Stephen Conroy (Victoria, Australian Labor Party, Deputy Leader of the Government in the Senate) Share this | Hansard source

I would like to thank all those senators for taking part in the debate on this measure. The amendments in the Tax Laws Amendment (Budget Measures) Bill 2008 make important improvements to the tax law to restore fairness and integrity to the tax system. They are also part of a responsible budget carefully designed to fight inflation and invest in the future. They restore the original intent of the FBT law by tightening the arrangements for eligible work related items and property consumed on employers’ premises. They improve equity in the treatment of employee remuneration and they align the period over which taxpayers can write off depreciable in-house software with that for computer hardware.

Currently, employees can salary sacrifice to obtain a meal card to purchase lunch, coffee and other consumption items out of their pre-tax income. Under these amendments, meals provided as part of a salary sacrifice arrangement will no longer be FBT exempt. This measure restores the intended policy and improves equity in the treatment of employee remuneration. Genuine staff canteens will not be affected. The FBT measures also ensure FBT exemptions are restricted to items used primarily for employment. That addresses the ability of employees to acquire items such as laptops for private use out of their pre-tax income. It also restores the original intent of the FBT law. The exemption will be limited to one item of each type per employee in each FBT year, unless it is a replacement item. The list of eligible work related items will also be updated for technological changes. The amendments also remove depreciation for FBT-exempt items. This addresses a double tax benefit whereby an employee can claim depreciation for an item that is also FBT-free.

The policy intent of the tax treatment of employee share scheme arrangements is also being restored. This amendment closes a loophole in the employee share scheme provisions and addresses double taxation. Amending the election requirements will stop taxpayers manipulating when they have a tax liability for discounts on employee shares or rights. This will ensure discounts are properly included in assessable income. The bill also removes the double taxation of certain employee share schemes using an employee share trust.

Under these amendments, the write-off period for in-house software is extended from 2½ years to four years. This is the same as the tax commissioner’s safe harbour period for computer hardware. The amount deductible is unchanged. Businesses will still get an immediate write-off when the remainder of the software is scrapped before four years. Small businesses and businesses that pay an annual licence fee for their software generally will not be affected. The amendments in this bill help restore fairness to the tax system and contribute to funding the government’s key priorities for the future.

There were a couple of items that were raised in the debate on this bill. A concern about removing the powers to accept amendments to tax returns was raised. Item 12 of the bill allows the tax commissioner to accept an election for the inclusion of a discount at a later time. This replicates the same powers contained in the current law. The impact on small business was also raised. The existing concessional small-business depreciation arrangements remain, so small businesses generally are not affected. Businesses with turnover of $2 million or less retain alternative depreciation arrangements unaffected by this change—that is, the immediate deductibility of software costing less than $1,000 and amounts of over $1,000 can be pooled with other assets and depreciated at 30 per cent diminishing value. One assertion was that software costing was unbelievable given the $70 million in tax expenditures statement. Software costing was considered by the committee. The costing reflects the timing effects. It reaches a peak in 2010-11 of $681 million and the costing considers growth in the industry. Once again, I want to thank all senators for their contributions.

Question agreed to.

Bill read a second time.