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Wednesday, 16 February 2005
Page: 127

Mr BROUGH (Minister for Revenue and Assistant Treasurer) (6:25 PM) —in reply—I particularly thank the member for Fisher for his contribution. I would like to thank the member for Lilley but he did not actually talk about the bill. I was actually hoping that he would be here because I did have an invitation for him. He stands here and lectures the government about all of the issues to do with financial rectitude and looking after Australia's families. I invite him when he is next in the chamber to inform the Australian public that he has worked out that the $600 family payments are in fact real money. Once he has that fundamental issue off his plate then he can move on to bigger and more significant issues when it comes to international tax arrangements. I am not deriding for one moment the absolute significance of those payments to the welfare of our families.

In the 2003 budget the Treasurer announced the outcome of the review of international tax arrangements, foreshadowing over 30 initiatives designed to modernise Australia's international tax system. In a statement at the time the Treasurer said:

... to maintain Australia's status as an attractive place for business and investment, the tax system needs continually to adapt to the international business environment.

Never were truer words spoken. I take the opportunity to congratulate my colleague and minister at the table here who at the time was Minister for Financial Services. I think it said a lot about the government's commitment to making Australia a global hub for financial services that Minister Hockey was the first ever minister for that particular portfolio. The government recognised the significance that the financial markets play and the importance of taking a lead role in these measures. So that largely commenced in 1996 and we have absolutely remained committed to ensuring that Australia is an attractive place to do business in the investment field in particular.

The package of reforms announced by the government will improve the competitiveness of Australian companies with offshore operations. These reforms will reduce the cost of complying with the controlled foreign company rules, reduce tax on foreign `active' business income and effectively reduce foreign taxes by modernising Australian tax treaties. The reforms will encourage the establishment in Australia of regional headquarters for foreign groups and improve Australia's attractiveness as a continuing base for our multinational companies. The reforms will also enhance competitiveness and reduce the compliance costs for Australian based managed funds.

The government first delivered on these announced reforms with the signing of the new tax treaty with the United Kingdom. The treaty was enacted in 2004. It provided significant benefits for Australian based multinationals operating in the United Kingdom. The New International Tax Arrangements Act 2004 and the New International Tax Arrangements (Participation Exemption and Other Measures) Act 2004 implemented many more of these initiatives. The changes reduced compliance costs and minimised the tax burden on the offshore operations in Australia's multinationals.

The bill before the House is a further instalment of these ongoing and important international tax reforms. The bill focuses on making the Australian managed fund industry more attractive to foreign clients. Australia has a significant managed fund industry facilitated by the strong economic performance of the Howard government, a highly educated work force, low-cost infrastructure, advanced regulatory systems—which cannot be understated—and sophisticated financial markets. Reforms in this bill reduce taxation impediments to further growth in this area. These changes allow Australia's managed funds to become more internationally competitive, increasing their attractiveness to nonresidents. Under current capital gains tax arrangements, nonresidents investing in assets through an Australian managed fund may be taxed more heavily than if they invested in those assets directly through a foreign fund. Measures in this bill will eliminate these distortions.

The size of the Australian fund management pool and its prospect for continued growth are drawing global firms to establish operations here in Australia. The resultant clustering of activities and concentration of expertise have created a robust domestic industry. This infrastructure provides a framework for Australia to become the funds management hub for the Asia-Pacific, and these reforms will remove impediments to achieving this goal.

This bill has very strong business support. I thank all in the business community who were involved in the process of developing this bill for their consultation and for their constructive approach to working with Treasury to ensure that we get it right. The future of the Australian economy is fundamentally linked to global prosperity and to Australia being part of that prosperity. That is why I found the comments today by the member for Lilley when he said that the government was ill-directed—I cannot quite recall the exact word he used—when we looked at bilateral relations with the US. It is the single largest economy in the world, and he derides the government for taking on the enormous task of securing a free trade agreement so that we can push forward with our trade with the US and, in doing so, help the balance of trade.

This bill is an important part of modernising Australia's international tax system to make the most of Australia's potential to market financial products to foreign investors. It is yet another instalment of the government's total commitment to ensuring we are at the forefront of both regulatory and tax improvements, so that overseas investors find this a safe, secure and a viable country to invest in, which at the end of the day will make us a more prosperous nation. I commend the bill to the House.

Question agreed to.

Bill read a second time.