Ursula Stephens (NSW, Australian Labor Party, Shadow Parliamentary Secretary for Science and Water) Share this | Link to this | Hansard source

The Tax Laws Amendment (2006 Measures No. 3) Bill 2006 and associated bill involve a raft of measures associated with extending concessions in some areas, modifying definitions, correcting errors and, in one case, overriding a major decision of the full Federal Court. The first two schedules of the Tax Laws Amendment (2006 Measures No. 3) Bill 2006 are important to the people whose lives have been devastated by the effects of Cyclone Larry, which hit far North Queensland just south of Cairns on 20 March this year. While there was no loss of life, a significant number of homes and businesses in the area were affected and the region was declared a natural disaster zone by the Queensland government. We recognise that some businesses have not been able to trade due to the cyclone. As a result, some residents in affected areas have had to rely on income support from Centrelink. These measures ensure that such support enjoys tax-free treatment, as it should.

The first schedule extends eligibility for the beneficiary tax offset to farmers and small business owners who receive Cyclone Larry income support payments. The Cyclone Larry income support payments provide income support to farmers and small business owners whose income has been adversely affected by Cyclone Larry. They are equivalent to the maximum rate of the Newstart allowance and, as we know, are administered by Centrelink.

Businesses have also received cash grants to make up for loss of trade. The second schedule provides tax-free status for certain Australian government payments to businesses adversely affected by Cyclone Larry. Payments of $10,000 will go to businesses that have been adversely affected, and those businesses that can show significant losses can receive up to $25,000. Without this assistance, some small businesses would need to close down, with loss of jobs and dislocation of people’s lives. Labor are firmly committed to assisting these small businesses and give this measure our complete support. Labor also support the reimbursement of any excise paid on diesel or petrol fuel used by businesses for generating their own electricity until normal services are restored.

Schedule 3 is a similar measure that ensures that persons affected by drought will also receive income support in a manner that does not attract tax. It extends eligibility for the beneficiary tax offset to drought affected taxpayers who receive interim income support payments.

The fourth schedule makes a correction to the share-tainting rules as they apply to demutualised entities. The simplified imputation system was part of the government’s business tax reform package, and applied from 1 July 2002. The share capital tainting rules are an integral part of the dividend imputation system. Accordingly, in this bill they have been redrafted and anomalies have been removed in order to integrate them into the new imputation system. Shareholders are taxed preferentially on distribution of share capital. In contrast, shareholders are generally taxed at their marginal tax rate on distribution of profits, with imputation credits available, if appropriate. The share capital tainting rules are integrity rules designed to prevent a company from disguising a distribution of profits as a tax preferred capital distribution by transferring profits to its share capital account and subsequently making distributions from that account to shareholders.

The opposition supported the original share-tainting rules and supported the redrafting of the dividend imputation system. The objective is that the new tainting rules will remain to act as an integrity measure. It now appears, however, that there was an oversight in the design of those rules when the original share-tainting rules were introduced in 1998—namely, the treatment of companies that were mutuals but which had demutualised. The bill introduces a regime which covers both capital returns made at the time of demutualisation and subsequent returns of capital made by demutualised companies to ensure that they are treated on a comparable basis to other companies. This is needed to create certainty that the integrity provisions of the share-tainting rules will not adversely affect shareholders of demutualised firms.

Schedule 5 exempts the recipients of certain grants from capital gains tax. There are cases when the receipt of such grants can be assessable income or an assessable capital gain. This bill simply clarifies that this is not the case in the situation of the M4/M5 Cashback Scheme and the Sydney noise insulation project. In addition, some grants to mediation and dispute resolution schemes under the new Work Choices laws are to receive this treatment. This schedule exempts the unlawful termination assistance scheme and the alternative dispute resolution assistance scheme grants from capital gains tax provisions. Labor supports the measure in defence of employees in dispute with their employer or contemplating unlawful termination actions. However, there seem to be insufficient integrity measures to ensure that these vouchers are properly used. Quotations from the hearings into the bill are quite relevant to this fact. Senator Webber asked of the department:

When they take their voucher along to this person that they have found, how do you determine how much money you pay? It says ‘up to $4,000’.

The response from the department was:

The provider would remit the invoice to the department for payment on behalf of the applicant and that invoice would need to set out the services that have been provided.

Senator Webber then asked:

Yes, and you will just pay on submission of that invoice?

The answer was, ‘Yes.’ It seems that insufficient safeguards are in place to ensure that the Commonwealth is not being billed $4,000 for all matters, even those which can be dismissed in 10 minutes as not having a prima facie case. Labor suggests that the department should investigate options to ensure that the voucher is only used for hours genuinely billed on a commercial basis.

Schedule 6 will provide a tax offset to certain taxpayers who, in the year in which they receive a significant eligible lump sum payment in arrears, have become liable for the Medicare levy surcharge or an increased Medicare levy surcharge liability due to the receipt of a lump sum payment in arrears. The amount of the offset will be the amount of the increased Medicare levy surcharge liability created by the receipt of that eligible lump sum. In cases where receipt of the lump sum payment in arrears alone results in the taxpayer’s spouse having a Medicare levy surcharge liability, the spouse will also be eligible for the offset.

Schedule 7 allows the commissioner to require superannuation providers to report prescribed information that is reasonably necessary to assist in the administration of the superannuation guarantee arrangements. The information that superannuation providers will be required to report are details of employer and total contributions. Where amounts are transferred between superannuation funds or retirement savings accounts, the transferring superannuation provider must provide the receiving superannuation provider with equivalent information. This is a measure that Labor has supported in the past. The next schedule excludes from reporting fringe benefits provided in order to address certain security concerns relating to the personal safety of an employee or an associate of the employee arising from that employee’s employment.

Schedule 9 provides that funding credits can only apply to reduce tax on contributions that are used to fund liabilities that were accrued prior to 1 July 1988. These amendments apply to the use of funding credits on or after 9 May 2006. In addition, any new or outstanding objections or requests for amendment to past assessments will only be able to amend funding credit use for the year or years up to the amount that can be claimed under the new tax law. It is not clear how this costing has been arrived at or what the impact on state superannuation schemes will be. That was part of the investigation pursued by the committee.

Schedules 10 to 12 introduce some changes to the rules that apply to charities. Schedule 10 amends the definition of the word ‘enterprise’ in both the GST act and the ABN act so that non-charitable public ancillary funds and prescribed private funds can obtain an ABN and will, where applicable, be entitled to be endorsed as income tax exempt. This amendment will also ensure that the DGR status of non-charitable public ancillary funds and prescribed private funds is maintained and that these entities can receive input tax credits for GST included in their acquisitions and importations. Labor supports this, but I add that the government is punishing some apprentices in relation to the ABN system.

The next schedule streamlines current DGR specific listing arrangements and provides a more consistent framework for assessing applications for DGR status. Funds, authorities or institutions that meet the criteria for the categories of war memorials, disaster relief, animal welfare, charitable services or educational scholarships will be eligible for endorsement as a DGR under one of these new general categories. Labor has consulted with major charities and has been informed that this measure is generally supported. However, Labor wants the charities to have the opportunity to express their own views and, accordingly, Labor referred it to the committee.

Schedule 12 of the bill amends the GST act to clarify that GST concessions are available to an entity only if it operates a fund, authority or institution that has gift deductible status, and it does not apply to the activities of the entire entity; that an entity that supplies a thing as a gift to an entity that operates a fund, authority or institution that has gift deductible status may have an adjustment under division 129 of the GST act if the gift is made other than for the principal purpose of the endorsed fund, authority or institution; and that charitable retirement villages must be endorsed by the commissioner in order to access the GST charitable retirement village concession under section 38-260 of the GST act. Although Labor understands that charities are not uncomfortable with this measure, the speed at which the bill has proceeded in the parliament creates the need for this schedule to have been considered by the committee.

The 13th schedule clarifies that the repeal of the six-year amendment period for general antiavoidance amendments only applies to assessments for the 2004-05 income year and later income years. Labor supports the correction and asks the Assistant Treasurer to make all efforts to clean up the act. Treasury has made some technical errors in this regard in the past.

The next schedule is vital to the wine industry. From 2006-07, each wine producer or group of wine producers will be able to claim up to $500,000 in WET rebates each year. This measure provides assistance to the wine industry at a critical time, and Labor supports it. However, there is a major problem in this measure, because it means that more funds will flow under the scheme to New Zealand producers.

The final schedule of the bill deals with the GST treatment of residential properties. These amendments ensure that supplies of certain types of real property are input taxed to confirm the policy intent that the words ‘residential’ and ‘residence’ are not limited to extended or permanent occupation; confirm that residential premises which have only previously been sold as commercial residential premises or as a part of commercial residential premises are still regarded as new residential premises; and confirm that the supply of accommodation provided to individuals in commercial residential premises by an entity that owns or controls the premises remains subject to the GST. These amendments apply to net amounts for tax periods that commence on or after 1 July 2000.

Labor is of the view that the evidence presented by the Treasury officials at the hearing and as outlined in the report seemed to conflict with the material provided in the explanatory memorandum in section 15.4. The inquiry reports state that Treasury representatives commenced their evidence by pointing out that the Marana decision was not focused on the key issues discussed by the committee. The Marana decision was about related issues around when something is a new residential property. It dealt with a situation where an old motel was converted into strata title units, so it was quite a specific case. As part of that, the court made some comments about what residential property might be as opposed to what new residential property might be. As such, the comments were obiter dicta. If this issue was purely obiter dicta, why has the government sought to legislate on this matter?

Statements in the explanatory memorandum that indicate that as a result of the Marana decision certain taxpayers would be advantaged or disadvantaged is not consistent with the interpretation of obiter dicta proffered by officials. The explanatory memorandum tabled by the minister is a document of notes to the courts on the interpretation of taxation law so it carries greater weight than the oral testimony given by officials at a hearing. Labor request that the minister address the issue of a potential conflict between the evidence given and the material stated in the explanatory memorandum.

In addition, Labor calls on the government to publish the number of taxpayers who have entered into relevant investments since the time of the Marana decision and 27 February 2006 and who have successfully made an input tax credit claim with the ATO. Labor calls on the minister to request from the Commissioner of Taxation advice as to whether he can use his discretion to grant rate relief to such taxpayers and publish this advice. In the event that the government is not prepared to make such material public, Labor would ask the government to consider the introduction of measures to grant relief to taxpayers who have entered into relevant investments since the time of the Marana decision and who have successfully made an input tax credit claim with the Australian tax office.

Andrew Murray (WA, Australian Democrats) Share this | Link to 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.

Helen Coonan (NSW, Liberal Party, Minister for Communications, Information Technology and the Arts) Share this | Link to 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.