Mr KELVIN THOMSON (4:30 PM) —I congratulate the member for Hume on his first speech and look forward to the opportunity of debating some of the issues he raised on a future occasion. Prior to the adjournment of this debate, I was indicating my great concern that what is intended by the GST is yet another redistribution of wealth away from those who have less towards those who have more. What we can see in the GST package is a massive sleight of hand. There is a raid on the budget surplus of the order of $5 billion to $7 billion over the next three years to fund income tax cuts whereby the top 20 per cent of income earners get $6.6 billion.

I would like to take honourable members back to the arrival of this government a couple of years ago when they discovered what they described as a $10 billion black hole. When they did that, where did they take that money from? They took $500 million off nursing homes, they dismantled the Commonwealth dental health care program and they jacked up HECS charges. In all sorts of ways they increased charges and they reduced services for ordinary Australians. The impact of their budget cuts was on ordinary Australians.

Now we find a projected budget surplus of the order of $5 billion to $7 billion over the next three years. Where is that going? It is not going back to providing those services for ordinary people which they said we could not afford. It is not going back to renewing the dental health program, to providing decent nursing home accommodation or to providing tertiary education opportunities. No, it is going into providing $6.6 billion for the top 20 per cent of income earners. Stripped of the middleman, of the GST, what this government is engaging in is what it has always engaged in: a redistribution of wealth towards the rich.

It is increasingly clear that groups which failed to raise issues during the election campaign, to their cost I think, are now raising many concerns about the impact of the GST. For example, let me quote from the St Vincent de Paul Society. On 8 November John Moore, the National President of the St Vincent de Paul Society, asked:

Where is the compassion and concern for the welfare of low income earners in this country?

He went on to say:

Not only has the promised six month consultation period on the impact of a GST been replaced by a 17 day examination of existing papers but the committee has a limited agenda.

He further said:

But it is simply unjust and un-Australian if a new regime is introduced which leads to a deterioration in the wellbeing of the 30% of Australians who are on low incomes.

Mr Moore went on to say:

The Society's view is that it is not simply a matter of excluding food from the GST to make it just and equitable. Exclusions, or some form of compensation, are needed, for the low income group on other essential items such as clothing, educational and health services.

He also said:

The haste to introduce legislation and to implement a system which is easy to administer must not override the examination of the interests of all citizens—the poor as well as the rich.

The St Vincent de Paul Society has expressed concern directly to members of parliament about the impact of the GST on low income people and the impact of the GST on this society which threatens its ability to continue to deliver services to the poor and to the needy.

That was one charitable organisation expressing concerns, but it is certainly not the only one. Within my own electorate of Wills I have received correspondence from the Helping Hand Association for the Intellectually Disabled of Coburg. They pointed out in correspondence to Prime Minister Howard that they believe fundraising events like raffles need to be GST free. They said:

. . . if a GST is imposed there is likely to be resistance from our raffle ticket buyers. The resistance will not only manifest itself in a reluctance to support us but also in anger against a Government that thinks it appropriate to put a tax on public philanthropy.

As they point out, proceeds from their raffles are used to provide residential and respite accommodation for people in their care. Having met with some of them, they are indeed some of the most disadvantaged people in this community. They also point out that capping the FBT exemption for charities will severely disadvantage the sector.

Similar concerns have been expressed by the Hope Street Refuge in Brunswick West. Their chairperson, Mr Clive Pattison, has said that unless the Howard government compensates local charities the increase in administration costs could lead to a scaling down of crisis support services to young homeless people in Moreland. He said that they have budgeted approximately $10,000 in the current financial year to meet their business administration costs, but in order to meet the obligations of the new system they need at least another $6,000 per annum and, at worst, another $10,000 for a mixture of paid employment as well as training for their volunteer treasurer. That means that the Hope Street Refuge will not be able to assist dozens of young homeless people and their families. Mr Pattison said that they may be forced to limit services such as those where they reconcile young homeless people with their families and that they will be affected by lower service levels per annum.

The GST will have an impact not just on charities but also on education. We received correspondence from the Australian Council of State School Organisations. They point to the concerns of the committee chair, Mr David Vos, who said:

. . . it would be ludicrous to contemplate that I can put an ad in the paper and say that we're taking submissions. We may decide that we will do it anyway . . .

The verdict of the Council of State School Organisations was that this is an admission that any claim that this is a consultative process is ludicrous. They further pointed out that, in the area of schooling, getting some clarity was going to be difficult. They said that government pronouncements have been confused and contradictory. In the original tax package only tuition was to be GST free. Things like school excursions, camps, hire of musical instruments, sporting equipment, calculators and computers were given as examples of activities which would incur a GST.

In contrast, by the end of the election campaign, the Prime Minister had stated that school provided services which contribute to the achievement of the national goals of schooling will be all GST free. We clearly need some clarification here.

Then, of course, we ought to come to the banks. In the last couple of days, the Australian Bankers Association—fresh from their triumph with the Commonwealth Bank announcing yet another increase in fees for those over-the-counter transactions and automatic teller machine transactions—announced that banks could be forced to increase fees and charges by up to $600 million on account of the GST. Their Chief Executive, Mr Tony Aveling, has said that a study by the banks before the release of the government's tax package estimated that they would be $600 million worse off under the GST. This was because their inputs would be taxed but they would not receive a rebate because financial services would not be GST free.

On this basis, the banks believe that they will be worse off. They say they are going to recoup that money from customers, and I do not think anyone here would doubt that they would take that action. Mr Aveling said that, if there is an increased cost, there will be pressure to pass on these costs to customers through higher fees and charges. An awful lot was said about that before the election. That was something the government managed to keep well hidden—the idea that banks would be forced to pass on additional GST costs to their customers. So on all these fronts there are a series of things emerging about the GST which were not the subject of discussion or community consideration prior to the election, and no doubt they will lead to a lot of people changing their minds concerning the merits of the GST.

In the remaining minutes available to me, I will make some brief remarks concerning each of the detailed and specific provisions of this bill. It covers a number of distinct areas, and I will go through them as follows. Firstly—denial of artificially created capital losses—the provisions will limit the total amount of capital losses incurred by corporate groups under the law to the level of the corporate group's actual economic loss. The general anti-avoidance provisions—that is, Part IVA of the Income Tax Act—are also amended to allow these provisions to now apply to schemes artificially creating capital losses in the year in which the capital losses are created.

Those amendments are said to protect around $100 million per year. This was being commented on by the tax office and reported in the Financial Review on 20 November. I would seek some response from the minister about the effectiveness of the provisions before the House to counter the kinds of schemes that were referred to by the Financial Review.

Secondly, in the area of deductible expenditure and capital gains tax cost bases, amounts that are deductions for income tax purposes will now have to be excluded from the cost bases of assets for capital gains tax purposes. This is to eliminate an effective double deduction for such expenditures—that is, they both reduce the taxable income flow from an asset as it is earned and the amount of the capital gain which is eventually taxable when the asset is disposed of.

This measure was estimated to raise $330 million over four years when it was announced. The Treasurer has subsequently amended his original decision and provided transitional relief to taxpayers who were hit pretty hard by the original announcement. So expenditure incurred until 30 June 1999 on land or buildings owned as at the 1997 budget will not be affected. Labor supports this measure.

Thirdly—depreciation of assets—the measure clarifies the tax office's interpretation of existing provisions applying to formally tax exempt entities which became the subject of taxation between 1 July 1988 and 2 July 1995. That is designed to ensure consistent treatment of assets for depreciation purposes for entities that came into the tax system between 1988 and 1995. The sorts of things we are talking about here are superannuation funds, some Commonwealth government business enterprises that have come into the income tax net—for example, Telstra and Australia Post—state government business enterprises which have been privatised wholly or partially and private entities which have lost their tax exempt status such as sporting clubs as a result of changes in the nature of their operations.

In relation to average calculated liabilities of life insurance companies, currently the tax law requires that life companies use calculated liabilities at the end of the financial year to determine the amount of exempt income to be allocated to the immediate annuity policies. As a result, this has caused distortions where the proportion of liabilities at the end of the year does not reflect the experience through the year. It has opened up the possibility of manipulation by life companies to reduce the amount of income tax that would be payable. Changing to an average calculated liabilities method will address this problem. This will protect revenue of $100 million per annum. We support this. This is quite a good example of where continual repair of the direct tax base can yield significant revenue to fund essential services without resorting to a tax on ordinary families as the GST will.

Item 5 is passive income of insurance companies. At present, the formulae used for determining the passive income of the controlled foreign companies of insurance companies is flawed. The passive income does not fall foul of the existing rules and thereby escapes Australian tax. This allows life and general insurance companies to obtain a significant advantage in respect of offshore investment income. This bill proposes a new formula. It will raise some $10 million per annum. We support this measure, which overcomes an unintended technical consequence of the existing legislation and frees some foreign income from tax when it should be subject to Australian tax.

In the area of dividend imputation and retirement savings accounts, franking—that is, imputation—credits or debits will be prevented from arising from the payment or refund of tax where those amounts are attributable to the retirement savings account business of a life assurance company. This is not punishing RSAs relative to other superannuation funds; it simply ensures that life assurance companies do not get a windfall under the dividend imputation system. We support this technical amendment.

Item 7 is the effect of bankruptcy on carrying forward tax offsets. These are technical amendments which simply propose that the tax rebate available for landcare type expenditure for farmers will not be available to be carried forward into future years for a taxpayer who becomes a bankrupt. Labor supports this technical amendment.

Item 8 is company tax instalments. The timing of when a company has to pay company tax depends on whether it is classified as small, medium or large, with large companies paying earlier than medium companies and small companies paying later still. The grouping measures that are part of that cover superannuation funds. The inclusion of superannuation funds is inappropriate as it can unfairly penalise a genuine medium size firm, and Labor supports this amendment.

Item 9 is fringe benefits tax measures. The bill proposes five changes to fringe benefits tax. Included amongst these are exempting all taxi travel to and from work from fringe benefits tax. This extends the exemption granted by Labor in 1995 to out of hours travel; that is, after 7 p.m. or before 7 a.m. On balance, Labor has made a decision to support this amendment, as we have other proposals which involve exempting certain car parking fringe benefits provided by small business. This has been a rather unpopular tax measure, particularly when the car parking is simply being allowed to part on the premises: for example, in the backyard.

The measures also alter the arranger provisions which deal with situations where a third-party provides a fringe benefit to an employee either on behalf of an employer or with their involvement. The new proposals purport to simplify what are very complex existing rules, although they may make them worse in some circumstances. Nevertheless, we do need to have rules in this area to ensure that fringe benefits tax cannot simply be avoided by someone other than the employer providing the fringe benefits.

There are also some changes to the way in which employers will maintain fringe benefits tax records. These proposals come out of the Bell Review of Small Business and seem reasonable. Therefore, they will not be op posed by Labor. And, finally, there are some changes in the payments of tax by small companies. These benefit small businesses only and, on that basis, we support them. The cost to revenue of this particular measure will be negligible. Having said that, Labor has moved a second reading amendment which I urge members to support. (Time expired)