Thursday, 9 February 2017
Tax and Superannuation Laws Amendment (2016 Measures No. 2) Bill 2016; Second Reading
I welcome the opportunity to make a contribution on the Tax and Superannuation Laws Amendment (2016 Measures No. 2) Bill 2016. The bill being considered by the Senate this afternoon involves the reintroduction of a suite of measures that were originally introduced in the 44th Parliament and lapsed when that parliament was prorogued. As Labor's shadow Assistant Treasurer, the member for Fenner, noted when he wrote to the Treasurer calling for its reintroduction, the bill contains sensible and considered measures that would make the work of parliament more efficient and allow us instead to focus on genuine challenges that rightly deserve more of our attention.
Turning to the bill itself, two of the specific measures contained in the bill stem from the periodic review of our tax laws. This is a relatively new process whereby the government subjects existing tax laws to review and maintenance at regular intervals, a process that originated with a recommendation of the Tax Design Review Panel, commissioned in 2008 by the then Labor government.
The bill contains four schedules of changes, all of which are largely technical in nature but contain worthy revisions to our tax law. Schedule 1 to the bill is the most consequential and deserves the bulk of our consideration today as it establishes a substantial new remedial power for the Commissioner of Taxation. This remedial power provides a new discretionary capacity to the commissioner that can be used to expedite the resolution of issues that arise when tax laws have an unforeseen or unintended outcome that was not known or contemplated when the original provisions were drafted.
By their nature, tax laws can be very complex and, as such, there are times when the application of tax law can lead to inadvertent outcomes. This can result in taxpayers, companies and other entities bearing the burden of an unintended increase in their tax liability or additional compliance costs contrary to the intention of the law. At present, resolving issues that arise unexpectedly can be subject to lengthy delays, often due to the need for additional legislative consideration and change, all of which can cause significant uncertainty for affected parties while the issue remains unresolved.
The remedial power contained within the bill allows the commissioner, by way of a disallowable legislative instrument, to make modifications to the operation of a tax law to ensure it can be administered to achieve its originally intended purpose. Labor recognises that this is a significant additional power to grant the tax commissioner and is only appropriate if tempered by a robust system of scrutiny. To that end, Labor are pleased that the bill also places considerable limitations on the remedial power, which ensures it can only be validly exercised when in line with a number of considered safeguards.
These are outlined in the bill's explanatory memorandum in great detail, but, importantly, they include that the commissioner's modifications cannot be contrary to the original intent of the provision, nor can the power be exercised unless the Treasury or the Department of Finance advise the commissioner that the impact of their change would not meaningfully impact on the Commonwealth budget. It is also worth noting that the commissioner cannot enact a modification that would leave taxpayers adversely affected. The power can only be used to unburden a tax liability that was not the intent of the original measure. It does not provide the commissioner with a mechanism to add additional liability to taxpayers at will.
As is appropriate, the commissioner's determinations under this power will rely upon legislative instrument and, as such, can be subjected in due course to the fullest parliamentary scrutiny, including disallowance by the parliament. The remedial power is the outcome of a series of targeted consultations with representatives of the Treasury, the ATO and the Australian Government Solicitor, as well as key industry and professional associations. Labor shares the view of many submissions in that process that it is important that the remedial power is only used to complement, not substitute, our ordinary law-changing processes. We have publicly declared our support for this measure to be reintroduced as we recognise that it is a proposal that addresses an existing need and that has received broad support through consultation for the measure itself and its safeguards. In this instance, we do believe this bill provides those appropriate safeguards, and we will monitor its application in practice.
Schedule 2 of the bill amends the Income Tax Assessment Act 1997 to allow primary producers to reaccess a facility within our tax system that allows them to perform income tax averaging after a waiting period if they had previously chosen to opt out. Income tax averaging is offered via the tax system to farmers as a way of offsetting the vagaries of nature and markets. Years in which farmers suffer poor harvests, natural disaster or depressed commodity markets can be offset against better years, smoothing out the income tax liability of eligible individuals from year to year. Broadly, this is achieved by providing a tax offset to a taxpayer where their income is higher than average or requiring them to pay extra income tax where their income is lower than average. Under the existing arrangements, if a primary producer opts out of the income-smoothing system, they are cementing that choice permanently. This bill will provide for entry into the system with conditions that prevent its exploitation. This measure was a recommendation of the Agricultural competitiveness white paper and was well received by stakeholders.
Schedule 3 of this bill makes changes to the A New Tax System (Luxury Car Tax) Act 1999 to provide relief from luxury car tax to eligible public institutions that import or acquire luxury cars for the sole purpose of public display. These changes apply to public museums, galleries and libraries that are registered for goods and services tax and that have been endorsed as deductible gift recipients. This change is an acknowledgement that the luxury car tax is, by intent, a consumer level tax and should not be applicable where institutions are seeking to acquire what is essentially a display piece for curating purposes.
Finally, schedule 4 makes a number of miscellaneous amendments to the taxation, superannuation and other laws. These amendments include standardising style and formatting, repealing redundant provisions and deleting references to pieces of defunct legislation, along with the correction of other outcomes and corrections to previous amending acts. They are small changes but important maintenance work for the statute book.
Taken individually, and in their totality, these measures contained in this bill are prudent and in the public interest. As such, Labor will be supporting this bill. In doing so, we remind the government that we stand ready to support sensible economic reform, wherever those reforms may originate. In this new year of the parliament, I would encourage those opposite to embrace the sentiment as we have and to support other sensible economic reforms that are manifestly in Australia's public interest. This includes those Labor has proposed to negative-gearing arrangements and to multinational tax, both of which would greatly improve the integrity and fairness of our tax system while simultaneously strengthening the Commonwealth's balance sheet. I commend the bill to the Senate.