Senator MURRAY (1:49 PM) —The Taxation Laws Amendment Bill (No. 3) 2003 was confusingly known as the Taxation Laws Amendment Bill (No. 8) 2002. I remind the Senate that the Scrutiny of Bills Committee has drawn attention to the difficulties of labelling bills in this manner. It is becoming more and more confusing for us because bills do transfer from one calendar year to another, and I am sure those who write these titles will be taking into account the unanimous views of that committee.

Like many taxation bills, this is somewhat of an omnibus bill and covers a diverse range of topics. Schedule 1 to the bill amends the tax acts to allow income tax deductions for certain gifts of $2 or more made to various organisations, including organisations as diverse as the Aboriginal Education Council (NSW) Incorporated, the General Sir John Monash Foundation and the St Paul's Cathedral Restoration Fund. Who says federal politics does not get down to the local issues?

The bill also deals with gifts to organisations that have changed their names. For instance, the Royal Society for the Prevention of Cruelty to Animals Victoria was changed to the Royal Society for the Prevention of Cruelty to Animals Victoria Inc. I also remind the Senate, as a point of history, that it was the Democrats that pressured the Labor government of the day to include the RSPCA for the first time in the category of organisations that get taxation relief on this basis. We have always been very proud of that effort.

The schedule covers gifts to organisations whose period of deductibility has been extended—for instance, Australia for UNHCR for an additional five years until 27 June 2007 and, another local one, the St Patrick's Cathedral Parramatta Rebuilding Fund, for an additional two years until 24 February 2004.

The Democrats are committed to the charity sector and we welcome the schedule changes. We are concerned that recent announcements concerning the charity sector, in the broad, need some attention because the charity sector has become concerned at government intentions. The Treasurer has assured them they have nothing to worry about; nevertheless, there is still concern. Senator Cherry, who has been intensively involved with the charities, both in his previous guise as an adviser and as a senator, will no doubt be making some remarks on these matters over time. The inquiry into the definition of charities and related organisations, I recall, was set up with former Senator John Woodley and I, with then adviser John Cherry, and with the support of the Democrats' party room. The charities inquiry was established as a result of an agreement between the Democrats and the government. We were pleased to highlight the sector for government attention and reform.

The Democrats welcome the fact that the draft Charities Bill picks up many recommendations of the inquiry, particularly the broadening of the scope of charitable purposes to include the advancement of the natural environment, of culture and of social and community welfare. However, the definition in the draft bill of what is a charity needs to be a modern and up-to-date reflection of charitable work. The key cause for concern—as people who have been following the matter in the public debate would know—is the definition of `disqualifying purpose of a charity'. This is having `more than an incidental purpose' of seeking to change government policy. The government argues that this merely reflects the current common law. That is always assuming that your view is that the current common law is adequate, which it often is not. This is a very restrictive view of current common law, relying, as it does, on English court cases, some of which are over 20 years old.

More recent court decisions, academic research, the recommendations of the charities inquiry and indeed the broad activities of charities point to broader scope for the lobbying work of charities and a more flexible definition than that which is there. The fact that so many charities are called on to provide advice and assistance to Senate and joint parliamentary inquiries and are heavily consulted by governments, state and territory and federal, shows how important they are in influencing and participating in public policy. Our concern is that the government's restrictive definition could force charities to self-censor their activities to ensure that their charitable status is not put at risk by being seen to be overly critical of government policy. Only minor changes to the Charities Bill are needed to fix this problem to ensure that it meets the Treasurer's stated objective of providing the flexibility required to ensure the definition can adapt to the changing modern needs of society.

We are also concerned that the government has failed to respond to a key recommendation of the charities definition inquiry to expand the definition of `benevolent charity'. The independent inquiry said the definition was clearly out of date. It recommended a broader category of benevolent charity to provide tax concessions to charities with the dominant purpose to benefit directly or indirectly those whose disadvantage prevents them from meeting their needs. Two years later, the Democrats and the charitable sector are still waiting for a government response to that key recommendation. Clearly, the government has a long way to go to build the confidence of the charitable sector with respect to this proposed legislation. Providing additional organisations with tax-deductible gift recipient status is a small step in that direction. I note that another bill before us, the Taxation Laws Amendment Bill (No. 7) 2003—which is also scheduled for today but which I doubt we will deal with much before late evening—has implications for the charities sector and the listing of deductible gift recipients. I will be expecting Senator Cherry to make a contribution at that time.

Schedule 2 of the bill amends the capital gains tax provisions that deal with employee share schemes to ensure the law operates as intended. The amendments are required where the employee share scheme is operated through a trust and the employee chooses to be taxed under the employee share provisions of the income tax law at the time those provisions treat the employee as acquiring the shares or rights. The amendments will ensure that capital gains or capital losses that arise while the shares or rights are held in trust are recognised and that the 12-month minimum qualifying period for the capital gains tax 50 per cent discount begins from the time the trustee acquires the shares.

This bill also makes technical amendments to the capital gains tax and fringe benefits tax provisions as they relate to employee share schemes. The technical amendment to the FBTA Act of 1986 applies for the FBT year commencing 1 April 1995 and later FBT years. Taxation laws are extremely complicated and we are placing a considerable amount of faith in the Treasury officials to correctly legislate provisions such as this. We have confidence in their ability, but we are conscious that well-paid tax lawyers and accountants seek to exploit any weaknesses in the tax laws on behalf of their very wealthy clients. Despite the fact that we would like to see amendments to the CGT act, we will be supporting this schedule. I seek leave to continue my remarks later.

Leave granted; debate adjourned.