. The schedule includes financial supplies consisting of borrowings that are made through a provision of the deposit account from an ADI and the current concession for borrowing. The schedule allows taxpayers who account on a cash basis to claim input tax credits for acquisitions made under a hire purchase agreement upfront. This removes the distortion that currently exists between hire purchase and other forms of financing. Predominantly it is just the difference between a chattel mortgage and an HP. One of them provides you with access to draw back down after your first payment—your GST credit. Small businesses often use that as cash flow to pump back through the business. It is a bit of a false economy because you are virtually still financing your business on borrowed coin, and there is a cost associated with it. I assumed they looked at this because of title or the ownership of a lease—whether it be a truck or any type of unit such as that. If title is with the business holder then there is the capacity for depreciation to be claimed back immediately. If it is with HP or a lease, title remains with the financier and those incentives are not available.

Schedule 4, the GST treatment of new residential premises, seeks to ensure that the sales of long-term leases of new residential premises by a registered entity are a taxable supply, subject to the GST at the time of sale. For that sale—or long-term lease for residential premises, other than new residential premises—input tax applies and it is therefore not subject to GST at the time of the sale under the goods and services tax. The changes clarify the intent of the law after the full Federal Court's decision in Commissioner of Taxation versus Gloxinia Investments (Trustee), which found that the sale of the new residential premises using a development lease arrangement should be treated as input tax. This is not subject to GST. These outcomes are contrary to the general policy intent in relation to the taxation of property under the GST Act.

Schedule 5 speaks about the adding of the Rhodes Trust to the list of deductible gift recipients. The Rhodes Trust raises funds to augment the existing Rhodes Scholarship Program at Oxford. All monies are used to provide scholarships to Australians to study at Oxford University. The member for Parramatta also said that basically any donation that is given to that trust becomes tax deductable under the bill, and that is a good thing. Schedule 6 is just a rats and mice one—miscellaneous amendments to the tax laws.

The bill makes technical corrections and other minor and miscellaneous amendments to the taxation laws. The coalition sees no serious issues with this legislation and does not intend to oppose it. I believe the provisions of the bill are to be applied as of 1 July 2012, and I am pleased to associate myself with the bill.

4:51 pm

Photo of Andrew LeighAndrew Leigh (Fraser, Australian Labor Party) Share this | | Hansard source

It is my pleasure to rise to speak on the Tax Laws Amendment (2011 Measures No. 9) Bill 2011. I am reliably informed by the office of the Assistant Treasurer that I now hold the record amongst government backbenchers for speeches on TLABs, a record that I suspect only I in this place would be proud to hold.

The bill before the House is non-controversial. As previous members have noted, it contains six schedules enabling superannuation fund members to request the consolidation of their benefits; amending CGT provisions to make it easier for businesses to restructure; implementing a number of the recommendations out of Treasury's review of the GST financial supply provisions; ensuring that sales or long-term leases of new residential premises are taxable supplies and that sales or long-term leases of existing residential premises are input tax supplies; adding the Rhodes Trust to the tax act; and making a number of what the previous speaker described as 'rats and mice' amendments.

Despite this, the coalition referred the bill to the House of Representatives Economics Committee. It was our not unpleasant duty to inquire into the bill—an inquiry which ultimately produced a report supported by coalition and Labor members. But it did raise in my mind the question as to why the coalition thought it was worth the House Economics Committee spending time on this rather than, for example, conducting inquiries into other questions such as the strong status of the Australian economy relative to other nations, boosting innovation in Australia and the importance of good economic management over fear mongering.

I would like to place on record the coalition's somewhat odd behaviour now when it comes to referring legislation to the House Economics Committee. As the chair, the member for Parramatta, told the main chamber earlier today, the House has discharged a reference of the appropriations bills—a particularly bizarre reference given that one would think that a government needs to appropriate money to conduct its business. It was in fact difficult for us to see how you would even begin to conduct an inquiry into the appropriations bills—but that was what those opposite wanted us to do. Naturally, the House Economics Committee have refused that reference. It is again just an indication of the general disarray of those opposite when it comes to economic management.

Over the weekend Laurie Oakes wrote in his column that the reason that there have been so many estimates as to how large the opposition's budget black hole is is that the member for North Sydney does not trust his colleagues. So, in order to work out which of them is leaking, he gave each of them verbally a different number for the size of the opposition's black hole—a cunning trick. He laid carefully a trap for his colleagues to fall into and then waited to see which number would emerge in the public domain. A number did very clearly emerge in the public domain. The opposition finance spokesperson came straight out and said, 'The number is $70 billion.' It explains something many of us have been wondering about, which was why the member for Goldstein was so confident about his $70 billion estimate and why the member for North Sydney was saying, 'It could be in a range; it could be $50 billion, $60 billion of $70 billion.' That is because the member for Goldstein had a precise figure which he was given not realising the trap he was about to fall into.

While those opposite are busy laying traps for their colleagues to fall into, we on this side of the House are focused on good economic management. We have a resilient economy with three-quarters of a million jobs created since Labor came to office. We are putting in place record investments in roads, doubling the road budget. We are increasing the rail budget tenfold and investing more in urban public transport than every federal government since Federation. At the same time we are putting in place a price on carbon pollution—an essential economic reform if we are to modernise our economy and create the green jobs of the future.

The choice is not between a carbon price and no carbon price. All those who look at the problem seriously know that the choice is between a carbon price now and a carbon price later, which will be more costly because the changes will be more gut-wrenching. Those opposite are in disarray when it comes to returning the budget to surplus and they are in disarray on just about every fundamental economic question one can point to. Former Liberal boss John Hewson has said the opposition leader is 'one of the most negative people I know' on economic and political issues.

Those opposite supported a recommendation that we have an independent parliamentary budget office. The member for Higgins was on the committee which unanimously recommended a parliamentary budget office, as was Senator Joyce. But, when it came to the House and the opposition realised the magnitude of the fiscal task which lay before them, they opposed a parliamentary budget office. They now say that they will not put their costings to be independently verified by a parliamentary budget office but will again use private accountants—private accountants who were, in the 2010 election, fined for their behaviour in looking into the opposition's costings.

We speak about a $70 billion black hole in the costings of those opposite but really we should be speaking about $70 billion of hidden cuts. That $70 billion is equivalent to stopping Medicare payments for four years and stopping the age pension for two years; it means cutting deeply into hospital spending and education and not investing in the future. In my electorate of Fraser it is already clear that one of the ways in which the opposition seeks to meet their massive fiscal target is to cut 12,000 jobs. The member for North Sydney has proudly spoken about making 12,000 Canberra public servants redundant. None of my constituents would have pride in that. Those opposite have said that they want to get rid of the Department of Climate Change. The member for North Sydney told Q&A last Monday that he does not know what public servants in the Department of Health and Ageing do. I might suggest he ask his leader who was, after all, the Minister for Health and Ageing under the Howard government when the Department of Health and Ageing employed about as many people as it does today.

On this side of the House, we are committed to keeping taxes as low as possible. Taxation as a proportion of the economy is lower now than it was under John Howard. The tax to GDP ratio was 23.7 per cent when Labor came to office; now it is 21.2 per cent. Our jobless rate has risen due to the global financial crisis but it has risen by only 0.7 per cent since Labor came to power. Compare that to a rise of 3.1 per cent in Britain and 3.6 per cent in the United States. The opposition's approach to the economic debate is all care and no responsibility. Those opposite would have thrown us into deep debt when the global financial crisis struck. We on this side of the House saved 200,000 jobs and tens of thousands of small businesses from going to the wall. When it comes to taxes, we have put in place income tax cuts and we are delivering pension rises and tax cuts under the clean energy future package from 1 July this year. Under those opposite the only people who would get tax cuts are the big miners and the big polluters. When it comes to the surplus, we will return the budget to surplus in fiscal year 2012-13. Those opposite have a dozen positions on the surplus. They have no consistency on their economic message.

Finally, Deputy Speaker—and may I congratulate you on your ascension to the role—I want to address an issue raised by the member for Wright over the cost of living. We in this country have a metric for the cost of living. It is not the amount of hot air that comes out of the Leader of the Opposition's mouth; it is the inflation rate. The inflation rate now is lower than when Labor came to office. The inflation rate is stable under Labor and we are proud on this side of the House to have ensured price stability. Many things have in fact fallen in price over the last year. Among the categories of things for which prices are cheaper than they were a year ago are bread, milk, shoes, appliances, pharmaceuticals, cars, computers and toys.

Photo of Scott BuchholzScott Buchholz (Wright, Liberal Party) Share this | | Hansard source

Thank God for that. I can go back to my electorate and tell them that.

Photo of Andrew LeighAndrew Leigh (Fraser, Australian Labor Party) Share this | | Hansard source

Do go back and tell your electorate, member for Wright. I would be very happy if you were to have an honest discussion with your electors about the cost of living—not the fearmongering that we have seen so often from your side of politics but some direct, fact based discussion. I know those opposite do not like dealing in facts. They would prefer to speak about towns being wiped off the map—

Photo of Scott BuchholzScott Buchholz (Wright, Liberal Party) Share this | | Hansard source

Mr Deputy Speaker, my point of order goes to relevance. We are seven minutes in and not once have I heard the member who is your gun—the government's gun—on the TLAB actually address TLAB No.9. You have got to get close to it soon.

Photo of Mike SymonMike Symon (Deakin, Australian Labor Party) Share this | | Hansard source

The member for Fraser will address his remarks to the bill.

Photo of Andrew LeighAndrew Leigh (Fraser, Australian Labor Party) Share this | | Hansard source

I shall, and I hope you do not take the reflection on the chair that the member for Wright has issued there.

This is a fundamental piece of economic legislation that underpins the Gillard government's commitment to a strong economy. Under us income taxes are lower than when we came to office. Inflation is lower than when we came to office. Interest rates are lower than when we came to office. A family with a $300,000 mortgage is saving $3,000 a year thanks to lower interest rates under the Gillard government. I commend the Tax Laws Amendment (2011 Measures No. 9) 2011 Bill to the House. It a small piece to be sure but an important piece of the long-term economic reform that we on this side of the House are putting into place.

Let me conclude with the words of a constituent who came and saw me in the mobile office that I attended on Saturday at the National Multicultural Festival. He said to me: 'When you look out across all the people at this festival probably almost none of us will still be here in 80 years time, but our children and grandchildren will be here and the reforms we are putting into place are ensuring that their prosperity is upheld. Yes, they are good for the current generations but they are recognising that in politics we do what we can for the future. We are not here just to scaremonger.' He said: 'You should see through what Mr Abbott is proposing. You should see out his negativity and you should see him out of politics, because what is important is the future prosperity of all Australians.' I commend the bill to the House.

5:04 pm

Photo of Stephen JonesStephen Jones (Throsby, Australian Labor Party) Share this | | Hansard source

It is a pleasure to follow my friend the member for Fraser in this important debate about tax. It is also a debate about the legislation that is necessary to manage our economy, to balance our budget and to ensure not only that we have the revenue stream to ensure that government activity is sustained now and into the future but that our tax system regulates economic and personal activity in a way that is in the national interest. With that in mind, and adding that the minister is in the chamber, which is always a certain sign that the debate is going to wrap up at any time soon, I will restrict my comments to something that is very close to my heart, which is the issue of superannuation. The first schedule to this bill goes to the issue of superannuation and assisting people who have money in superannuation accounts to consolidate those funds.

It is a part of a Labor project. It was Labor that brought occupational superannuation into this parliament through the Hawke-Keating government in the late 1980s. It was Labor that saw the establishment of industry funds as the mainstay of workers' superannuation savings in this country. It is Labor that has ensured that we have a direct employee say in the management of those superannuation funds because we believe quite simply in worker capital. We believe that, if workers are putting literally hundreds of thousands of dollars into a savings vehicle for their retirement, then they should have some say in the management of those savings.

It is Labor that saw the shift in the superannuation employer contribution to employee superannuation from three per cent to nine per cent. And it will be Labor, against the fierce opposition of the member for Wright, and those who he sits in the chamber with, who will see the move in occupational superannuation from nine per cent to 12 per cent. This is all a part of Labor's project to ensure that, when workers retire, they have the dignity of a nest egg, a retirement egg.

Schedule 1 to this piece of legislation goes to that long-term project. It will enable the Australian Taxation Office to operate a scheme that will make it easier and simpler for lost superannuation fund members and retirement savings account holders to consolidate their benefits. We are not talking about small beer here. There is approximately $12.9 billion in lost superannuation that is unclaimed or is in unallocated superannuation accounts in this country today. It is $12.9 billion that belongs to somebody but is not yet allocated.

These measures are yet another step in the Labor project of ensuring that when workers earn their superannuation it goes into a well-managed fund and, when it goes into a well-managed fund, it ends up in their retirement savings account. It does this by amending the Superannuation Industry (Supervision) Act 1993 and the Retirement Savings Accounts Act 1997 to enable certain superannuation fund members to simply electronically request the consolidation of their superannuation benefits through the Australian Taxation Office.

The scheme is going to be referred to as the Electronic Portability Form. The Electronic Portability Form will make it simpler and easier for lost superannuation fund members to consolidate their benefits. This, in turn, will reduce the fees paid on multiple accounts and will maximise members' retirement benefits. The Electronic Portability Form will allow lost superannuation fund members to electronically request the transfer of their benefits to their active accounts through a portal on the ATO website.

This means a lot to ordinary working families in my electorate of Throsby in the Illawarra and Southern Highlands. It means a lot to them because we have quite a high incidence of casual, part-time and seasonal workers. They are people who do not have the traditional pattern of employment where they will work from the beginning of their employment life until the day that they retire with one employer. It is quite likely that workers in my electorate may during the course of any one year have three or four employers, which is a series of employers throughout the course of a year or a series of employers at any one point in time. As they move from employer to employer and from job to job and, indeed, often from home to home, their superannuation accounts could get lost in that process.

I commend the minister for bringing this bill before the House, and I am delighted to have the opportunity to speak on the matter. As I said, it is a part of an important Labor project. At the heart of that important Labor project is this simple idea: if somebody works their entire life then they are entitled to a dignified retirement, not one that is reliant upon a pension and the vagaries of government decision making in relation to that pension. They are entitled to retire on the savings income that they have earned for their entire life. This bill is going to do its bit to ensure that $12.9 billion finds its rightful owners. I commend the bill to the House.

5:10 pm

Photo of David BradburyDavid Bradbury (Lindsay, Australian Labor Party, Parliamentary Secretary to the Treasurer) Share this | | Hansard source

I thank all members who have contributed to the debate on the Tax Laws Amendment (2011 Measures No. 9) Bill 2011. I wish to acknowledge those members whose contributions I have witnessed in the time that I have been here in the chamber—in particular, the members for Parramatta, Fraser and Throsby. I also acknowledge the contribution of the member for Wright. I thank him for his support of the bill and also for livening up the debate—even if that was with some rather misguided comments.

Schedule 1 of the bill allows regulations to prescribe the operating details of a scheme that allows the ATO to assist lost superannuation fund members to electronically consolidate their benefits. Lost members will be able to visit the ATO website, fill in a form online and submit it electronically to the ATO. The ATO will conduct verification processes and, if they are successful, they will send the form to the fund which reported the member as lost. This process will make it simpler and easier for people to claim their lost super. By consolidating their accounts, members will reduce the fees that they pay on multiple accounts and maximise their benefits on retirement.

Schedule 2 broadens access to certain CGT rollovers to make it easier for businesses to restructure. These changes provide greater flexibility for entities that convert from a body to an incorporated company, entities that use a share or sale interest facility for foreign interest holders in a restructure, and demerger groups that include corporations sole or complying superannuation entities.

Schedule 3 implements three of the recommendations agreed to by the government arising out of the Treasury's review of the GST financial supply provisions. The remaining measures require amendments to the GST regulations. This schedule amends the GST law to increase the first limb of the financial acquisition threshold from $50,000 to $150,000 , to exclude financial supplies consisting of a borrowing made through the provision of deposit accounts by an Australian authorised deposit-taking institution from the current concession for borrowings and to allow taxpayers who account on a cash basis to claim input tax credits for acquisitions made under hire purchase agreements upfront. The amendments will reduce compliance costs for businesses by reducing the number of businesses that are prevented from claiming input tax credits on acquisitions that relate to making financial supplies, removing the distortion between hire purchase and other forms of financing for cash based taxpayers, and ensuring that hire purchase agreements are treated the same regardless of whether taxpayers account on a cash basis or a non-cash basis. The amendments will also better target the borrowing exemptions to reflect the policy intent by no longer providing access to input tax credits for expenses related to borrowings in the form of deposit accounts provided by Australian authorised deposit-taking institutions.

The amendments in schedule 4 deal with the new residential premises provision and will ensure GST is payable on the full value added to newly constructed residential premises by developers and builders. This is achieved by ensuring GST is applied to the retail sale of new residential premises to home owners and investors as well as the wholesale supply of the premises to the developer or builder.

Schedule 5 amends the deductible gift recipient provisions of the Income Tax Assessment Act 1997. Taxpayers can claim an income tax deduction for gifts to organisations that are DGRs. Schedule 5 adds one new organisation to the act—namely, the Rhodes Trust in Australia. Making this organisation a DGR will assist it to attract public support for its activities. This schedule also recognises the name change of Playgroup Australia Inc. to Playgroup Australia Ltd. Finally, schedule 6 covers miscellaneous and technical amendments to the tax laws. These amendments are part of the government's commitment to the care and maintenance of the tax law and include some legislative issues raised by the public through the Tax Issues Entry System, or TIES for short. I commend the bill to the House.

Question agreed to.

Bill read a second time.

Message from the Governor-General recommending appropriation announced.

Ordered that this bill be reported to the House without amendment.