Helen Coonan (NSW, Liberal Party, Minister for Communications, Information Technology and the Arts) Share this | Hansard source

Given the late hour of this last day of the session I also seek leave to incorporate a summing-up speech.

Leave granted.

The speech read as follows—

To begin with, I would like to thank Senators who have taken part in this debate on the Tax Laws Amendment (2006 Measure No. 3) Bill and the New Business Tax System (Untainting Tax) Bill.

This bill implements a number of changes and improvements to the tax laws.

The first measure in this bill extends the eligibility for the beneficiary tax offset to taxpayers in receipt of Cyclone Larry and Cyclone Monica income support payments.

The Cyclone Larry and Cyclone Monica income support payments are provided to farmers and small business owners whose income has been adversely affected by those cyclones.

Applying the beneficiary tax offset to Cyclone Larry and Cyclone Monica income support payments ensures that recipients of those payments are provided a tax treatment consistent with that provided to those receiving Newstart allowance.

The second measure provides additional assistance to businesses that are adversely affected by Cyclone Larry and Cyclone Monica. Payments from the Cyclone Larry Business Assistance Fund and the Cyclones Monica and Larry Business Assistance Fund will be exempt from tax.

Eligible businesses may apply for a one-off grant of $10,000 under the relevant Business Assistance Fund.

Those businesses that can demonstrate significant losses may apply for a higher grant of up to $25,000.

In addition, any excise paid on diesel or petrol used by businesses affected by Cyclone Larry for generating their own electricity until restoration of normal services will be subsidised by the Government. These fuel excise relief payments will also be exempt from tax.

These changes recognise the extraordinary hardship inflicted by Cyclones Larry and Monica and apply to all relevant payments made in the 2005-06 and 2006-07 income years.

The third measure in this bill extends the eligibility for the beneficiary tax offset to drought-affected farmers who receive interim income support payments, as announced in the 2006-07 Budget.

Interim income support payments are provided to farmers in areas where an exceptional circumstances application lodged by a state demonstrates a genuine case for full exceptional circumstances assistance.

Interim income support is available for up to six months while the case for full exceptional circumstances assistance is being considered. These payments will remain taxable but will attract the beneficiary tax offset which will reduce any resulting tax liability.

Applying the beneficiary tax offset to interim income support payments ensures consistency with the taxation treatment of exceptional circumstances relief payments.

The fourth measure represents a further component of the simplified imputation system. The share capital tainting rules are integrity rules that prevent companies from disguising distributions of profits as capital distributions.

The share capital tainting rules will be inserted into the Income Tax Assessment Act 1997 and are broadly consistent with the old rules. Some modifications will ensure that:

• certain amounts transferred from an option premium reserve do not cause a company’s share capital account to become tainted; and
• certain amounts transferred in connection with the demutualisation of an insurance company do not cause the company’s share capital account to become tainted.

The new share capital tainting rules will apply to transfers made to a company’s share capital account from 25 May 2006, the date of introduction of this bill. Some consequential amendments to the old share capital tainting rules will apply from 1 July 1998.

The next measure in this bill provides an exemption from capital gains tax for recipients of the WorkChoices grants.

This measure ensures that recipients of the Government’s Unlawful Termination Assistance Scheme do not incur a capital gain or loss.

The Unlawful Termination Assistance Scheme provides eligible applicants with Government assistance for independent legal advice to assess the merits of their unlawful termination claim.

Similarly, the capital gains tax exemption will apply to the Alternative Dispute Resolution Assistance Scheme. This scheme provides eligible parties with the opportunity to receive alternative dispute resolution services.

This measure will also add a generic provision to expand the capital gains tax exempt status to include other government grants that reimburse expenses. This allows recipients to better utilise their WorkChoices grants and other government expense reimbursing grants.

The next measure in this bill provides a tax offset to taxpayers who have a Medicare levy surcharge liability, or an increased liability, as a result of receiving an eligible lump sum payment in arrears.

This amendment will benefit those taxpayers who are generally not liable for the Medicare levy surcharge but incur a liability in a particular year due to receipt of a large lump sum payment in arrears and those who would otherwise have had to pay a larger Medicare levy surcharge.

The seventh measure in this bill amends the Superannuation Guarantee (Administration) Act 1992 to ensure a superannuation fund or retirement savings account provider continues to report to the Commissioner of Taxation on an annual basis. The required reports will contain details of employer and total contributions made to a superannuation fund account or retirement savings account provider.

The eighth measure in this bill, excludes from the fringe benefits reporting requirements, fringe benefits provided to address certain security concerns relating to the personal safety of employees and their associates that arises from their employment.

This reporting exclusion is being provided because an employee may require certain security services outside of their employment as a result of a credible threat of attack to them or their associates by reason of that employment.

This measure will be backdated to apply from 1 April 2004. As a result of this reporting exclusion, the payment summaries of employees who receive such fringe benefits will not include these amounts.

The next measure in this bill is a revenue protection meeting and will improve the integrity of the taxation system by preventing the inappropriate use of pre 1 July 1988 funding credits.

Funding credits are used by superannuation schemes to reduce their tax liability. They were granted to unfunded or partly funded schemes and were intended to ensure that contributions made to a scheme after 1 July 1988 (when the 15 per cent contributions tax was introduced) to fund benefits that accrued prior to 1 July 1988 were not taxed. This ensured equity with funded schemes.

This measure ensures funding credits will be able to be used only in accordance with the original policy intent. That is, funding credits will be used only to reduce tax on contributions made in respect of pre 1 July 1988 benefits.

The tenth measure in this bill will allow those prescribed private funds and public ancillary funds that distribute to deductible gift recipients that are not charities (such as public ambulance services and research authorities) but are exempt from income tax, to obtain an Australian Business Number (an ABN).

This measure ensures that all prescribed private funds and public ancillary funds that distribute solely to deductible gift recipients which are exempt from income tax, can themselves access an income tax exemption as well as the GST concessions.

The next measure in this bill gives effect to the Government’s announcement in the 2005-06 Budget that it would create five additional deductible gift recipient general categories to enhance philanthropy in Australia.

The new deductible gift recipient general categories cover war memorials, disaster relief, animal welfare, charitable services and educational scholarships.

The twelfth measure in this bill will address the potential exploitation of certain GST charity concessions. The changes in this measure confirm that the GST concessions apply only to deductible gift recipients and not to any non-charitable activities of entities that operate the deductible gift recipients.

This measure also ensures that charitable retirement village operators must be endorsed by the Commissioner of Taxation, like other charities, in order for the GST concessions to apply. This will ensure that the tax law will apply consistently between charities.

The next measure in this bill makes a technical clarification to the Tax Laws Amendment (Improvements to Self Assessment) Act (No. 2) 2005, to ensure that the reduced four year amendment period for income tax assessments involving tax avoidance applies from the 2004-05 income year as announced by the Government.

The fourteenth measure in this bill delivers enhanced assistance for the wine industry under the wine equalisation tax (WET) producer rebate.

From 1 July 2006, the maximum amount of WET rebate each wine producer (or group of producers) may claim in each financial year will increase to $500,000, compared to the current threshold of $290,000. This will effectively exempt around $1.7 million in domestic wholesale wine sales for a wine producer each year.

The final measure in this bill ensures supplies of certain types of real property remain input taxed under the GST.

This measure amends the GST Act to ensure supplies involving properties such as serviced apartments and strata units leased to hotel operators remain input taxed. This is consistent with the Government’s policy intent and will avoid the need for many small investors to register for the GST.

For the reasons I outlined above, I commend these bills to the Senate.

I would also make a brief comment. Senator Stephens raised the question of whether there was a potential conflict between the evidence given by Treasury and the material stated in the explanatory memorandum. My advice is that there is no conflict between the evidence presented by the Treasury officials to the Senate committee and the explanatory memorandum. They both said that the court decision in Marana was about whether the sale of a unit which was previously a room in a motel was the sale of new residential premises and thus subject to GST. In this decision the court considered what residential property might be.

Question agreed to.

Bills read a second time.