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Monday, 22 June 1998
Page: 3627


Senator NEWMAN (Social Security) (5:23 PM) —I table a revised explanatory memorandum relating to the Wheat Marketing Legislation Amendment Bill 1998 and move:

That these bills be now read a second time.

I seek leave to have the second reading speeches incorporated in Hansard .

Leave granted.

The speeches read as follows

WHEAT MARKETING LEGISLATION AMENDMENT BILL 1998

Madam President, this bill concerns the restructuring of marketing arrangements for the export marketing of Australian wheat based on the objectives of grower ownership and control, self reliance and a fully commercial approach to marketing. Industry and Government have both agreed that a structure based on these objectives would best meet the needs of industry into the next century.

In April 1997, the Government agreed to industry's recommendation for the establishment of a grower owned and controlled company to assume responsibility for wheat marketing from 1 July 1999, when the Government guarantee of the Australian Wheat Board borrowings ends.

The new grower company will operate under Corporations Law in accordance with its memorandum and articles of association. It will have two classes of shares—A class shares will be issued only to growers and will give control of the company; B class shares, issued on the basis of Wheat Industry Fund equity, will form the capital base of the company.

Madam President, as a transitional step towards these arrangements, Government agreed that the Australian Wheat Board establish a wholly owned company to carry out all the commercial activities of the Board. The new company AWB Ltd, with separate subsidiaries to undertake pooling and domestic trading, became operational on 1 June 1998.

In March 1998, industry put to Government, and Government endorsed, the final details for the new arrangements to commence on 1 July 1999.

Madam President, the bill before the House completes the legislation necessary for the restructure of the Australian Wheat Board. It addresses the following key areas:

. the conversion of the Wheat Industry Fund to shares and thereby providing the capital base of the new company structure;

. provision for managing the continuation of the wheat export monopoly; and

. other transitional matters to finalise the new arrangements.

Conversion of the Wheat Industry Fund to shares

Almost a decade ago, the wheat industry commenced building up funds for a capital base for a future grower owned Australian Wheat Board via a levy on wheat sales. These funds were paid into the Wheat Industry Fund.

Under the bill, from 1 July 1999 the Wheat Industry Fund will be returned to growers in the form of B class shares. B-class shares will be issued to Fund equity holders on the basis of one share for every Fund unit and will provide the new company's capital base.

Madam President, the issue of shares to growers to replace Wheat Industry Fund equity is a significant financial transaction. Growers have been rightly concerned as to the taxation implications. The taxation treatment to apply to the conversion of the Wheat Industry Fund to shares is covered by tax legislation. So there can be no doubt, I would like to reiterate the taxation arrangements agreed to by Government.

As announced in November 1997, shares in the new grower company are to be treated as capital for taxation purposes. Automatic roll-over relief from capital gains tax on conversion of the Wheat Industry Fund units to shares, means that capital gains tax on the shares will only apply when they are disposed of.

For capital gains tax purposes, the cost base of the share is to include levy contributions made by growers prior to 13 May 1997, indexed for inflation. However, levy contributions made after 13 May 1997 will remain immediately income tax deductible, and will receive the benefit of capital gains tax indexation until disposal of the asset. On disposal of the asset, the cost base is to be reduced by levy contributions made after 13 May 1997.

In addition, the Government has decided that the capital gains tax small business roll-over provisions, as announced in the 1996-97 Budget, will be available to growers where a wheat industry fund unit is disposed of and the proceeds applied to the purchase of another small business `active asset'. However, this roll-over relief will cease to be available after the Wheat Industry Fund units are converted to shares.

Provision of the Wheat Export Monopoly

Madam President, the bill also provides for the retention of the wheat export monopoly from 1 July 1999.

Specifically, the bill provides for an independent statutory authority, to be known as the `Wheat Export Authority', to manage the export monopoly on wheat.

To give growers the certainty that they have been asking for, the bill also provides that the new grower company pool subsidiary (called `company B') has an automatic right to export wheat for five years. Requests to export wheat from other than the grower company pool subsidiary (as currently happens) will be managed by the Wheat Export Authority in consultation with the grower company pool subsidiary.

The Wheat Export Authority will oversight the pool subsidiary's use of the export monopoly to ensure it is being used in accordance with the intentions of Parliament. It will also examine and report on the benefit to growers from the pool subsidiary's performance in relation to the export of wheat.

Madam President, the Government is committed to the principles of National Competition Policy. Continuation of these arrangements for the export monopoly for the full five year period will be subject to the outcome of a comprehensive and independent National Competition Policy review in 1999-2000.

Assuming the National Competition Policy review in 1999/2000 recommends continuation of the export monopoly, it is envisaged that before the end of the prescribed five year period in 2004 an export monopoly performance review would be held. Specifically, the review would assess the performance of the pool subsidiary in its use of its wheat export rights and advise Government on the future operation of the export monopoly, including whether that company should continue to have special export rights. Such a review would probably be linked with a National Competition Policy review process. It would be up to the Government to decide who would receive any special export rights beyond 2004 and for Parliament to amend the legislation as necessary.

Other Transitional Matters

Madam President, the bill also provides for a number of other transitional matters to finalise the restructure of the Australian Wheat Board including:

. deletion of the redundant provisions of the Wheat Marketing Act 1989;

. the completion of the transfer of assets, liabilities and staff from the Australian Wheat Board to its wholly owned holding company prior to 1_July 1999; and

. continuation of Government underwriting for pool borrowings outstanding as at 30 June 1999, until these borrowings are repaid.

Conclusion

This bill finalises the legislation for the restructure of wheat marketing.

Administrative and legal work, such as the transfer of staff and assets to the new companies, will be completed over the next twelve months.

The grower company of 1 July 1999 will be a robust, commercial company with the flexibility to meet the marketing challenges of the next century. Industry is to be congratulated on its success in developing this model and we now look forward to industry taking control of its future as it enters this exciting new era of opportunity.

I commend the bill to Honourable Senators.

NATIONAL FIREARMS PROGRAM IMPLEMENTATION BILL 1998

This bill complements the National Firearms Program Implementation Acts of 1996 and 1997 supporting a firearms buyback scheme in the territories of Norfolk Island, Cocos (Keeling) Islands and Christmas Island.

Following the tragic events at Port Arthur in April 1996 the Australasian Police Ministers' Council agreed to nationwide gun control measures. A significant element of these measures was the amnesty and compensation scheme for owners of semi-automatic firearms. It was agreed that people who surrendered these firearms during the amnesty period, would be compensated and the Commonwealth would pay the cost of the compensation scheme.

The Commonwealth also agreed to pay compensation for the surrender of other prohibited firearms of a more dangerous type where the surrender is consistent with the spirit of the national firearms program.

The compensation-for-surrender scheme in the States and mainland territories was funded by a one-off increase in the Medicare levy for the income year 1996-97. The funds raised by that one-off levy will also meet the cost of the scheme in the territories of Norfolk Island, Cocos (Keeling) Islands and Christmas Island.

The bill provides for me to authorise payments for the purpose of providing compensation to firearms owners and dealers and for purposes directly connected to the compensation scheme and for implementation of licensing and registration schemes in the territories.

The bill appropriates moneys from the consolidated revenue fund for these purposes.

The National Firearms Program has received bipartisan support. I ask that that support continue.

I commend the bill to the Senate and I present the explanatory memorandum to the bill.

TAXATION LAWS AMENDMENT (FARM MANAGEMENT DEPOSITS) BILL 1998

Madam President, honourable senators, this bill establishes the Farm Management Deposits Scheme.

The bill introduces an important element of the government's integrated rural policy strategy to build a competitive, sustainable and profitable rural sector. The government's new Agriculture—Advancing Australia initiative is the first attempt in many years to comprehensively address the range of issues facing rural Australia. This Scheme delivers on a major commitment given by the Coalition at the last election.

Extensive consultation with State and Territory governments, farmer groups, financial institutions and the public has contributed significantly in shaping the measures introduced today. The initiatives in this bill have received widespread endorsement from key farming bodies such as the National Farmers' Federation and from the financial sector, including the Australian Bankers' Association.

The Farm Management Deposit (FMD) scheme enhances and expands the previous Income Equalisation Deposit (IED) and Farm Management Bond (FMB) schemes operated by the Department of Primary Industries and Energy. This bill has been carefully designed to meet the Coalition's long standing desire to encourage increased financial self reliance among farmers, while also taking account of the high variability of farm income streams, and the vulnerability of farming businesses to natural events.

Madam President, the bill takes the operation of the FMD scheme out of Government hands and commercialises it. The FMD scheme will be a tax-linked financial risk management tool that allows farmer taxpayers to transfer income between high income and low income years. The Government's aim is to improve primary producers' capacity to manage financial fluctuations caused by environmental and market conditions. It helps them do this by allowing them to set aside considerable cash reserves earned during high income years for use in low income year, in a tax effective way. Financial institutions are likely to offer a range of products, providing farmers with more choice as well as increased flexibility in their investment decisions.

I will be asking my Department and the Australian Taxation Office to ensure reporting arrangements are in place so that the scheme retains its integrity and can achieve its objectives. The restriction of the scheme to prudentially controlled deposit taking institutions or those with government guarantees on the deposits will increase the security of deposits.

The key features of the enhanced FMD scheme will be:

. A limit on holdings in the scheme of $300,000 per taxpayer;

. The investment component will be set at 100 per cent on the entire balance—this means interest will be able to be earned on the whole deposit which has been made out of pre-tax income;

- currently the investment component is only 61 per cent for IEDs;

. Eligibility will be restricted to primary producers with a taxable non-primary production income of not more than $50,000;

. The scheme will be commercialised and delivered through financial institutions, making it far easier for farmers to make deposits and withdrawals;

. Investors will be able to elect only one institution with which to hold deposits, however this institution may be changed at any time;

. Financial institutions will pay an interest rate determined in the market;

. Deposits will be fully tax deductible in the year of deposit and taxable in the year of withdrawal;

There will be a minimum deposit period of 12 months;

Interest will be taxable in the income year it is earned;

. On withdrawal 20 per cent of the amount withdrawn will be deducted for tax purposes but this deduction may be exempted if the depositor demonstrates to the Department of Primary Industries and Energy that he or she is in serious financial difficulties;

. As with current arrangements, FMDs will not be available to companies, trusts or partnerships, although individual beneficiaries of trusts and individual members of partnerships will be able to use them.

IEDs and FMBs have, to date, had a low rate of uptake, mainly because they have been inflexible and not commercially attractive or tax effective. Some 222 million dollars are currently invested by more than 6600 people in IEDs and 110 million dollars by more than 3300 people in FMBs. Primary producers with existing IED or FMB accounts will be able to transfer them to FMDs with no loss of tax benefits.

The revised conditions in the new FMD Scheme, including its commercial nature, larger investment component and flexibility of withdrawals, should secure an increased uptake of the new scheme. This is appropriate as the aim of the package is to encourage more farmers to use such deposits to manage risk.

The Government will be closely monitoring the operation of the scheme; in particular the interest rates offered by financial institutions and the fees and charges they levy on FMD accounts.

The Income Equalisation Deposits (Interest Adjustment) Act 1984 applied only to interest payments made under the IED scheme during the period 29 June 1984 to 22 November 1984 inclusive. All relevant periods for amendment or appeal processes relating to that time period have expired. The bill repeals the Income Equalisation Deposits (Interest Adjustment) Act 1984 as it has become redundant.

Madam President, today is a proud day for me as Minister for Primary Industries and Energy. The Farm Management Deposit Scheme and the new financial risk management capability it offers will be of great benefit to the farm sector.

I have great pleasure in commending the bill to honourable senators.

PASSENGER MOVEMENT CHARGE AMENDMENT BILL 1998

The purpose of this bill is to amend the Passenger Movement Charge Act 1978 to increase the rate of the Passenger Movement Charge (the charge) by $3, to $30, with effect from 1 January 1999. The increase was announced by the Treasurer in the 1998-99 Budget and will help meet the additional costs associated with the transit of people and goods for the Sydney 2000 Olympic Games.

The charge, which is imposed on the departure of a person from Australia, is collected by airlines and shipping companies at the time of ticket sales and then remitted to the Commonwealth in accordance with arrangements entered into under section 10 of the Passenger Movement Charge Collection Act 1978. These arrangements have been extremely successful and beneficial to all stakeholders, not the least being the passengers whose departure from Australia is unimpeded through a seamless process which no longer requires the purchase of charge stamps.

Current arrangements with airlines are due to expire on 30 June 1998 and the Government is finalising negotiations with interested parties for new arrangements to apply from 1 July 1998 to 30 June 2001. The increase in the charge will have no impact on the arrangements and collection and remission procedures will remain the same.

It is, however, desirable that the amendment to give effect to the increase in the charge from 1 January 1999 be in place at the earliest opportunity so as to provide certainty for airlines and shipping companies in relation to ticket sales for departures after the proposed date for the increase.

Ordered that the resumption of the date be made an order of the day for the first day of the 1998 spring sittings, in accordance with standing order 111.

Ordered that the bills be listed on the Notice Paper as separate orders of the day.