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Wednesday, 3 March 2004
Page: 25712


Mr ROSS CAMERON (Parliamentary Secretary to the Treasurer) (10:01 AM) —It is my pleasure to sum up what has been a spirited, at times informative, at times entertaining and, regrettably, at times malicious debate on the Taxation Laws Amendment Bill (No. 9) 2003. The previous speaker, the member for Corio, is basically a very good bloke, but he has a capacity to let himself down in these moments of debate. I will address in the first instance the reasons why the government will be opposing the member for Kingston's amendment in relation to the sugar industry.

People ask me from time to time how I think the Leader of the Opposition is going. The factors in my mind are not what I regard as the peripheral or incidental ones. People may form judgments about his previous language or his apparent capacity to hold different positions at the same time, but it is the big issues that concern me—in particular, the free trade agreement, which is the subject of the opposition's amendment. There are big moments—for example, deciding whether or not we join the US in a coalition of the willing and whether or not we enter a negotiation with the US over a free trade agreement—that affect the direction of the nation. They go to the architecture of the Australian economy and of Australia's strategic relations and defence arrangements. At these moments, I think it is clear that the Leader of the Opposition has been found wanting. Often it is against his best instincts, but his party suffers, in this case, from a fundamental ambivalence about the United States, which I believe makes them unsuitable to govern Australia.

When we talk about the attack the member for Corio has made on the government for executing this historic agreement, we ought to bear in mind that this agreement gives Australia access to 300 million of the most prosperous individuals in the world. Whatever anyone thinks about the equity of the situation, the United States economy accounts for over 25 per cent of global consumption. The United States economy has provided over 80 per cent of all the growth in the world economy over the last decade. The United States economy accounts for almost 50 per cent of the world's equity markets. Here we have an opportunity for Australia, representing less than two per cent of the world economy, to negotiate privileged access to the largest and most prosperous economy in the world, and the opposition are ambivalent about it. The opposition cannot decide whether they are for it or against it. The opposition are somewhat embarrassed by their initial reaction of total opposition. On the basis that we did not get a perfect outcome for the sugar industry, they said we ought to trash the whole deal and rip up this once in a lifetime opportunity.

I think there is one thing about which we can be certain: if the Australian Labor Party had been on the Treasury benches over these last few years, we would not have this free trade agreement with the United States. We would not have the extraordinary opportunities for increased income for Australian exporters, increased profits for Australian industries with imported inputs and reduced prices for Australian consumers. That is the bottom line as far as this free trade agreement in concerned. Labor simply could not have executed it.

The government is committed to working in partnership with the sugar industry to facilitate a sustainable future. Yesterday the Prime Minister announced that the government will help those in most genuine need with immediate income support. As a first step to help ease their financial situation, up to $21 million in income support will be available to eligible sugar cane growers and harvesters. The government will be considering further assistance measures after we have further discussions with industry on the way ahead. This support is in addition to the $80 million in assistance provided over the past four years to thousands of cane farmers and harvesters and their families. Since October 2002 the Sugar Industry Reform Program has delivered over $20 million in assistance to over 2,500 people involved in the sugar industry. The Australian government will now undertake further discussions with the sugar industry about further assistance, and we have indicated we are prepared to go beyond the previously announced package to help position the industry for the future.

I have to ask: what has the Beattie government done to help its own sugar cane growers? In the last 18 months the Beattie government has spent virtually nothing on assistance to the industry. Earlier this week Premier Beattie reached agreement with the sugar industry on a model for regulatory reform, and I commend him for that. But it is now up to the Queensland government to commence delivery of its long promised, much anticipated but slow to arrive $30 million in industry assistance. The Australian government remains committed to working in partnership with industry to facilitate a viable future.

In terms of prices, sugar is essentially the most corrupt commodity market in the world. Sugar growers in Australia today and into the future will have virtually no control over the prices they are offered for their product. They face huge competition from other countries in the world, particularly from developing countries like Brazil, and massive subsidies from governments around the world who are determined to prop up the industry whatever its fundamental economics look like.

While the government has accepted its responsibility to help in this transition to viability, it is also incumbent on the industry to have a look at itself, be prepared to make changes, and accept the fact—I am speaking as the federal member for Parramatta rather than as the Parliamentary Secretary to the Treasurer—that there are many individuals around Australia who face risks and uncertainties in their business environments and do not have control over all their variables. In some instances, individuals have to be prepared to look at other alternatives, such as moving capital into other sectors of the Australian economy, if they cannot secure the economic fundamentals of their business or industry.

The Taxation Laws Amendment Bill (No. 9) 2003 gives effect to several wider taxation measures. Each of these measures will refine the operation of the current law, improving the fairness and equity of the system. Schedule 1 to the bill will ensure that a GST registered supplier of an eligible first aid or lifesaving course is able to treat the supply as GST free.

I foreshadow that the government intends to move an amendment to add greater flexibility to this exemption. The amendment to the bill will provide the necessary legislative flexibility to allow qualifying suppliers of a first aid or lifesaving course to be prescribed in the regulations. This will allow the government to recognise relevant training qualifications as and when appropriate.

Schedule 2 to the bill modifies the general value-shifting regime so that, as a transitional measure, the consequences arising from operating under the regime do not apply to most direct value shifts involving services. This measure will help to reduce compliance costs for businesses during the transition to consolidation. The consolidation measure is an important business tax reform initiative that allows wholly-owned corporate groups to elect to be treated as single entities for income tax purposes. The consolidation regime will promote business efficiency, improve the integrity of the Australian tax system and reduce ongoing income tax compliance costs for those wholly-owned groups that choose to consolidate.

The general value-shifting regime is an important integrity measure, designed to prevent the manipulation of tax rules by shifting value between assets by closely held entities that are not part of the same consolidated group. This new regime is complementary to the consolidation regime and reproduces the structural value-shifting integrity achieved by the consolidation regime to those groups outside consolidation.

The measures in this bill ensure that groups that consolidate during a transitional period do not incur compliance costs associated with setting up systems to identify service related indirect value shifts, when those systems will not be needed after consolidation. The measure will reduce compliance costs for business during the transition. The measure will allow groups that do not consolidate extra time to establish systems to track service related indirect value shifts that may require adjustments under the general value-shifting regime.

Schedule 3 will improve the operation of the alienation of personal services income provisions. The fringe benefits tax law will be amended to remove the potential for effective double taxation of payments that are made non-deductible by the personal service income provisions, and which may also be subject to fringe benefits tax. It was never intended that such double taxation would apply. This schedule will also make further amendments to the tax law to allow an individual working through a personal services entity to deduct a net personal services income loss. This change is consistent with the intent of the rules generally, which is to put the individual earning personal services income through an entity in the same situation, had the individual been deriving the income as an employee. These amendments were sought by tax professionals and will align the operation of the law with the original policy intent.

The amendments in schedule 4 will amend the income tax law to specify the taxation treatment of sugar industry exit grants made under the sugar industry reform program. One component of the sugar industry reform program is Commonwealth government assistance for cane growers who wish to leave the sugar industry. The assistance consists of a one-off payment, a sugar industry exit grant, of up to $45,000. Sugar industry exit grants that are paid to taxpayers who leave the agricultural industry altogether will be exempt from income tax. Grants that are paid to taxpayers who leave the sugar industry but continue to carry on another agricultural enterprise will be included in assessable income.

Schedule 5 will ensure that foreign resident withholding rules will apply where an alienated personal services payment is of a kind to be covered by the foreign resident withholding rules. This will facilitate the efficient collection of tax on the payments. The foreign resident withholding rules broadly require an entity to withhold an amount from a payment of a kind prescribed by regulations. The government has not yet prescribed any payments. An alienated personal services payment is a payment received by an entity that relates to an amount that is included in the assessable income of an individual. These payments may also be of a kind to be prescribed by the foreign resident withholding rules.

Under the existing law, where an entity receiving a payment of this kind is a foreign resident, the withholding rules will not apply and the entity may be liable to pay an amount under the alienation of personal services income rules. In these circumstances the tax relating to the payment may not be paid by the entity that is outside Australia. Recovery of the tax debt may then be difficult. The amendments will ensure the appropriate operation of the foreign resident withholding rules so that tax is collected on those payments before they leave Australia.

The amendments in schedule 6 will ensure that mutual friendly societies that are life insurance companies and that restructure by demutualising can benefit from the taxation framework that applies to other mutual life insurance companies that restructure by demutualising. Some friendly societies that qualify as life insurance companies have restructured by demutualising. However, due to technicalities in the existing law, the taxation framework that applies to other mutual life insurance companies that demutualise does not apply to those friendly societies. The amendments will remove this inconsistency.

Schedule 7 will amend the simplified tax system to provide an optional rollover relief when there are partial changes in the ownership of a partnership. This rollover relief will ensure that a taxable gain or loss will only arise when a partnership ultimately disposes of its depreciating assets. These amendments will remove a barrier that may be deterring some small businesses from entering the simplified tax regime.

Schedule 8 amends the consolidation regime under which wholly owned corporate groups are treated as a single entity for income tax purposes. The amendments will provide additional flexibility in the transition to consolidation by allowing certain choices made by a head company to be revoked or amended before 1 January 2005. The amendments in this schedule also ensure that the rules governing eligibility for the research and development tax offset apply appropriately in cases where companies join or leave a consolidated group part way through an income year. I commend this bill to the House.


The DEPUTY SPEAKER (Mr Jenkins)—The original question was that this bill be now read a second time. To this the honourable member for Kingston has moved as an amendment that all words after `That' be omitted with a view to substituting other words. The immediate question is that the words proposed to be omitted stand part of the question.

Question agreed to.

Original question agreed to.

Bill read a second time.

Message from the Governor-General recommending appropriation announced.

Message from the Administrator recommending appropriation for a proposed amendment announced.