Senate debates

Thursday, 10 September 2009

Tax Laws Amendment (2009 Measures No. 4) Bill 2009

In Committee

Bill—by leave—taken as a whole.

1:02 pm

Photo of Bob BrownBob Brown (Tasmania, Australian Greens) Share this | | Hansard source

by leave—I move Australian Greens amendments (1) and (2) on sheet 5918 together:

(1)    Schedule 2, item 22, page 9 (after line 22), insert:

426-117      Commissioner must prepare annual report on private ancillary funds

(2)    Schedule 2, item 22, page 11 (after line 12), insert:

        (1)    As soon as practicable after 30 June in each year, the Commissioner must prepare and give to the Minister a report on the activities of private ancillary funds during the year ending on that 30 June.

        (2)    The report must include but is not limited to:

             (a)    the number of, and value of, grants dispersed by these funds; and

             (b)    the range of activities supported from these funds and the amount of money going to each class of activity.

        (3)    The information required by subsection (2):

             (a)    must be prepared using the information provided by each private ancillary fund in submitting a return of income to the Commissioner each year; and

             (b)    may be aggregated in the report to a level that protects the privacy of individual private ancillary funds and donors to those funds.

        (4)    The Minister must cause a copy of the report to be laid before each House of the Parliament within 15 sitting days of that House after the day on which the Minister receives the report, together with a statement containing the data from item A70 in the relevant Tax Expenditures Statement (Deductions for donations to prescribed private funds).

We have here important amendments to enable the public to be better informed about the quite massive amount of money going into quite a large number of trusts called private ancillary trusts. The amendments introduce a range of measures to schedule 2 of the legislation to improve the governance and administration of these private ancillary trusts. The changes that we are proposing will ensure that private philanthropic trusts are more accountable to the tax office in the amount of money they earn and how much is dispersed.

However, the activity remains pretty translucent, if not opaque, to the public. For example, we do not know how many activities these trusts support or who they are. We do not know how much tax revenue is foregone when donors receive a tax donation from contributions to the trusts or how much money the trusts disperse. I remind the committee that this provision for these trusts was part of the Howard government’s effort to stimulate philanthropy, and that in itself is a good thing. But the fact is that we are not assured that the money is directed to philanthropic outcomes rather than to a tax remediation opportunity for those who are involved. We would like to know how much these trusts are dispersing and to what philanthropic ends it is going. Without that information it is not possible determine whether the community as a whole is benefiting rather than just the people who are using the trusts gaining from the forgone tax revenue.

The vast majority of trusts are engaged in good works, but this continuing lack of transparency will inevitably raise suspicions about whether the trusts are using their funds to support non-charitable activities or whether they are simply, to put it bluntly, tax havens. Under the legislation, the government will be requiring private ancillary trusts to submit a tax return to the tax office. The amendments I am bringing forward on behalf of the Greens ask for information from the tax returns to be submitted to parliament so that a transparent and public evaluation can be made of the benefit of providing these tax deductions through the philanthropic outcomes of these trusts. We recognise that privacy has to be an issue for donors and trustees. Therefore, we have formulated the amendments in a way that accepts that this information is to be provided as an aggregate, and is not going to require that the trust funds or the donors—or one might say investors in the trust funds, whichever way—have their privacy compromised.

I commend the amendments, which would have the commissioner prepare an annual report on these private ancillary trust funds. After 30 June each year, the commissioner would prepare and give to the minister a report on their activities in the previous financial year. The report would include, but would not be limited to, the number and value of the grants dispersed by the funds, the range of activities supported by them and the amount of money going into each form of activity. That would include preparing information provided by each private ancillary fund that goes to the Commissioner of Taxation, and that being aggregated in the report to a level that protects the privacy of individuals, as I have said.

The minister would then have a copy of the report brought before the Senate and, indeed, the House of Representatives. That would enable the parliament to be reassured that the deductions and donations to prescribed private funds are being used for philanthropic purposes and are not simply being used as a tax haven—dare I say, a tax-avoidance mechanism. It is a worthwhile set of amendments. It is simply to give transparency to taxpayers all over the country. Millions of dollars are going into these funds that are set up for philanthropic purposes and many taxpayers will want to know that, in fact, the nation is gaining by a due amount of money being spent on a philanthropic outcome and not being squirrelled away to the benefit of the investor but to no benefit to the wider community.

1:08 pm

Photo of Helen CoonanHelen Coonan (NSW, Liberal Party, Shadow Minister for Finance, Competition Policy and Deregulation) Share this | | Hansard source

I have listened carefully to Senator Bob Brown’s comments and his rationale and to what he is trying to achieve in putting forward these amendments. However, on my understanding and reading of the act, this information relating to private ancillary funds is, broadly speaking, already published by the Australian Taxation Office on their website, following completion of the financial year. That is my first point. This information is also published in the Commissioner of Taxation’s annual report, released in December each year, and further information that goes to some of these points is contained in the taxation statistics publication released by Treasury in December or January each year. I am concerned that the prescriptive requirements and the way in which these amendments are framed could potentially have the effect of restricting the Australian Taxation Office from actually providing any additional useful information on these funds. Sometimes, with some of these reporting requirements, you can actually do more by letting the existing provisions work the way in which they are intended to work rather than trying to take this additional step.

I have made these comments to place on record my appreciation of the sentiment behind Senator Brown’s amendments, but I also place on record that we do not really think it will achieve what he is trying to do. In addition, we do not think that there is going to be any additional useful information and we do not think that the provisions are required in those circumstances, because of the existing provisions. That is the basis on which we do not support the amendments.

1:10 pm

Photo of Ursula StephensUrsula Stephens (NSW, Australian Labor Party, Parliamentary Secretary for Social Inclusion and the Voluntary Sector) Share this | | Hansard source

I also thank Senator Brown for explaining what it was that he was seeking to achieve through presenting these amendments, which seek to require the commissioner to annually give the Treasurer a report on the activities of the private ancillary funds. Senator Coonan, my understanding, too, is that this information is already publicly available, as you said, by the ATO and the Treasury in a timely way.

I would like to go to the concerns that Senator Brown has raised about transparency around the distribution of funds through private ancillary funds. I advise him of the significant piece of work that has been undertaken this year, in very close consultation with Philanthropy Australia, to review the integrity, I suppose, of prescribed private funds and to improve certainty as to philanthropic obligations when using those particular instruments. The government, as I said in my speech summing up the second reading debate, has been consulting very widely on some draft guidelines, which will be made by legislative instrument. There is wide support for improved transparency and clarity through those guidelines. That has been demonstrated to us through the work being led by Philanthropy Australia.

Having said that, though, what you are seeking to do is less than what is already available. The reporting that is currently in place—actually, the taxation revenue forgone—is reported in the Treasury’s tax expenditure statements released around December each year, as Senator Coonan said. That is something that is required by the Charter of Budget Honesty. Secondly, both the number and the value of the distributions and donations and the range of activities that are supported—reported as per the DGR categories—are regularly published by the ATO around June each year and again in the commissioner’s annual report later in the year.

I am sure Senator Brown would also be interested to know that there has been significant additional consultation and work undertaken through COAG and through the Productivity Commission about the reporting requirements of not-for-profit organisations generally. In a commissioned study into the contribution of the not-for-profit sector, the Productivity Commission has been specifically asked to identify unnecessary impediments to the efficient and effective operation of not-for-profit organisations, which go quite substantially to the issue of access and use of philanthropic funds. The regulation of the not-for-profit sector is being considered by the COAG Business Regulation and Competition Working Group. We think that there is a significant piece of work currently underway that will address many of the concerns that you have and, therefore, we are not supporting those amendments.

Going to the second amendment, as the ATO acts as the primary government agency that oversees the activities of PPFs, it is appropriate that the ATO be given greater oversight of PPFs, including the power to impose penalties and to replace trustees. Therefore, the amendments proposed by the Greens are unnecessary. Again, this information is already being provided by either the ATO or Treasury in line with their existing responsibilities. As your amendments are currently framed, they do not acknowledge the respective responsibilities that already exist in those two agencies or the fact that the information is already being provided.

1:15 pm

Photo of Bob BrownBob Brown (Tasmania, Australian Greens) Share this | | Hansard source

That tempts me, of course, to ask Senator Stephens—or Senator Coonan: could you now tell the committee what the range of activities of these philanthropic trusts is and how much money in the last financial year was spent on each of those activities?

Photo of Ursula StephensUrsula Stephens (NSW, Australian Labor Party, Parliamentary Secretary for Social Inclusion and the Voluntary Sector) Share this | | Hansard source

I cannot respond chapter and verse on that. The place to go to find that information is the ATO website as part of the reporting that is currently in place. But I have some advice for you. Thankyou to the advisers here.

In the last financial year, the donations received were $471,711,556, the distribution from those funds was $117,072,842 and the closing value of the prescribed funds total was $1,234,105,542. The ATO website also provides public information on the distribution by categories. The categories are health, education, research, welfare, defence, environment, industry trade and design, family, international affairs, sport and recreation, philanthropic trusts, cultural organisations, fire and emergency organisations, and other.

1:17 pm

Photo of Bob BrownBob Brown (Tasmania, Australian Greens) Share this | | Hansard source

It is easy to mention health or one of the other categories that the parliamentary secretary listed, but we need to know what philanthropic activities are involved there. Putting money into, for example, infrastructure may not be philanthropic, but putting money into research which is not taken up by the private sector will be philanthropic, by and large. My amendment is seeking to get at the philanthropic nature of the outcome of these trust funds. There are many more trust funds in Australia which have much more invested in them than the $1 billion to $2 billion that the parliamentary secretary just spoke about, but we know that they go to a whole range of private activity and the sky is the limit with them.

These funds were set up as philanthropic trust funds. I want to be assured that the parliament has the information which will show that the money being expended—$471 million in this case, as Senator Stephens informs the committee—is being expended on philanthropic outcomes. Maybe she could give examples from the ATO site or the site she refers to that will reassure me and the committee that it is in fact a philanthropic outcome that we are getting here.

1:19 pm

Photo of Ursula StephensUrsula Stephens (NSW, Australian Labor Party, Parliamentary Secretary for Social Inclusion and the Voluntary Sector) Share this | | Hansard source

Senator Brown, I cannot give you an example from the information I have in front of me; what I can say is that there have been concerns raised by you and by other people since the establishment of the prescribed private funds that perhaps there has been suggestion of manipulation—that this has not been wholly philanthropic and that perhaps people have been using it for tax advantages. That is why the government has been involved in a very serious and comprehensive process of consultation around changes to improve the transparency of the PPFs, which will now become private ancillary funds. Under the new regime, which will be in place very soon, I am confident that you will have greater confidence around these processes in the future. It is difficult for us to go back for a retrospective analysis of the information that we have available for 2007. It is incumbent upon those organisations to improve their transparency and their public accountability for these funds, and that is a part of the measures that we are trying to put in place.

1:20 pm

Photo of Christine MilneChristine Milne (Tasmania, Australian Greens) Share this | | Hansard source

I heard the parliamentary secretary say that in excess of $400 million had been allocated, and she also listed the range of activities. We were asking for the amount of money going to each class of activity and I would like to know how much of the $400-odd million that was allocated last year went to defence as a philanthropic activity. I would like you to tell me, in some way or other, what sorts of activities were funded for defence for that value of money.

1:21 pm

Photo of Ursula StephensUrsula Stephens (NSW, Australian Labor Party, Parliamentary Secretary for Social Inclusion and the Voluntary Sector) Share this | | Hansard source

I am happy to provide the information that I have here. From what I can see, across the category of defence there is nothing. But I do want to remind people listening to this debate that funds that are distributed through the PPFs can only be given to organisations that have deductible gift recipient status. There is a register of those organisations already on the tax office website. Most of those are charities, unless they are linked to government. The tax expenditure for 2007-08 against gifts to deductible gift recipient status organisations was $210 million.

1:22 pm

Photo of Bob BrownBob Brown (Tasmania, Australian Greens) Share this | | Hansard source

I will not prolong this debate, because I know that we will lose the vote when it comes, but I just want to make the point here—and I thank Senator Stephens for her information—that what I am moving here on behalf of the Greens is to legislate an outcome. She says, ‘The government is moving to improve the transparency and the information that is coming out.’ I always think it is a good practice to legislate it. The view that the government will do it anyway is one that I might subscribe to—I don’t know; I do not know if I ever will know—if I were in government. But I am a parliamentarian and I think the parliament has a right to expect through legislation that it will get these outcomes. If the government has the intent to provide for these outcomes anyway, it should not have any trouble with the amendments. It is a pretty simple rule, if you ask me.

1:23 pm

Photo of Ursula StephensUrsula Stephens (NSW, Australian Labor Party, Parliamentary Secretary for Social Inclusion and the Voluntary Sector) Share this | | Hansard source

I have no more comment to make on Senator Brown’s commentary and observation there other than to say, Senator Brown, that you would know that this is an issue of personal interest to me and something that I am intently working upon and want to ensure that there is greater transparency for all of us around these issues.

In relation to Senator Milne’s question, I have some information. The kind of support that PPFs could provide in the defence category include perhaps the Australian War Memorial or other war memorials that have DGR status or programs associated with the Returned and Services League.

Moore Sen Scott (the Temporary Chairman):

The question is that amendments (1) and (2) on sheet 5918 revised, moved by Senator Brown, be agreed to.

Question negatived.

1:24 pm

Photo of Christine MilneChristine Milne (Tasmania, Australian Greens) Share this | | Hansard source

I move amendment (1) on sheet 5906 revised:

(1)    Page 96 (after line 11), at the end of the bill, add:

Income Tax Assessment Act 1997

1  Subdivision 40-J

Repeal the Subdivision.

This amendment is jointly sponsored by the Leader of the Nationals in the Senate, Senator Joyce, and me in relation to removing the tax deduction for the establishment of carbon sink forests. The matter has already been well canvassed in the second reading debate, but I want to thank the members of the National Party for the remarks they made in relation to this. There are a couple of clarifications. I can assure Senator Joyce that my opposition to managed investments schemes extends to Tasmania. I have made that very clear throughout. I released a report earlier this year on what has happened in Preolenna and Meunna, in particular, in relation to managed investment schemes. We are seeing dairy country, in particular, turned over into forests in Tasmania to great cost in those communities.

I would also like to say to Senator Boswell that whilst it is absolutely true that the Greens come at this from a perspective of trying to build resilience in ecosystems and maintain the sustainability of those ecosystems so that they can continue to produce food and keep people leaving a decent life in rural Australia, the fact of the matter is that the Greens have also talked at length on issues around increased land prices, increased water prices, the displacement of food growing land and so on. That is a major concern to us. Senator Boswell may not realise but the reason I ran for politics in the first place in 1989 was as a result of a very hard-fought campaign over two years to oppose the construction of a kraft pulp mill at Wesley Vale in north-west Tasmania because of its impact on agricultural land, the pollution that it would have caused on that land and Bass Strait, in addition to the loss of native forests in Tasmania. So I am glad that at least in this Senate there is a combination of senators from the Greens and the National Party who are working to protect agricultural land, ecosystems and to stop the tax rorts that actually lead to bad outcomes for rural Australia. That is what this is: it is about tax rorts. I commend to the Senate the amendment in my name and that of Senator Joyce and the remarks that have been made in the Senate.

1:27 pm

Photo of Barnaby JoyceBarnaby Joyce (Queensland, National Party) Share this | | Hansard source

One thing that needs to be pointed out is the conjecture that surrounds this, especially with regard to capital expenditure. As you know, Temporary Chairman Bernardi, things can be either a debit or a credit. They can be either capital in nature or income in nature. There are no other forms in accountancy. It is what this legislation actually says, if we go through it—and the interpretation by the court will be on what is written in this legislation. It says that you can deduct amounts for capital expenditure incurred for establishing trees that meets the requirements for constituting carbon sink forests. The purchase of land is most definitely a capital expenditure—without a shadow of a doubt. Any 100-1 accountancy student if asked, ‘Is the purchase of land capital in nature or income in nature?’ Would answer, ‘It is capital in nature.’ This legislation says that expenditure that is capital in nature is deductable upfront. If you go to 40-1005(1) it says:

(a) you incur capital expenditure that is covered under section 40-1010 in relation to particular trees established in the income year; and ...

It goes on later to say in subsequent and previous income years for the establishment income for a carbon sink forest. At section 40-1005(4)(b) it says:

(b) you incur capital expenditure in the next income year for establishing other trees;

in determining whether you can deduct an amount under subsection (1)...

On and on it goes. In fact, what becomes very interesting in the reading of this legislation, is that it actually does go to capital expenditure that is not acceptable. The only two things that are not acceptable are noted in section 40-1020—certain expenditure disregarded—and that is in draining swamps or low-lying land or clearing land. So that says that all the rest of the capital expenditure is obviously allowable. All it requires is someone to wander off into court and say: ‘This is the legislation. This is what it says.’ The legislation even has the opportunity and goes to the process of precluding certain amounts of capital expenditure and in that preclusion it leaves out, or is silent, on the purchase of land. So quite obviously and evidently land is in. Therefore, one person on one side of the fence gets an upfront tax deduction for the purchase of land as they live happily ever after in inner suburban metropolitan Australia or overseas while the farmer on the other side does not get it.

Why? There is the carbon argument and a belief that if we sequestrate more carbon the world will change. That is an argument for another day and that is fair enough. Obviously if you vote for this, it is an endorsement of that principle, and people should be aware of that. We are saying here that you will get an upfront tax deduction for capital expenditure for everything bar the draining of swamps and low-lying land and the clearing of land because you choose to plant a scrub and then wander away. Actually, you cannot plant a scrub—it has to be over two metres high—so it is going to be trees. And where are you going to find trees? You will find them in prime agricultural land. That is where you will find them. Does it go to a section of precluding prime agricultural land? No, it does not. That is what is so wrong about this legislation.

So we are giving people an upfront tax deduction to take out of production the capacity to grow food. I just find that fantastic. I think that is the most peculiar thing that has ever been designed—an upfront tax deduction to remove agricultural land from production. Who becomes the beneficiary of that? Obviously it is not the person living on the land. The beneficiaries are those living in a metropolitan area. So even the benefit of that tax deduction and the income stream from the carbon credit that will be distributed is taken out of the district. It is removed from the district.

This is the irony, the parody of justice: you are removing the means of production from a certain regional area and then giving a benefit to another area away from that land, and you are giving a benefit to a unit holder, or whatever, living in a metropolitan area or overseas. The land is left destitute from the removal of that means of production which was the support of that district, and the benefit is given to a person in a metropolitan area. And the methodology behind the benefit: obviously this is a mechanism to cool the planet; that is what we are doing. They believe that and that is what this is all about, and that is a fair enough argument.

But I think that it is completely unjust to compromise the food potential of an area. We have asked over and over and over again for someone to direct us to where in the legislation it says that capital expenditure for the purchase of land is not included. But it never made it into the legislation. It was a fast and furious debate. This issue was brought up over and over and over again: why don’t you exclude the purchase of land? It reminded me of a former Premier of my state, a good bloke, saying, ‘Don’t you worry about that. That is not an issue. Don’t you worry about that.’ Well, I am worried about it. This legislation specifically says that the purchase of land is included.

So what is wrong with it? You are giving an upfront capital expense deduction to some people while other people cannot get it. You have allowed the clumsy hand of government to come into the marketplace and pick winners and losers. You have allowed the definition of those winners and losers to be decided by a fence line. You have allowed a deduction for the removal of a productive component that does the decent thing of putting food on the table and feeding our nation and giving affordable food to our Australian people and to the world to be replaced by a carbon sink, which is an issue that you cannot touch—it cannot be milled and you cannot do anything with it.

I live next door to a forest. It is not something to be joked about. It is a complete impost because it becomes the home of vermin and pests like pigs, kangaroos in abundance, rabbits and wild dogs. You might think that is hilarious. How would you like it in your backyard? How many feral pigs and wild dogs do you want in your backyard and how many other examples of vermin do you want before it is not a joke for you? There are some areas now where you certainly cannot have sheep and they are removing the capacity to have cattle as well because of the complete lack of management expertise.

But the core issue here is that you have made a moral statement. You have decided to remove the capacity to grow food and replaced it with an upfront tax deduction to grow a forest that will never actually deliver any sustainable outcome in export dollars or in food that will feed the masses, which I think is one of your primary jobs as a decent human being.

I know that on any TLAB they could bring this issue up and it can turn into a wedge. In the National Party we are not prepared to do that. We have stated our case. We might speak on the issue in the future but today we are prepared to vote in this direction as a measure of how important the National Party feels it is. We tried in the National Party over and over and over again to get to a point of agreement. The last thing we wanted to do was cross the floor on this. We tried and tried to get some mitigator to bring us to an area of agreement, but we did not get there. So at this point in time on this issue we will reflect our deepest concern, and in some instances disgust, with what the government has put forward, because of the statements it makes about how you value things in life. Apparently you value the scrub more than food. We will reflect our concern in the way we vote this time.

I thank Senator Milne for participation in the National Party’s co-sponsorship of this motion. We approach it from slightly different directions, but the intent is clearly spelt out. This was dreamt up by the only practising accountant in the whole of the parliament. It was dreamt up at a free-for-all dinner at which they worked out a great way to get a tax deduction for doing nothing. They have been particularly sneaky in staying silent on the key issue, which is a capital deduction for the purchase of land.

1:37 pm

Photo of Helen CoonanHelen Coonan (NSW, Liberal Party, Shadow Minister for Finance, Competition Policy and Deregulation) Share this | | Hansard source

I want to place some very brief comments on the record. We have seen this amendment before and we have had this discussion ad nauseam and at great length. The core positions do not seem to have moved very much and the debate is not much advanced by repetition.

I also strongly contend that the debate is not advanced by dropping this on to the end of a TLAB which deals with a lot of other issues and does not deal, in any kind of primary sense, with carbon sinks. However, that is what we are currently considering in the Senate.

The Greens have foreshadowed that, with every tax bill, we are going to have this debate over and over again and I would suggest to them that they might like to reflect on whether this achieves very much. This has been exhaustively discussed and, from the coalition’s perspective, our views have been well and truly put on the record. So I am not going to burden the Senate and the record with stating them all over again other than to say that, in our view, carbon sink forests are an important tool in the fight against climate change and in reforesting areas of Australia that arguably should never have been cleared in the first place.

We do not believe that there is compelling evidence that the carbon sink provisions encourage the planting of carbon sink forests on prime agricultural land. It is, in our view, highly unlikely, perhaps even improbable, that farmers would allow prime agricultural land capable of producing a crop or livestock for profit to be planted with a carbon sink forest for the purpose of claiming a tax deduction.

I realise that there are strongly held views that are in disagreement with that proposition, but that is the coalition’s position. It is certainly our position in relation to this amendment. We continue to believe in the benefits of carbon sink forests. We have not altered our view about that, despite the heat and light that has been generated by this debate. As I have said, we think that they are an important carbon sequestration technique and tool.

Carbon sink forests currently have support from the majority of the Senate. This amendment of course will not succeed. Having said that, I do appreciate that our friends in the National Party have a passionately held, differing view on this and we respect that. I am very glad that I belong to a party that allows, in such a civilised and civil way, the advocacy of a different viewpoint when members consider it appropriate. The National Party have consistently expressed that view. However, respecting those differences, from the coalition’s perspective we still do not see that there is a compelling case to alter our view.

I could go on and on and take issue with all the points. I do not think anything is to be gained by that, as I have said. It was nevertheless appropriate that I very briefly indicated that the coalition will not be supporting the amendment and the reasons why.

1:41 pm

Photo of Ursula StephensUrsula Stephens (NSW, Australian Labor Party, Parliamentary Secretary for Social Inclusion and the Voluntary Sector) Share this | | Hansard source

Thank you, Senator Coonan, Senator Milne and Senator Joyce for those contributions about these two amendments to the Tax Laws Amendment (2009 Measures No. 4) Bill 2009. The effect of the amendments would be to remove the tax deduction for the establishment of carbon sink forests. The government is not prepared to do that.

The tax deduction provides an incentive for growing forests for the specific purpose of taking carbon dioxide out of the atmosphere and to help national efforts to reduce greenhouse gas emissions. We have been over and over this issue many times, including through the Senate committee inquiry which reported in September 2008. It found that the carbon sink forest tax legislation is ‘a valuable policy addition that will promote greenhouse gas reductions’. The report notes that the legislation addresses an anomaly in that other forms of greenhouse gas emissions reduction activities by industries are tax-deductible. The amendments would have the effect of reversing that and creating an inconsistency in taxation treatments relating to greenhouse gas emissions.

Your amendment on sheet 5907 would impose additional conditions before a tax deduction could be claimed for establishing carbon sink forests. The Environmental and Natural Resource Management guidelines for the tax measure foster complementary environmental and natural resource outcomes and the Senate committee report of September 2008 recognised the benefits of relying on existing state and territory regulatory structures for the management of impacts of carbon sink forests on the environment. After that Senate inquiry, and in consultation with the crossbenches and taking into account concerns from the opposition, the Minister for Climate Change and Water amended environmental guidelines on relevant legislation to help address this issue. The government is committed to closely monitoring carbon sink forest establishment activity under this legislation.

I now go to a specific issue that has been part of the debate contributions today and reiterated by Senator Joyce, and that is this notion that the legislation can be used to purchase land for growing trees. I would like to draw everyone’s attention to the interpretive decision by the ATO which was recently released on this matter. It is ATO ID 2009/60, which concerns a taxpayer who purchased land for growing trees. The ATO made it very clear that the cost of purchasing land to establish a carbon sink forest is not establishment expenditure. The legislation operates in the same way as arrangements for horticultural plants, and no-one has ever suggested that land is deductible under those provisions. So the government is not supporting this amendment. I think we all understand that, if we continue to have these debates every time we have a tax laws amendment bill, we will not make too much progress.

1:45 pm

Photo of Barnaby JoyceBarnaby Joyce (Queensland, National Party) Share this | | Hansard source

Just briefly, the ATO says a whole range of things all the time. In fact, the number of court cases where people have taken on the ATO would fill this room and one besides, I am sure, and there would be myriad court cases currently going. What the ATO says in a decision is not the relevant issue here. The superior document is what the legislation says or, in this case, does not say. The legislation is there for you to read; it is there in black and white. It actually goes to preclusions which, in section 40.1020 of the Income Tax Assessment Act 1997, are quite evident: there are two there, and they do not include land. So land is in. It is capital expenditure, without a shadow of a doubt. It is not precluded, without a shadow of a doubt. Are other items that would be deemed to be capital expenditure precluded? Yes, they are. That is, ipso facto, a statement that all other forms are in. All you have to do is trot off to court and present your case and say, ‘This is the legislation; this is what it says.’ What the ATO says is quite irrelevant.

Question put:

That the amendment (Senator Milne’s and Senator Joyce’s) be agreed to.

1:54 pm

Photo of Christine MilneChristine Milne (Tasmania, Australian Greens) Share this | | Hansard source

I move Greens amendment (1) on sheet 5907:

(1)    Page 96 (after line 11), at the end of the bill, add:

Income Tax Assessment Act 1997

1  After paragraph 40-1010(2)(c)


           (ca)    the trees are a mixture of species that approximate the local native vegetation or, if not available, from an ecologically similar location;

2  After subsection 40-1010(3)


     (3A)    The guidelines provided for in subsection (3) must ensure that:

             (a)    any property claiming a carbon sink forest expenditure has an environmental management system audited to conform to ISO14001 in place; and

             (b)    forests over 100 Ha require an ecosystem evaluation to develop recommendations for appropriate planting; and

             (c)    the owner is required to enter into an easement agreement with the Department of Climate Change preventing any development or modification of the property which would result in the property no longer meeting the conditions specified for a carbon sink forest; and

             (d)    an easement agreement entered into in accordance with paragraph (c) remains in force for a period of not less than 100 years, or until the Commonwealth determines that the forest no longer requires protection, whichever is the earlier.

3  After section 40-1015


                 Ecosystem evaluation means an ecological assessment and report prepared by a suitably qualified person which includes, but is not limited to:

             (a)    an assessment of impact of the carbon sink forest on the hydrology of the catchments within which it is situated;

             (b)    an assessment of the local and regional linkage and connectivity values of the site, including potential links in relation to any other remnant vegetation areas;

             (c)    identification of constrained areas such as steep land and land adjacent to waterways which are likely to have particular management requirements;

             (d)    an assessment of fire risk within the site and in relation to adjacent premises including areas of native forest;

             (e)    identification of any other environmentally sensitive areas on which the proposed use may potentially impact;

              (f)    identification of any likely conflicts between the proposed carbon sink forest use and any adjacent or nearby premises or places;

             (g)    identification of a selection of suitably benign species for planting.

This is an alternative amendment to the one that was just lost. The previous amendment was to remove the tax deduction for carbon sink forests. Since that was not the will of the majority, this is an amendment to place conditions, safeguards, on the establishment of those forests. It is basically to make sure that the trees are mixed species. It is also to make sure that there is an ecosystem evaluation in relation to those carbon sink forests, namely that there be things such as a hydrological assessment of those particular areas and a look at the issues, and to make sure that when you have any prospect of establishing a carbon sink forest there is a proper ecological assessment. The government, quite irresponsibly, do not provide for that in their legislation. Anyone concerned about sustainability would want an ecosystem assessment and evaluation before such a plantation was established. The government say it is their intention, so let them vote for it.

1:56 pm

Photo of Bob BrownBob Brown (Tasmania, Australian Greens) Share this | | Hansard source

I wonder if we could have a response from the government to Senator Milne’s proposal.

Photo of Ursula StephensUrsula Stephens (NSW, Australian Labor Party, Parliamentary Secretary for Social Inclusion and the Voluntary Sector) Share this | | Hansard source

I am sorry, Senator Brown. I indicated in my earlier remarks that we were not supporting either of the amendments.

Photo of Bob BrownBob Brown (Tasmania, Australian Greens) Share this | | Hansard source

I am well aware of that, but I would expect that the government would be able to give reasons as to why it is not supporting this amendment. It is a very important amendment; it is well reasoned. Senator Milne has presented the argument in favour of it. Surely the government—if it is going to defend the indefensible, as I see it—is going to put to the chamber a reasoned and cogent argument as to why it is not going to support this amendment.

1:57 pm

Photo of Ursula StephensUrsula Stephens (NSW, Australian Labor Party, Parliamentary Secretary for Social Inclusion and the Voluntary Sector) Share this | | Hansard source

Senator Brown, I did speak quite specifically to the second amendment. I indicated that the government was not supporting it because it has the effect of imposing additional conditions before a tax deduction can be claimed for the establishment of carbon sink forests. When this issue was raised following the Senate committee inquiry in September 2008, the Minister for Climate Change and Water amended the guidelines to address concerns from the opposition and crossbench senators when the Senate last considered this measure. The government believes that its intention to closely monitor carbon sink forest establishment activity under this legislation suffices.

1:58 pm

Photo of Bob BrownBob Brown (Tasmania, Australian Greens) Share this | | Hansard source

I will just say that that is a nonsense. It was no response whatever. The crossbench—in this case, Senator Milne again—has brought forward a very logical and reasoned amendment, and it deserves better than that from the government.

Question put:

That the amendment (Senator Milne’s) be agreed to.

Bill agreed to.

Bill reported without amendment; report adopted.