Barnaby Joyce (Queensland, National Party) Share this | Link to this | Hansard source

Both schedules of the Tax Laws Amendment (2008 Measures No. 3) Bill 2008 have been dealt with by the Senate. This is just a brief statement to say that what we are seeing here with the McNeil case, which is schedule 1 of TLAB 3, is basically the returning of the legislation to its original intent. A brief synopsis of the McNeil case is that it changed the nature of rights issues potentially from one of capital to one of income and, as such, could have created immense uncertainty in how people would participate in such things as rights and options.

The McNeil case was agreed by the coalition last year. The consequence of that case meant that legislation should go before the parliament to return the legislation to its original intent. There are some concerns with regard to drafting and whether, as a consequence of the drafting, there still may be some inadequacies. We wait to see how that will work its way through, but certainly through the Senate inquiry there was a consensus between all involved that there should be a change back to the original intent.

The McNeil case is schedule 1. Schedule 2 relates to another case, being the KAP Motors case. KAP Motors dealt with the consequences of the refund of GST and other overpayments of certain taxes. The consequence of the KAP Motors case, which is noted in schedule 2, implied that overpayment of GST does not need to be reimbursed to the customer before it can be claimed back from the Commissioner of Taxation. Obviously getting something back from the Australian Taxation Office before you have paid it back to the person with whom you were involved goes against the intention of the legislation. Schedule 2 once more returns this legislation to its original intent.

I think that both schedules still have some drafting issues. I think there is a consensus about what we are trying to do here. TLAB 3 is one piece of legislation that should be supported throughout this chamber. However, it will be different, I suspect, from what the Senate may consider with regard to TLAB 4; there are some serious concerns about the structure of that piece of legislation. I will close on that.

I will also briefly say that I commend those involved in the defence forces. I also thank them for allowing us to intrude on their schedule, as we have through the Australian Defence Force Parliamentary Program. Having done a bit of military service myself, I was thrilled to go back and do weapons drill and to start marching again.

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

Thank you, Senator Joyce, that explains many things. I would like to thank senators who have taken part in the debate on the Tax Laws Amendment (2008 Measures No. 3) Bill 2008. Schedule 1 to this bill will overcome the impact of the decision of the High Court of Australia in Commissioner of Taxation v McNeil. The amendments will restore the longstanding tax treatment of rights issued by companies or unit trusts to existing members to acquire additional memberships. As a result of these amendments, no amount will be included in the assessable income of a member as a result of acquiring certain rights issued by company or unit trust. In addition, if an amount is included in the assessable income of a member as a result of acquiring rights issued by a company to dispose of shares, this will be reflected in the capital gains tax cost base of the rights.

Schedule 2 corrects a deficiency in the GST refund restriction provisions. The decision of the Federal Court in KAP Motors highlighted anomalies in the operation of the restriction on refunds of GST, and the application of the four-year time limit for payments and refunds of indirect tax. As a result of this decision, taxpayers are entitled to obtain refunds where GST has been charged but it is later determined that a transaction was not a supplier for GST purposes. This is not consistent with the intended policy intent of the refund restriction.

This measure ensures that businesses are not entitled to obtain a refund unless they have satisfied the Commissioner of Taxation that they have reimbursed their customers. This ensures that businesses are not enriched when the economic incidence of the GST has fallen on their customer. It also ensures that there will be no entitlements to refunds in relation to transactions between businesses. In these transactions there will generally be no GST borne, as the purchaser will generally be eligible to obtain an input tax credit. This decision also highlighted that certain payments and refunds of GST could be made outside the intended four-year time limit on claims. The amendments provide that a consistent four-year time limit will now apply to payments and refunds of indirect tax. This brings the operation of the time limits back in line with their intended operation. The amendments apply from 1 July 2008. The amendments in this bill help to restore fairness to the tax system and contribute to funding the government’s key priorities for the future. I commend this bill to the Senate.

Question agreed to.

Bill read a second time.