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

Madam Acting Deputy President Moore, it will not surprise you in particular that I stand to speak to a tax bill. Dealing with the last first—namely, the shadow minister’s remarks about referring a bill to a committee—this is one of those bills which did need to be referred to a committee. The inquiry, short and rushed as it was, was very illuminating. I must say that the secretariat did a very good job in producing a report on the bill at short order. The point of my making those remarks is to refer to a bigger problem we have as a Senate; which is that time-sensitive budget bills, both under the previous government and the present government, are being rushed through simply because they have the financial year end in mind. That is dangerous when you are dealing with complex legislation which materially affects large communities of people and where tax law changes result in negative consequences for certain people enjoying benefits under the law as it presently stands. Even where the policy might be the right one, it still needs time for people to express reservations and to suggest changes and amendments.

I remind the Senate that I recently made similar remarks. As a consequence of those remarks, I wrote to the President and asked him to refer the matter to the Procedure Committee. I ask the opposition, in particular, to take an interest in that. My central proposition, particularly with bills consequent to the budget, is that there should be a mechanism developed by the Senate for bills, once they land in the House, to be immediately referred to a committee. At present you have the May budget and after that the House meets for two weeks and then meets for these two weeks in June. But the Senate does not. The Senate meets for two weeks of estimates. Therefore, the first time the Senate can meet and say, ‘Yes, we’ll send that bill across to a committee,’ it is too late for a thorough review and consideration before the end of those two sitting weeks. That creates a real problem with the proper examination and review of legislation—whereas, if this bill, for instance, had been referred to a committee in May, soon after the budget, we would have had a far deeper and more informed analysis and a far better understanding of how these changes either are merited or will affect people detrimentally. I think the Senate needs to find a better mechanism for time-sensitive bills than it has at present. I have formally written to the President asking him to refer to the Procedure Committee and I hope he agrees to refer to it. I ask the opposition in particular, and all parties, to pay attention to that reference to try and find a proper mechanism.

I now turn to the bill specifically. The second general comment I make is that the general descriptions of tax bills are quite confusing. I came down here scrambling to make sure I had my tax measures bill and not my tax measures bill No. 1 in my hand. Although the Senate Standing Committee for the Scrutiny of Bills and the parliamentary counsel—the legal counsel who draft government bills—did try to improve the naming of the bills, I still think we need to name them a little better because it is not necessarily clear, on their face, what you are dealing with. Hopefully I am now about to address the right bill! I say that because I was once vastly amused when a minor party senator, not from my own party, arrived and spoke passionately and at length to obviously the entirely wrong bill. The Senate was cruel enough to let him go almost all the way through and then said, ‘By the way, it’s the wrong bill.’ That amused me at the time.

The Tax Laws Amendment (Budget Measures) Bill 2008 amends taxation legislation to give effect to some of the policy initiatives announced as part of the 2008-09 Commonwealth budget. Proposals within this bill are contained in two schedules, with amendments to a number of acts. The first one—the controversial one—is changes to fringe benefits tax. This schedule proposes amendments to the Fringe Benefits Tax Assessment Act 1986 and the Income Tax Assessment Acts 1936 and 1997. The changes are in several parts. They tighten the fringe benefits tax concessions for so-called meal cards: those cards received at work as part of salary sacrifice arrangements. They tighten fringe benefits tax concessions for laptop computers, portable printers, electronic diaries and mobile phones, and they tighten the provisions to deny a personal income tax deduction for depreciation on work related items, such as computers. These changes result in significant revenue gains, including $610 million related to meal cards and $530 million related to computer items, over the forward estimates period.

The other part of the fringe benefits tax bill relates to employee share schemes and removes any incidence of double taxation arising from such schemes. It also clarifies the timing at which the proceeds of these plans are brought to account for taxation purposes. This will result in a $77 million revenue benefit over the forward estimates period. The changes to the depreciation rules for computer software are captured in schedule 2, which proposes amendments to the ITAA 1997 to extend the current depreciation rule for computer software from 2½ years to four years.

There will be relatively minor and immediate financial consequences arising from the proposed changes to the fringe benefits tax regime and the rules governing taxation from proceeds arising from employee share schemes. However, the cumulative gain in revenue arising from the lengthening of the depreciation period for computer software from 2½ to four years—an industry average, as it turns out from the committee report—is $1.3 billion, as I outlined earlier, from 2008-09 to 2011-12. This sounds significant, but effectively it is just an accounting change. This, as with all depreciation life schedules, is a timing shift. Over the long run, no revenue loss or gain will occur. So do not be alarmed when you see that very large figure; it is accurate in the budget estimates, but it evens out over the long term.

I think, personally, the main amendments in the bill are relatively modest, although people will be feeling quite strongly about the loss of some benefits in their particular case. Both the fringe benefits tax and the employee share scheme amendments are claimed by the government and the Treasury witnesses to the committee to restore the fringe benefits tax regime to its original policy intent. Sometimes governments and departments will make that claim somewhat lightly, but not in this case. I think it is an accurate claim. I think it does in fact do that very thing and I would remind the chamber that the Democrats for many years have adopted a twofold view: firstly, that we must make a serious effort to make our tax system more simple and less complex; and, secondly, it is desirable, if you are going to get equity and efficiency in the system, to broaden the base. In a small way this does broaden the base.

Companies benefiting from the present situation claim the meal cards reform is an assault on lower income workers. In my view, it is nothing of the sort. The measures increase revenue and so will be unpopular with some of those from whom the revenue is raised. I do not know anyone who likes to be taxed. What was the name of the French cardinal—it might have been Richelieu—who said you have to tax people like plucking geese: with the least amount of hissing? I have not got the quotation precise but I seem to remember that is what it was about. There is not too much hissing out there, so you are doing all right.

I think the measures are in the overall public interest and they are better tax policy. The main objections and submissions to the committee were to removing the exemption from fringe benefits tax currently enjoyed by people able to buy their lunch more cheaply—that is, more cheaply than other people—through salary sacrifice. It is an odd thing that tax law should encourage that some people get a benefit not available to other Australians. It just makes the other Australians cheesed off that they are not getting the benefit. The bill will mean these people have to pay the same for a lunch as those not able to package their salaries in any way, but the bill does not stop people from buying a healthy lunch, which is one of the spurious claims put to the committee. It does not stop people having their lunch delivered to their workplace—that is another spurious claim. It does not prevent employers subsidising lunch—that is yet another spurious claim—although some of the objections advised to the committee make this rather wild assertion. So you will hear from my remarks that I am not too sympathetic in this instance to the claims of special interest, but I recognise the remarks of the shadow minister that the nature of the implementation will have small-business effects.

I sometimes wonder at an attitude we have that, when farmers are forced to change their way of producing, operating and functioning, we give them adjustment packages—many millions, for sugar, milk or whatever it is—but, when we do the same for small business, there is no structural adjustment package. It may be good policy, as it might have been considered to be for milk, dairy and other things, but we need start to develop greater consistency in this compensation area. So, on those grounds, I am sympathetic with the shadow minister’s and the coalition’s view that some of the small businesses, which presently enjoy the benefits of the current way in which tax laws are administered in this fringe benefits area are probably likely to be hurt by these changes.

I like committees because you learn stuff. Senator Joyce, who, as the chamber knows, is an accountant by profession and understands that sort of stuff, was surprised at the extension of the software provisions. I thought he had a case, from my own experience. Businesses tend to turn over their software pretty quickly in contrast to individuals. I do not know about other senators, but my software at home is pretty aged. It is about to be upgraded as I shift into a different role, but business do turn it over quickly. So, in the committee report, as a result of Senator Joyce’s inquiries and other views, there is a table of the depreciation of software presently employed. It is taken from the latest annual reports—somebody has done some very good research and the table shows assumed useful lives in years terms. I will just select a few: ANZ Bank, three to five years; Macquarie Bank, three years; the ASX, Australian Securities Exchange, seven to 10 years—interesting; Insurance Australia Group, IAG, which that wonderful comedian Connolly advertises, three years; government, Treasury, three to five years; Bureau of Statistics, two to 28 years—that is a worry, isn’t it; I would like them to turn their software over pretty quickly, given the importance of what they do—Reserve Bank of Australia, four to seven years; Telstra, six years; Metcash, run by a South African friend of mine, five years; and Qantas, three to five years.

What that schedule indicates is that choosing a depreciation standard of four years is not unusual or unreasonable. I would have, on the surface, thought it was, but it turns out that the survey indicates it is not so that four years depreciation is a good choice. With those remarks and a general view on some other matters I have outlined, I indicate that the Australian Democrats will be supporting the Tax Laws Amendment (Budget Measures) Bill 2008.