Andrew Murray (WA, Australian Democrats) Share this | Hansard source

I seek leave to incorporate my remarks.

Leave granted.

The speech read as follows—

The purpose of the Tax Laws Amendment (2006 Measures No. 3) Bill 2006 is to implement a number of disparate legislative taxation measures to achieve a range of Government policy outcomes.

The bill is arranged into 15 schedules with key amendments pertaining to the Income Tax Assessment Act 1936, Income Tax Assessment Act 1997, the Superannuation Guarantee (Administration) Act 1992, the Fringe Benefits Tax Assessment Act 1986, A New Tax System (Goods and Services Tax) Act 199, A New Tax System (Australian business Number) Act 1999, and the Tax Laws Amendment (Improvements to Self Assessment) Act (No. 2) 2005.

Schedule 1 extends the beneficiary tax offset to Cyclone Larry income support payments, and Schedule 2 provides assistance for affected businesses.

It is hoped this level of taxation assistance for those hit by Cyclone Larry will help get the small businesses and the banana producers in that region back on their feet. These two measures are not contentious.

Schedule 3 is an extension of the beneficiary tax offset. It extends eligibility for the tax offset to those affected by drought and in receipt of interim income support payments. As the drought drags on and affects so many areas of Australia, this offset extension is appropriate.

Schedule 4 - this schedule amends the Income Tax Assessment Act 1997 to ensure that a company’s share capital account will become tainted if it transfers certain amounts to that account. If it taints its share capital account, a franking debit arises in the company’s franking account. If the company chooses to untaint its share capital account, an additional franking debit may arise and untainting tax may be payable.

Schedule 5 amends the Income Tax Assessment Act 1997 to exempt the recipients of the Unlawful Termination Assistance Scheme and the Alternative Dispute Resolution Assistance Scheme which have been set up under the WorkChoices Legislation.

The scheme provides a worker with a voucher to be used to pay for legal representation (up to a capped amount) at either of these tribunals. In providing these voucher payments, these could be considered to be a ‘capital gain’ for the purposes of income tax, so this amending schedule excludes them (and any expense-reimbursing government grant) from any CGT. It applies to a capital gain or a capital loss from any expense-reimbursing government grant.

The amendments proposed in Schedule 5 arise because the Government’s WorkChoices legislation was rushed through the Parliament without sufficient preparation and scrutiny, so that aspects like this must be dealt with at a later date.

Pursuant to the WorkChoices legislation, employees who have been terminated are provided with a voucher to be used to pay for legal representation at the Unlawful Termination Tribunal or the Alternative Dispute Resolution.

These vouchers only provide a certain level of financial assistance and when the voucher payment runs out, the cost of representation has to be carried by the terminated employee.

This could have a dampening effect on any worker from pursuing a claim further than the initial voucher payment.

We all know that if an employer is unscrupulous enough to treat an employee badly, and terminate them unlawfully, then there is every chance that they will go on and attempt to ensure that the worker’s Government voucher is expended well before the resolution of the matter.

This amending schedule ensures that the voucher payment is not considered a ‘capital gain’ for the purposes of income tax, so that the terminated worker is not penalised by being out of a job and then taxed on the ‘windfall’ of being allocated a voucher to defend his or her rights.

The amendment is a fair outcome for the worker in the circumstances but the system which gives rise to the necessity for this amendment is not.

Schedule 6 affects the Medicare Levy surcharge lump sum payment in arrears offset. It amends the Income Tax Assessment Act 1997 to provide an offset to certain taxpayers in respect of their Medicare levy surcharge liability where that liability arose, or significantly increases, as a result of the taxpayer receiving an eligible lump sum payment in arrears. The Democrats support this – because just because you get a lump sum, it does not mean that you are necessarily a high income earner, and the levy surcharge is not supposed to penalise those who receive a one-off payment.

Schedule 7 amends the Superannuation Guarantee (Administration) Act 1992 to require superannuation providers to report details of superannuation contributions to the ATO. This amendment is necessary because of the abolition of the superannuation surcharge and its attendant reporting requirements to the ATO. This simply reinstates those SG reporting requirements.

Schedule 8 is the exclusion of fringe benefits to address personal security concerns. This amends the Fringe Benefits Tax Assessment Act 1986 to exclude from reporting fringe benefits provided to address certain security concerns relating to the personal safety of an employee or an associate of the employee, arising from the employee’s employment.

This applies to a police officer who may be subjected to a credible threat through his employment, and he and his family are provided with certain types of cars, personal safety devices, telephone upgrades and so on in reaction to the threat.

Schedule 9 affects pre-1 July 1988 funding credits. Schedule 9 is to prevent the inappropriate use of pre-1 July 1988 funding credits by ensuring that superannuation schemes can only use them to reduce their tax liability in respect of contributions made for the purpose of funding benefits that accrued before 1 July 1988; and to allow regulations to be made to implement policy. This amendment ensures that funding credits can only be used to reduce tax on contributions made in respect of pre- 1 July 1988 benefits.

Schedule 10 allows certain funds to obtain an ABN. This schedule deals with Public Ancillary Funds and Prescribed Private Funds which are established for philanthropic purposes. Currently because they are not an ‘enterprise’ for the purposes of the GST and ABN Acts they are not entitled to have an ABN with all the ancillary taxation implications of not having an ABN. This amendment is to ensure they can get an ABN so that PAFs and PPFs can be exempt from income tax and receive input tax credits for GST paid and other GST benefits. Although this is not contentious, this is another example of the messy taxation arrangements surrounding deductible gift recipients and charitable organisations.

Schedule 11 provides for new deductible gift recipient categories. This amends the Income Tax Assessment Act 1997 to create five new general categories of DGR. The new categories are war memorials, disaster relief, animal welfare, charitable services and educational scholarships.

I am sure these new categories have merit and are deserving of the status being bestowed upon them. However, as I have previously brought to the attention of the Senate, the not-for-profit sector and DGR status are matters which should be properly regulated by a disinterested Commission.

In the current system, an entity could have DGR status one moment, and lose it the next, on the decision of a Minister. Or, an entity may not have DGR status, then lobby the Government and lo and behold, their status is changed by legislation. This really is not good public policy.

I prepared a Parliamentary Discussion Paper and distributed it to all members and senators with the aim of encouraging agreement as to the need for overall reform of the not-for-profit sector.

Certain aspects of the NFP sector and the types of entities and structures which can claim tax relief need to be more transparent and better regulated.

As I have pointed out in that Discussion Paper, the heavy public investment through indirect tax expenditures and tax concessions and the direct government expenditure given to Not-for-Profits really requires compliance with advanced integrity, reporting, and accountability standards.

Because NFPs play a large part in the provision of government services, the private provision of public services, and the representation of public and community interest groups, their regulation needs to be more systematic to safeguard the public interest.

The public interest is not served when new categories of DGRs are just popped into an omnibus piece of taxation legislation with 15 schedules.

There is no other sector of society which is still able to conduct its business (and I use that term advisedly) without an overall coherent framework of regulation. Such a framework should meet the standards of regulation which apply to other sectors of our economy and society.

I think it is clear from the ATO seeking to have these new categories of DGR’s declared that a lot of time and effort is put into this area by the Taxation Office, and although they willingly undertake the work, their preferred position, hinted at on occasions, is that this is something that should be determined by an independent body and should not be something which continues to be within its purview.

There has been some controversy over Schedule 12 that deals with the GST Treatment of Gift deductible entities. The main thrust of Schedule 12 applies to retirement villages, and that they must be endorsed as ‘charitable retirement villages by the ATO to access the GST charitable retirement village concessions. This is an understandable clarification especially in light of the fact that there are an increasing number of ‘over 55’ real estate complexes popping up all over the country.

This amendment clarifies that GST concessions are available to an entity only because it operates a fund, authority or institutions that have DGR status and does not apply to the entity as a whole. That is, the GST charity concessions apply as originally intended.

It also clarifies that charitable retirement villages must be endorsed by the ATO in order to access the GST charitable retirement village concession under s38-260 of the GST Act. This may be partly in reaction to some Local Councils who have complained about retirement villages being declared charities and therefore not being liable for land tax and so on. This would reverse that position – hopefully it means that retirement villages that are sold as tax effective investments for the well-heeled retiree cannot take advantage of land tax exemptions etcetera unless they are formally endorsed by the ATO.

Schedule 13 has a technical clarification of time for certain amended assessments. Previous Tax amendments covered the period following the lodgement of tax returns that the ATO could take action. The Treasurer announced that it would apply to assessments from the 04-05 income year and thereafter. However although that Act reduced the period for review from 6 to 4 years, it did not state a particular application date. This clarifies the application date.

As the Senate knows I have argued consistently against the Wine Equalisation Tax in favour of volumetric taxation.

Schedule 14 increases the wine equalisation tax producer rebate from $290,000 to $500,000 and is another short term reaction to a long term problem. Those who were seeking a negative gearing tax advantage by investing heavily in vineyards as a tax break are in no small way responsible for the current state of the market and this rebate may provide short term assistance to wine producers but little else.

This rebate has the effect that small wineries do not pay any tax on the first $1.7 million in sales.

A more considered approach to the problem is needed and the Rural, Regional and Transport Committee made some recommendations for the industry regarding unconscionable conduct and the drafting of a mandatory Code of Conduct to regulate the sale of wine grapes.

Economic support for any part of the industry, such as small wine farmers, should be via grants or rebates. It should not be via discriminatory tax exemption. I am supportive of measures to boost the economic circumstances of regional communities through encouraging tourism and through maintaining small business wine farmers on the land, but I do not think it should be done through tax exemptions; I think it should be done through grants or rebates.

I take issue with the wine equalisation tax. I have been against it from the start—although I should note that my party was not—because it has created a low-price cheap alcohol cask market that is at the centre of alcohol abuse and because as a value-added tax it punishes the premium and small business bottled wine sector.

Why not create a system in which the wine industry is assisted in a sensible, ongoing way through industry support, rather than distorting the excise system so that wine industry support ends up as a greater priority, and pricing wine casks so that the appalling alcohol abuse in some Indigenous communities, including in my state, can be lessened through price mechanisms. This is evidence of a short-term approach being taken to a problem, rather than a long-term, considered plan to maintain the viability of the industry.

Cheap cask wine is at the centre of alcohol abuse, which in turn is a cause of family and domestic abuse. Price affects alcohol consumption. A simple change in the way the excise is levied has the potential to change consumer habits. The government should take that step, and support it with advertisements, family assistance programs, housing programs, health programs and so on. Volumetric taxation of wine is, in the long term, the way to go.

Schedule 15 is to ensure that following the decision in Marana Holdings Pty Ltd v Commissioner of Tax, to clarify that supplies of certain types of real property are input taxed. In Marana the Full Federal Court decided: That the sale of a unit which was previously a room in a motel was the sale of new residential premises for the purposes of the Act and therefore subject to the GST; and Consider that the terms ‘reside” and “residence” connoted a permanent or at least long-term, commitment to dwelling in a particular place.

One concern was about this Schedule 15’s retrospective application, but the Senate Scrutiny of Bills Committee saw no concern worth noting because of low or beneficial impact. I gather from the evidence given to the Committee that the number of investors to be impacted by this change will be small, but the work involved in reworking their taxation returns is not inconsiderable.

I note the evidence from the Real Estate institute of Australia was that they had been in discussions with the ATO about redrafting GSTR2000/20 to reflect the Marana decision and that based on the proposed redrafting, people had made investments.

I agree with the Committee that when making investment decisions that the law as it stands at the time is the best indicator of what is acceptable, however I have a bit of a problem with the ATO and the Treasury arguing that position, when they are implementing legislation with retrospective application.

The Australian Democrats will be supporting these Bills as they provide some good measures for those in distress and tidy up some loose ends. However the fact that these Bills, with so many schedules impacting on a variety of areas, were passed through the House with little time for consideration and debate shows how essential it is to keep the Committee system in the Senate as vigorous as possible.

These Bills were rushed through the House, and were given only a day for a Senate Committee before being presented to the Senate for debate – and I use that term loosely at this time of the sitting week and year. Such limited scrutiny is better than none, but only just. The issues relating to many of these schedules have not been fully discussed and, given the timeframe, it would have been tough day to introduce amendments if the Committee had found major shortcomings with the bills.