Senator MARK BISHOP (5:54 PM) —In discussing the Taxation Laws Amendment (Film Licensed Investment Company) Bill 1998 , I wish to address the current status of the Australian film industry, the government's approaches in recent times, reservations expressed by the ALP in the lower house and several of the matters raised in the recent Senate report as tabled last week in this chamber.

Turning to the Australian film industry, it is clear there has been significant growth and great strength in this industry in recent years. Investment over the last 30 years appears to be bearing fruit in a number of states. Growth is apparent in New South Wales, as evidenced by Fox Studios investment and the location of major work into that state. I am advised that studios recently built and expanded in New South Wales are booked out until the year 2002. There has been ongoing investment in Queensland in major films with large budgets using the many facilities also built in recent times in that state.

A number of Australian films are having both critical and commercial success in offshore markets, to mention but a few topical films of recent days: LA Confidential, Shine, and Babe. More importantly for our own purposes, a lot of the higher value work is being sourced these days in Australia: technicians, animators, trades persons, computer operators, graphic and design people, script writers, directors and producers. These are all pleasing developments. When one looks at the bare statistics, they show a similar story or confirm the anecdotal reports from industry and press reports. The ABS shows audiovisual production worth $1.3 billion in the last financial year. Employment figures show over 40,000 persons are employed in the industry.

Films and allied entertainment are industries of the future, based on intellectual property and creativity, requiring education, training and the ongoing development of skills, industries that are developing, which we welcome, and offer long-term and rewarding career prospects to those persons who choose to enter the relevant areas. The government's attitude in recent times has been, not to appear too churlish, somewhat disappointing. In light of the above growth and success, it is difficult to understand the government's actions in recent years. Last year's budget reduced government assistance from $97 million to $70 million. A 30 per cent cut in the outyear forecasts shows no improvement. There have been massive cuts in government support for the ABC, a critical institution for innovation, creativity and training in Australia. It has always been an important source of film and TV production and the capacity to continue that incubator role is restricted by more recent budget cuts.

When this bill was being discussed in the lower house, the ALP mentioned a number of reservations. In particular, the member for Denison expressed reservations. Basically, he criticised the government for withdrawing a substantial amount of support for the film industry in recent years. Mr Kerr went on to make a number of points. Firstly, he sought an ongoing commitment to the Film Finance Corporation which, forward estimates show, is not funded past the current triennium. We repeat our support on the basis that it is a trial supplement to current funding arrangements which should remain undisturbed. We will ask the minister to formally respond to that issue in due course.

Secondly, Mr Kerr entered a caveat concerning the Senate's report. The Senate report has been down for some days now and fundamentally addresses three issues: the adequacy of the level of the proposed tax deduction, whether the capital gains tax provisions could act as a disincentive to investment and whether the scheme would be effective in attracting more investment in Australian films.

Turning to the adequacy of the level of the proposed tax deduction, most submissions to the Senate inquiry made the following points. The Gonski recommendation was for a tax deduction of 120 per cent and anything less than that was not adequate because of the high risk nature of this industry. Doubts were expressed about investment being attracted if the figure was set at no more than 100 per cent. In this context, the submission was repeated on a number of occasions that the changes being introduced by this bill were not an improvement in that context.

In respect of the capital gains tax, most submissions argued that a zero cost base of 100 per cent of sale price of shares which would be subject to CGT would also be a disincentive to investors. Many industries, one should note in passing, make the same point. In the recent industry policy inquiry conducted by the Senate Economics References Committee, many investors made the point that the capital gains tax regime in Australia appeared to inhibit investment and needed review.

The Senate report addressed whether the scheme would be effective in attracting more investment. Submissions argued that the cap of $20 million tax concession per year limited the potential for the film industry to expand. FACTS argued against clause 25 of the bill which prevents FLIC from investing in a film developed or produced by commercial broadcasters. Both these objections were discussed by the Senate committee at pages 5 and 6.

I have two minor points to make in concluding. The first point I wish to address concerns clause 3.33—extending the end date of the scheme from 30 June 2002 to 30 June 2003. It is not necessarily a bad thing, and it is probably caused by delay in the passage of the bill occasioned by the recent election. This, however, should not necessarily extend the time before the scheme can be reviewed. It would be beneficial to all parties, particularly industry participants and investors, to understand the progress of the trial scheme and any potential problems or abuses foreseen or unforeseen. So we would commend to the government an earlier assessment of the scheme at 30 June 2002.

The second point I wish to address is that when the bill was first introduced in May 1998 it was thought necessary to allow up to two years to raise the total amount of concession or capital. Apparently, that is not the case now. To significantly reduce the time in which capital may be raised could have two consequences. Firstly, the failure to raise a target amount could save the government some tax concessions and moneys otherwise allocated. Secondly, there could be a rush by investors to throw money at projects without proper consideration. Either development would be unwelcome and would defeat the purpose of the bill and the government's stated intention. If the pilot scheme opportunity to trial is based upon a more diverse set of investors, a higher level of investment and a broader base of private investment in this film industry, narrow time lines should not get in the way of its eventual success.

In summary, in the lower house the opposition did not oppose the legislation. We cooperated with the Senate inquiry process and, now that the Senate report is delivered, we voice no objection of any great substance, subject to my earlier comments about dates and time lines. The opposition will watch the progress of this trial scheme with interest and look forward to the review documents in due course. As this industry appears to be developing well, we support this scheme as a vehicle to raise additional finance, to develop new projects and to expand the horizon of this influential industry in Australia. The opposition does not oppose passage of this bill.