Ruth Webber (WA, Australian Labor Party) Share this | Hansard source

I rise to briefly make some remarks—particularly given the hour of the evening—on the Tax Laws Amendment (2007 Measures No. 3) Bill 2007 and the Tax Laws Amendment (Small Business) Bill 2007. I begin firstly by commending to the chamber the minority report signed by those Labor members and the Democrat member of the Senate Standing Committee on Economics, and I support Labor’s second reading amendment. As has been canvassed by other speakers in this debate, our main concerns in this legislation—apart from the contribution of my colleague Senator O’Brien, obviously—go to schedule 10 of the Tax Laws Amendment (2007 Measures No. 3) Bill.

As has been outlined before, Labor supports the framework of a flat rate applying to all types of nonresidents, as this measure provides, as it creates certainty and simplicity. As a result of this measure, there would be one withholding outcome for distributions of income—other than dividend, interest and royalty income—by Australian managed investment trusts and Australian intermediaries: withholding at the company tax rate, regardless of whether the foreign resident is an individual, company, trustee or foreign superannuation fund. However, Labor does not support a 30 per cent rate. Rather, as has been outlined by our leader, Kevin Rudd, Labor supports an amendment to apply a lower flat and final 15 per cent rate.

It is our view that applying a flat rate to all types of beneficiaries of managed investment schemes provides the Australian property trust sector with compliance savings by having a single rate applied to distributions to different types of entities. This reduces compliance costs associated with tracing different types of income and different types of recipients of that income, as is currently the case. A flat rate to all beneficiaries removes the need for managed investment trusts and intermediaries to classify the nature of the foreign investor as individual, company, trustee or foreign superannuation fund. Consequently, the measure will also reduce the uncertainty regarding the obligations of managed investment trusts and intermediaries to withhold amounts from distributions to foreign residents. This in turn would improve Australian property trusts as a destination for foreign capital.

These compliance cost savings and reduced uncertainty would have the effect of increasing the efficiency of the Australian managed funds industry in providing funds management services to foreign residents. This results in the greater ability of the Australian managed funds industry to compete against foreign managed funds industries for the management of the investment of foreign residents’ savings. As has been outlined by my colleague Senator Hurley, this is a sector of our diverse economy where competition is growing. Whilst Australia, as was outlined at the committee hearings, has quite a mature sector, there are other economies that are choosing to follow our lead and diversify. It is therefore beholden on all of us to come up with a regime that maintains our competitive edge whilst restricting any impropriety that may take place in the market.

Labor was disturbed with some of the evidence given at the Senate hearings, particularly from Treasury, about the lack of consideration of gearing when costing Labor’s proposals. Something else that was not given much consideration, when I was having discussions about this with some of the industry, was the role of wholly owned Australian subsidiaries in the market. If company B, which is a wholly owned subsidiary, borrows from company A, the offshore company, to invest in the market, then takes all the income it gets and repays it to company A as interest, it is not caught in the current regime. It will not be paying the 30 per cent flat rate. It is our view that the 30 per cent flat rate encourages that kind of behaviour, whereas a 15 per cent flat rate would make us more competitive and would remove the incentive to behave like that.

I echo Senator Murray’s concerns about some other aspects of the bill. Whilst Labor will support the bill, I am personally concerned about the lack of consultation when it comes to the special recognition that we are giving to police and defence personnel. As with the more generous spirit that Australians these days show in some of the crises that occur in our region, it is not just the AFP and defence that these days governments of all persuasions choose to put in harm’s way. We choose to send other emergency service personnel overseas and aid workers overseas. Australia itself has been the beneficiary of emergency service personnel coming to assist us in our time of need, firefighters being a classic example. We have had US firefighters come here and we have sent ours to other countries. Whilst I do not want in any way to diminish the contribution that our AFP and defence personnel make, it seems to be unnecessarily harsh not to consider the contribution that some of our aid workers and other emergency services personnel make when governments—as I said, governments of all persuasions—choose to send them overseas to risk their lives in line with government decisions. With that brief contribution I commend to the Senate the minority report and Labor’s second reading amendment.