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Wednesday, 10 February 2010
Page: 1035


Mr NEUMANN (5:16 PM) —I rise to speak in support of the Tax Laws Amendment (2009 Measures No. 6) Bill 2009. Today in the Main Committee there is a long list of speakers on appropriation bills. Those are the bills that actually give out money on the expenditure side. Today in this chamber we are dealing with legislation that deals with tax laws—that is, the income that comes into government revenue. Government is like a business, in effect: you expend money and you get money in. As someone who was in business for more than 20 years before coming into this place, I know the challenges of small business—how to grow a business and how difficult it is. You need to be prudent, careful and efficient in the way you deal with things. The legislation that is before the House today is about improving not just the equity but the efficiency and effectiveness of our tax system.

I listened to the shadow minister in relation to schedule 1, and I do not share her concern with that. Schedule 1 does deal with trust cloning, which is a problem for us in terms of the mischief it can cause. People are entitled to engage in succession planning, in asset protection; but they are not entitled to change ownership in circumstances to avoid capital gains tax. People who can afford it, people with income and assets, people with access to good tax advisers, can make use of provisions in our Income Tax Assessment Act to avoid tax. No-one should be able to evade tax, but it is legitimate to minimise our tax arrangements. In fact, the Income Tax Assessment Act should effectively be used as a dumbbell it is so heavy—and it has been growing over the years. We need to make sure that our tax system is lean, efficient and simplified. We cannot have situations where people can make arrangements—using, say, discretionary trusts—to change ownership arrangements so as to minimise their tax in a way that evades it. Discretionary family trusts are fine; it is legitimate to use them. But you cannot make your trust arrangements in a way so as to effectively mean that you pay less than you ought.

I said today in the Main Committee that my electorate had received considerable sums of money in Regional and Local Community Infrastructure funding, and I outlined examples today. That is on the expenditure side. Money has been delivered in vital infrastructure. We cannot engage in the BER funding, we cannot engage in Regional and Local Community Infrastructure funding; we cannot build the roads, fix the ports, build the railways, pay social security or fix our health and hospital system unless we get our tax system right—unless we get it lean, efficient and effective. Schedules 1, 2, 3, 4, 5 and 6 are the methods by which we can contribute to making sure that the tax system is fair on all of us, making sure that those on low and medium incomes are not disadvantaged compared with those who are wealthy and can afford the best tax advisers. The meatworkers, the cleaners, the public servants in my electorate should not be disadvantaged compared with those who are wealthy—the millionaires and the billionaires in this country.

Schedule 1, as the minister has said, contributes to our tax system being more lean and efficient. It effectively abolishes the exception to the capital gains tax events, what are known as E1 and E2. These are known as the ‘trust cloning exceptions’. That is the process whereby someone who is smart, and probably business savvy, can create a new trust on the same terms, with the same beneficiaries as the original trust, so that assets can be transferred between those trusts without raising what we would call a capital gains tax liability. That does not mean to say that we should not effectively allow someone to use a fixed trust where there is no effective change of ownership, but what we must do is eliminate the possibility that there can be an effective ownership change without that capital gains tax liability arising.

There is, as I said, a limited CGT rollover for transfer of assets between fixed trusts—and that is the right thing to do, because people are entitled to restructure their trusts. But we cannot have a situation where those people who have the capacity to can arrange their affairs in a way where all the rest of us can suffer disadvantage and our consolidated revenue is disadvantaged such that our health system, our hospital system, our roads and our social welfare system are disadvantaged.

We want to make sure that people can engage in trust arrangements. We want to make sure that they can restructure their trusts. We want to make sure that, as the minister said, capital gains tax is not an undue impediment to the restructure of those trusts. I think the schedules as specified in this legislation do reflect what the Minister for Small Business, Independent Contractors and the Service Economy said—that this is very typical of the Rudd government’s busy work ethic when it comes to tax reform. It is important that we continue this while we wait for the government’s consideration of the Henry tax review and for the announcements that will follow.

Schedule 2 removes very substantial income tax impediments to mergers between complying superannuation funds. We have seen some pretty big superannuation funds merge. AustralianSuper is typical of that. The merger between the former Australian Retirement Fund and the Superannuation Trust of Australia took place in 2006. I believe that there will be future mergers in the sector. There have been other mergers, and the industry does want this change.

I think one of the greatest legacies of the Hawke and Keating governments is our superannuation industry. Superannuation allows our senior citizens—and we are all going to get older—to have economic security and dignity. It allows them to access the necessities of life, put a roof over their heads and not have to worry quite so much about their future economic security. Many people in this place would have parents—some even grandparents—who are in that situation.

There are economies of scale in the merger of superannuation schemes. Anything we can do to permit mergers to happen so that schemes do not have the terrible charges that so many smaller superannuation schemes seem to impose on their beneficiaries is good. Anything we can do to improve the superannuation industry is of benefit to the whole nation and those people whom we hope to represent to the best of our ability in this chamber.

Schedule 2 removes significant income tax impediments to mergers, as I said. It permits the rolling over of capital losses and revenue losses realised under the merger and the transfer of previously realised capital and revenue losses. That loss relief is going to be available for a complying superannuation fund which merges with another complying superannuation fund with five or more members. If we did not do this, there would be an impediment to such mergers. The industry wants this change to take place. Submissions made in relation to this matter after it was announced that this would take place indicate clearly that the industry is in favour of what we are doing in this regard.

The third schedule deals with exempt annuities. An annuity is really a right to receive a payment over a period of time. It is very common for that to take place in the form of an income stream from a life insurance company. They market these annuities. It is very common for people to engage in these arrangements, and they are entitled to do so. Schedule 3 clarifies the circumstances in which an income derived from a life insurance company qualifies as non-assessable and non-exempt income. It is a very technical change. It is of benefit, as it does make certain the situation in relation to this matter. I do think, however, that at some stage we need to look at an amendment to the wording of what is an ‘exempt annuity’. There is no definition of that in the legislation. I think we need to look at that in the future. That would clarify the situation and help people to understand the legislation.

The amendments in schedule 3 also make it clear that superannuation income streams offered by life insurance companies are not subject to annuity conditions. Therefore, life insurance companies will be taxed on the superannuation income stream in the same way as any other superannuation income stream provider is. Unlike the previous provisions with respect to annuity conditions, which have a retrospective aspect to 1 July 2000, those changes in the latter amendment that I referred to operate from the 2007-08 income year, so the retrospectivity is not so great.

Schedule 4 helps our community to be more charitable. It lists two new organisations, the Green Institute Ltd and the United States Studies Centre, as income tax deduction beneficiaries. Under the current law, an individual can claim income tax deductions if they give gifts to certain organisations which qualify for the status of a charity. This will help philanthropy in the country. I do not share the concerns of the shadow minister with respect to the Green Institute. There is another provision that changes the name of one of the organisations from the Dymocks Literacy Foundation to Dymocks Children’s Charities. The law of charities goes back to the Elizabethan era. It is one of the great initiatives of that time. I recommend to anyone a thesis that was written by the brother of the member for Leichhardt on that particular era and area of law as it has developed. If anyone is interested in reading that, I suggest they contact Matthew Turnour. I think this amendment is good. It will help people to contribute to those organisations and will allow the organisations to have a tax-deductible status.

Schedule 5 deals with other changes which are of benefit to our society, particularly to Queenslanders. I represent an electorate in South-East Queensland. In my personal life, my family suffered terribly in the 1974 floods when the house in which I lived as a child was eight foot under water. The devastation which my parents and my whole family suffered at that time will never be forgotten. It was the end of my childhood and I saw what my parents and their neighbours went through. I saw the economic challenges that they suffered and the emotional and psychological damage that was done to family and friends when a third of the city of Ipswich, which I now represent, was underneath the water. The support given by the Army in physical assistance, in getting furniture out of houses, and the assistance given by Social Security, churches and charities will never be forgotten by me as long as I live. Anything we can do to help our fellow Queenslanders who have suffered terribly from the devastating floods in north-western Queensland will be of benefit. Schedule 5 exempts from income tax the income recovery subsidy paid to those people affected. North Queensland suffered terribly and this legislation will help employers, employees, small business operators and the many farmers in North and north-western Queensland who suffered devastating consequences to their businesses, their farms, their homes and their livelihoods. This exemption will assist, and we must do everything we can to assist them, in their recovery. Recovery does not happen in a week, a month or a year—it can go on forever. What we do here, in exempting from income tax the income tax recovery subsidy paid, is a small step. Eligible recipients, as I said, are employees, small business persons and farmers who were in the devastated area within the designated time period. It means that those people are put in the same category as those who suffered such devastation in the bushfires in Victoria.

The final schedule is very uneventful. It deals with the excise on the manufacture of spirits. It is just a technical amendment preserving the status quo for the concessional spirits regime. I will not speak further about that, as it is self-explanatory. It really makes very little difference, as it is just a technical amendment that allows the system to operate more effectively in relation to the excise on the manufacture of spirits.

This is a complex piece of legislation, but a worthy one. It benefits people in my home state of Queensland and it will benefit the people in my electorate. It will benefit the recipients of superannuation and people who wish to be philanthropic by contributing to charity. Whilst it is a very technical piece of legislation, it is an important one and I commend the bill to the House.