Mr SLIPPER (5:30 PM) —At the outset, I would like to thank the honourable members for Melbourne, Cook, Rankin, Kingston, Grey and Wills for their contributions to this debate. The member for Wills, of course, will not be at all surprised to hear that the government does indeed reject the amendment moved by the member for Kingston. The government is very pleased, however, that all members of this House do in fact support these measures which are an important part of the government's tax reform package for which it obtained a mandate at the election held in October last year. This has been a wide ranging debate. The particular items included in the three cognate bills have been canvassed, but certain of the participants have also talked about other aspects of A New Tax System. As the government has made out quite clearly, it is absolutely committed to curbing abuses of trusts which are contrived or designed for the purposes of avoiding tax.

The government has been criticised by some who suggest that the bills are draconian. Solicitor Richard Roberts says in the Financial Review of 26 May that `this bill treats users of discretionary trusts as tax cheats'. So the government, on the one hand, is criticised by the opposition for not going far enough; on the other hand, the government is blamed for going too far. So it is pretty clear that the government has got the balance right.

As is well known, the Taxation Office has evidence that certain taxpayers are using complex chains of trusts to minimise tax. The A New Tax System (Closely Held Trusts) Bill 1999 and the two associated bills address this problem by enabling the tracing of ultimate beneficiaries through complex chains of trusts. These measures will apply regardless of the number of trusts through which the distributions may pass. In effect, these measures will provide an administrative audit trail, helping to establish tax liabilities in circumstances where complex chains of trusts are used to minimise tax. At their heart, these are anti-avoidance measures. They are anticipated to raise $30 million in each of the 1999-2000 and 2000-01 financial years. As has been pointed out by the honourable member for Grey, Mr Wakelin, the number of trusts lodging returns in Australia has grown in recent years—from 331,338 in 1993-94 to 427,431 in 1996-97. Therefore, it is appropriate that the tax treatment of these vehicles is considered carefully to ensure that equity is retained.

The member for Wills suggested that in 1995 it was suggested that something needed to be done about the area of trusts. It ought to be recognised that in 1995 the Labor Party was in office and it did absolutely nothing following that information coming to light. We ought not to lose sight of the very obvious fact that for 13 years, from 1983 to 1996, the Labor Party was the government of this country. So it is all very well for Labor members to come into the chamber and to huff and puff and accuse this government of inactivity. The reality is that this government has done more than any other government about doing away with abuses of trusts and closing loopholes, and we are not, in any way, shape or form, apologising for what we have done.

Honourable members would be aware that the government did reintroduce trust loss provisions, it brought in measures to combat sales tax fraud in the computer industry, and it brought in various other tax avoidance provisions and provisions which define the tax laws to make sure they apply as intended—for example, franking credit trading, dividend and capital streaming and dividend substitution. In addition, everyone in Australia knows that the change in tax mix which will follow the implementation of our new tax system as we approach the next millennium will indeed reduce opportunities for tax evasion. These are real, meaningful tax reforms. They reduce reliance on income tax and change the collection system and the way trusts are taxed.

The amendment moved by the honourable member for Kingston claims that the new tax system will hurt Australian families. The Prime Minister has said, and this government has made it amply clear—and it is widely recognised in the Australian community—that, far from hurting families, it has a very strong bias towards the Australian family. It brought in the family tax initiative and many other meaningful and real reforms which benefit the Australian family. The amendments to the new tax system which were negotiated with the Australian Democrats will also benefit families. So people will reject the arguments of the Labor Party. They have no tax policy. As we approached the last election, they were rejected yet again by the Australian people, and yet they seek to come into the chamber and thwart the attempt by this government to implement its promises and the mandate given to it by the Australian people.

The current measures are meant to counter practices where entitlements pass through a series of trusts. For instance, part or all of the net income of a trust may be passed through a series of trusts, with no ultimate beneficiary being assessed on that net income—either because there is no ultimate beneficiary or because the ultimate beneficiary cannot be identified. Other assets of a trust may be said to be distributed through a series of trusts, yet the assets may never be reflected in the assets of any ultimate beneficiary. Or there may be taxpayers whose assets reflect trust distributions which cannot be traced back through the succession of trusts to which they are ascribed. Broadly speaking, these bills require trustees of closely held trusts with trustee beneficiaries to disclose to the Commissioner of Taxation the identity of ultimate beneficiaries of trust net income and trust preferred amounts to which another trust is entitled.

To reduce compliance costs, a number of closely held trusts, such as complying superannuation funds and deceased estates, have been excluded from the measure. The honourable member for Wills asked me why the government selected the period of five years with respect to deceased estates. I am very happy to advise the member for Wills, and indeed the chamber, that the reason five years has been selected is that this period is consistent with other provisions in the tax laws, including the trust loss provisions.

Under the legislation, a trustee need trace an entitlement to net income no further than any of a range of listed persons, including exempt bodies, charitable trusts and widely held trusts, and this also reduces compliance costs. For those people who suggest that there will be excessive compliance costs, it ought to be seen that the government has very carefully drafted this legislation to minimise any concern in relation to this area. I believe that the government has the balance right in relation to this particular area.

In his speech, the honourable member for Melbourne said:

Labor has no problem in supporting this legislation. It improves the equity of the tax system and makes those with the capacity to pay, pay more of their share.

They are the words of endorsement from the honourable member for Melbourne. The member for Melbourne ought to be commended for that very supportive statement of the laudable motives of the government, as encapsulated in the three bills which we are now debating. It is, however, an ongoing tragedy that the Labor Party refuses to approach overall tax reform in the same objective manner. Instead, it refuses to look to the national interest and continues to oppose tax reform.

The honourable member for Cook, as always, made a very thought provoking contribution. He stressed the reasons why the government sees these three bills as being necessary. He also emphasised how the government has a genuine commitment to real tax reform. The honourable member for Grey mentioned the growth in trusts, and I referred to that a moment ago. He summarised the provisions of the bill and he provided an overview of the government's overall tax reform strategy. He stressed that the compliance costs—as I have just said—will indeed be minimised.

The honourable member for Rankin spoke about problems which were identified in 1995 in relation to the taxation of trusts. I have just alluded to the fact that those problems were identified during the 13 years of Labor government when nothing was done. He also claimed that there were inconsistencies in the tax package as amended. The reason we would have any inconsistencies, if they were to exist, is that the Labor Party failed to support the mandate given to the government by the Australian people in October last year.

We see our original tax package as being fair, and we see the amended tax plan, agreed with Senator Lees and the Australian Democrats, as being fair. We are proud of the fact that we have been able to sit down with Senator Meg Lees and the Australian Democrats and been able to compromise and bring forward real and meaningful tax reform.

Mr Martin Ferguson interjecting—

Mr SLIPPER —It is very interesting to listen to those opposite who are supporting a continuation of an appalling situation where we have a hidden wholesale sales tax which is charged at six irrational and varying rates. The government's proposal for tax reform is comprehensive. We intend to abolish Labor's inefficient and outdated wholesale sales tax, and we are not going to apologise for doing so. I simply do not know why the Labor Party is so devoted to such a troglodyte attitude to tax reform. We are proud to be replacing Labor's wholesale sales tax with a much fairer, broad based and single low rate GST.

Mrs Bronwyn Bishop interjecting—

Mr SLIPPER —I thank the Minister for Aged Care for her supportive interjection. States and territories will receive all GST revenue. Our tax plan delivers over $10 billion of tax cuts. This means that 80 per cent of Australian taxpayers will be on a top marginal rate of no more than 30 cents in the dollar. We have increased assistance to families, pensioners and independent retirees. There will be lower diesel fuel costs for businesses and also for rural Australia.

We are very supportive of the environment. Indeed, it ought to be recognised that this is the greenest government Australia has ever seen. The Natural Heritage Trust, funded by the partial sale of Telstra, has ensured that the situation of Australia's environment, which we hand on to future generations—

Mr Martin Ferguson interjecting—

Mr SLIPPER —It will be infinitely better, my friend, than what the Labor Party failed to achieve in its 13 years of office. As part of the tax package, we are spending $1,000 million on initiatives to improve the environment, such as urban air quality, greenhouse gas emissions and so on. We are building on the wonderful record that we already have.

There was also some comment made in the debate in relation to the provisions on page 26 of the explanatory memorandum under `Government Revenue'. Under 1.102, it says:

This measure was estimated to raise revenue of $30 million in each of 1999-2000 and 2000-2001. After these periods the effect of the measure is likely to be absorbed by the entities' taxation proposal announced in Tax Reform: not a new tax, a new tax system: The Howard Government's Plan for a New Tax System , if it is implemented as announced from 2000-2001.

These bills before the chamber are only part of our tax plan. We cannot presume that all bills will get through the parliament, although we are confident—following the agreement with the Australian Democrats—that, unlike the Labor Party, we will be able to deliver on the mandate given to us by the Australian people. This government is committed to keeping its promises.

We do remember that when the Labor Party were in office—and I suspect that you yourself, Madam Deputy Speaker, remember— they were prepared to do anything. Prior to elections, they were prepared to promise anything. They said they would not sell the Commonwealth Bank. I think they said they would not sell Qantas.

Mrs Bronwyn Bishop interjecting—

Mr SLIPPER —And what did they do? They sold them both. So the Labor Party are prepared to do anything. They come into the chamber prepared to promise anything prior to a poll with a view to getting elected, and when they get onto the government benches they simply tear up the promises that they have made.

This government is determined to keep its promises. This government was given a mandate by the Australian people, and this government is very pleased to support the new tax system which we are bringing in as we approach the next millennium.

Returning to the provisions of the bill, it ought to be seen that the commissioner will need the information from trustees to check that a beneficiary includes his or her share of the net income of a trust in his or her assessable income for the year and to make sure that the right beneficiary's net assets include any other tax preferred amounts from the trust. When a trustee does not get the necessary information in relation to net income of the trust, the bills will impose a tax on the trustee in relation to that part of the net income at the top marginal tax rate plus the Medicare levy. This is so regardless of whether the trustee refuses to give the information, cannot give the information or gives incorrect information. The bills will also impose a tax on a share of the net income for which there is no ultimate beneficiary, again at the top marginal rate plus Medicare. If the trustee does not give the required information about a tax preferred amount, the trustee of a closely held trust may be guilty of an offence under the Taxation Administration Act 1953 if the trustee did not give the information that he or she knew or did not take reasonable steps to find out any information that he or she did not know.

This has been a wide-ranging debate. The contributions made by government members have stressed the importance of A New Tax System. The contributions made by those opposite have, as always, been shallow. I am very pleased to commend these three bills to the chamber. The government rejects the amendment moved by the honourable member for Kingston.

Question put:

That the words proposed to be omitted (Mr Cox's amendment) stand part of the question.

The House divided. [5.51 p.m.]

(Madam Deputy Speaker—Mr J.A. Crosio)

Ayes . . . . . . . . . . . . . . . . 73

Noes . . . . . . . . . . . . . . . . 60

——

Majority . . . . . . . . . . . . 13

——

Question so resolved in the affirmative.

Voting details are recorded in the Votes and Proceedings.

Bill read a second time.