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Thursday, 12 August 2004
Page: 26271


Senator IAN CAMPBELL (Minister for the Environment and Heritage) (9:54 AM) —I 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—

WATER EFFICIENCY LABELLING AND STANDARDS BILL 2004

Managing Australia's fresh water resources effectively and efficiently is one of our most important environmental and resource management challenges. Without secure and high quality water resources we would be unable to sustain our regional economies or urban communities. The long-term health of our fresh water ecosystems also depends on us minimising the negative impacts of agricultural and urban water consumption.

The emerging urban water problems in Australia are looking increasingly serious. One only needs to look at Melbourne, Sydney, Perth and South East Queensland for a graphic illustration of the urban water issues. High rates of population growth, the strong economy, increasing demands for environmental releases and prolonged drought conditions are continuing to offset the gains from conservation programs and increasing the pressure on available water supplies.

Reduced rainfall and inflows to storages have resulted in much lower sustainable yields from available storages than had been projected as recently as 5 to 10 years ago. The Gold Coast, for example, will be past the sustainable yields of its existing dams in only a few short years. Previous estimates of the potential water available from unexploited dam resources are being revised downward as a result of the recent drought at a time when the population is growing at a tremendous rate. As a consequence the Gold Coast is now in the process of planning a new regional pipeline to collect water from a dam near Brisbane. Unfortunately this solution will only provide temporary relief and the Gold Coast is now looking at recycled water, desalination and rainwater as part of its future water supply strategy. Water conservation has become more than a noble idea for the Gold Coast, but is now an integral part of meeting future water needs.

The Howard Government has taken this challenge very seriously by committing significant resources to improving water management across the nation and by working in partnership with the State and Territory Governments.

Today I am introducing a Bill for the introduction of a national Water Efficiency Labelling and Standards Scheme that will require water efficiency labels to appear on a range of common water-using products like washing machines, dishwashers and toilets and also establish a regime for the setting of minimum water efficiency standards. But before I explain the detail of the Bill, I would like to provide the House with the broader context of the initiative.

At the 1994 Council of Australian Governments (COAG) meeting, COAG agreed to implement a strategic framework for the reform of the water industry. Through the implementation of water reforms over the last ten years, Australian governments have made some real progress towards efficient and sustainable water management. The recognition of the need for environmental water provisions, the separation of water entitlements from land, and pricing reform, have all been significant steps forward.

At the COAG Meeting in August last year, the Government agreed to develop a draft National Water Initiative for COAG's consideration at its 2004 meeting. It was agreed that opportunities for a cooperative national approach to further progress water reform exist in four key areas, which form the basis of the National Water Initiative. The four key areas encompass water access entitlements, water market institutional and administrative arrangements, the specification of environmental flow regimes, and a new generation of urban water reforms.

The urban water reforms are aimed at improving water-use efficiency and demand management and making better use of stormwater and recycled water. There has been a lot of activity in this area over the last ten years, including in the reform of water pricing in urban areas. This Bill—the Water Efficiency Labelling and Standards Bill—is a key initiative in support of the urban water reform agenda.

The Government is also working with States and Territories to develop National Guidelines for Water Recycling—managing health and environmental risks. The new Guidelines will cover water recycling and water sensitive urban design and be a part of the National Water Quality Management Strategy. The Guidelines will increase the uptake of water recycling opportunities in Australia to provide new sources of supply in a way that protects public health and the environment.

So the Water Efficiency Labelling and Standards Bill must be seen in the context of the Government's very significant achievements in relation to water reform and as a contribution towards achieving efficiency improvements under the National Water Initiative.

At just under 1,800 gigalitres per year, that is, 1,800 billion litres per year, household water use accounts for about 16 percent of the consumption of the mains-supplied water in Australia. This is the second largest share of mains water use after agriculture, which at around 8,400 gigalitres per year, accounts for around 75 percent of consumption. Clearly whilst the “main game” in water consumption will always focus on agricultural use, urban and household water use cannot be ignored, especially as our main urban centres are experiencing significant water supply problems. The dual effects of increasing population and the emerging impacts of climate change make efforts to manage urban water use ever more important. Indeed, between 1996 and 2001, the supply of water to households in the main urban areas increased by 13 percent since 1996-97 to 2000-01.

The purpose of the Water Efficiency Labelling and Standards Bill is to establish a water efficiency Scheme for a range of important water-using products. Through the Scheme, the Government wants to empower consumers with by providing them with information about the water efficiency of products so that they can contribute to water conservation directly through the purchase of more water-efficient products. This information will predominantly come in the form of labels on products covered by the Scheme, but also from the associated website and promotional material.

The net savings to consumers are forecast to be substantial. By simply choosing more efficient appliances, by 2021 the community stands to save more than $600 million through reduced water and energy bills. And these savings are achieved without any compromise in product performance or convenience or any major adjustment in user behaviour. A water-efficient washing machine performs its function just as well as an inefficient one, as does a water-efficient urinal. So the scheme will promote clever design that benefits both consumers and the economy.

The water efficiency Scheme will be the first of its kind in the world. Given that pressure on freshwater resources is emerging as a truly global problem, the potential for Australia to position itself as a leading exporter of water-efficient technologies and expertise is significant. Underpinned by a robust technical regime, our exporters will be able to use the label as a platform for marketing the water efficiency of their products to a growing global market.

The Government estimates that by 2021, water efficiency labelling will cut domestic water use by five per cent or 87,200 megalitres per year. A total of 610,000 megalitres—more water than in Sydney Harbour—will be conserved by 2021. Nearly half the water savings will come from more efficient washing machines, about 25 percent from showers and 22 percent from toilets.

The Scheme will also deliver substantial energy savings and greenhouse gas abatement through a reduction in hot water use. The reduction in greenhouse gas emissions for Australia is projected to reach about 570 kilotonnes of carbon dioxide equivalent per annum by 2021, with a cumulative total of around 4,600 kilotonnes of carbon dioxide equivalent by 2021.

The Water Efficiency Labelling and Standards Bill establishes a national legal and administrative structure for the Scheme. And yet, in the true spirit of federalism, the Scheme provides for working in partnership with the States and Territories, which will enact complementary legislation. This mirror legislation will fill in the small constitutional gaps in the Commonwealth's powers. Importantly, the States and Territories have also agreed in principle to assist with funding the program using the usual population-based funding formula for any program costs that cannot be recovered through industry registration fees.

The Government expects the Scheme to commence in 2005. Initially, six appliances will be required to carry water efficiency labels: washing machines, dishwashers, toilets, showerheads, taps and urinals. Flow control devices will be covered on a voluntary basis. In addition to labelling, it is proposed that toilets will be required to comply with a minimum efficiency standard so that inefficient toilets with an average flush volume of more than five and a half litres can no longer be sold in Australia.

Under the framework set out in the Bill, it will be possible in future years to introduce minimum water efficiency standards for additional water-using or water-saving products other than toilets, where the need for this can be established. Minimum water efficiency standards will ensure that inefficient products can no longer be sold.

The Bill will also allow the product range covered by labelling requirements to be expanded if this is found to be appropriate in future years. Whilst the Scheme will initially cover washing machines, dishwashers, toilets, showerheads, urinals, taps and flow control devices, there is every reason to believe that further research and development will reveal that other products would benefit from labelling and minimum standards. For example, evaporative air-cooling systems and hot water systems are potential candidates for inclusion in the Scheme.

Industry has been consulted on the detail of the proposal and I am pleased to advise that the Scheme enjoys broad support.

The water efficiency Scheme will help consumers make informed decisions about what products to purchase and the water, energy and financial savings that are possible. Industry will also benefit from the Scheme because it will create a level playing field in relation to claims about water efficiency and provide for nationally consistent product standards.

In conclusion, in this Year of the Built Environment the water efficiency labelling and standards initiative provides another important way that all Australians can conserve water and so help to make our urban communities more sustainable.

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VOCATIONAL EDUCATION AND TRAINING FUNDING AMENDMENT BILL 2004

The Vocational Education and Training Funding Amendment Bill would appropriate a total of $1.148 billion as the Australian Government's contribution to the States and Territories for vocational education and training in 2005.

Vocational education and training underpins the competitiveness of our industries in an increasingly global market and is vital for our economic growth. Since 1996, the Australian Government has reinvigorated vocational education and training—with record numbers in training, record numbers in New Apprenticeships and significant progress made towards developing a high quality, truly national system.

The latest figures show that in 2002 there were close to 1.7 million students in VET. This represents more than 10% of Australia's working age population.

New Apprenticeships have grown to almost 416,800 in training at March 2004—more than three times the number in training in 1995. Today New Apprenticeships are available in more than 500 occupations, including emerging industries such as aeroskills, electrotechnology, information technology and telecommunications.

This growth has not been at the expense of the traditional trades, however. At March 2004, 147,100 New Apprentices were in training in traditional trades. This is 35% of all New Apprentices in training, and encompasses trades such as carpenters, plumbers and electricians. Over the last five years, while employment growth in trades and related occupations grew at an average annual rate of 0.8%, New Apprentices in training in trades and related occupations grew at an average annual rate of 2.7%.

Under the Australian Government's New Apprenticeships strategies, women are benefiting significantly. Since 1998, there has been a 98% increase in the number of female commencements in New Apprenticeships. There has been a 72% increase for males.

We are also seeing record numbers of people completing New Apprenticeships. There were 132,500 completions in the twelve months to March 2004, up 13% from the previous year.

Australians of all ages are benefiting from the Government's successful vocational education and training policies. In 2002, 27% of vocational education and training students were aged 15 to 19 years. The number of 15-19 year olds in training has grown by 24% since 1998, reflecting the success of vocational education and training in schools programmes, now available in more than 95% of Australia's secondary schools.

At the same time, older people are very well represented in vocational education and training. 61% of vocational education and training students were 25 years and over and 20% were 45 and over. It is particularly worthy of note that the participation rate for people 40 years and over in all education, at 6.6% of the age group in 2001, is the highest of all OECD countries.

Record levels of Australian Government funding are contributing to these achievements.

In 2004-05 this Government will spend a total of $2.1 billion on vocational education and training, of which more than $725.5 million will go to supporting New Apprenticeships through programmes including New Apprenticeships Incentives.

The Australian Government is also working directly with industry on tailoring strategies to address areas of skills shortages, particularly in traditional trades, and emerging skills needs. In April 2004, the Government launched its National Skills Shortages Strategy, committing $2 million this financial year and up to $4 million in subsequent years. In addition, the Government provides more than $510 million in incentives each year to employers opening up opportunities for training-related employment through New Apprenticeships.

In December 2003, the States and Territories rejected the Australian Government's offer for a new funding agreement of $3.6 billion over three years to 2006, which included an average real increase of 2.5% per annum. If they had accepted the ANTA Agreement offer, up to 71,000 additional places over three years would have been created.

The Australian Government has applied the additional funding which was not taken up by States and Territories to purchasing 7,500 training places for priority groups—older workers, parents returning to work and people with a disability. In this way the Australian Government has fully maintained its level of commitment to vocational education and training in 2004.

Negotiations for a new ANTA Agreement will resume later this year and I look forward to a successful outcome. This Bill would provide funds for vocational education and training in 2005 under an ANTA agreement and would be subject to update for the outcome of negotiations on a new agreement. If, for example, an outcome of the ANTA Agreement negotiations is to return the priority places funding to the agreement, an amendment to the Vocational Education and Training Funding Act will be required.

This Bill provides the Commonwealth funding required to support Australia's world class vocational education and training system in 2005. I commend it to the Senate.

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TAX LAWS AMENDMENT (2004 MEASURES No. 4) BILL 2004

This bill makes amendments to the income tax law and other laws to give effect to several taxation measures.

Firstly, after listening to the concerns of business, the Government is implementing, in Schedule 1 further refinements to the consolidation regime.

The refinements provide greater flexibility and certainty to the consolidation membership and loss rules. The bill clarifies the consolidation cost setting rules with respect to finance leases, certain types of mining expenditure, and low-value and software development pools. The refinements also reduce compliance costs by alleviating the notice requirements under the inter-entity loss multiplication rules during the consolidation transitional period for entities that are in the same consolidatable group and in other circumstances approved by the Commissioner of Taxation. Generally, these amendments take effect from the 1 July 2002, which is the commencement date of the consolidation regime.

Secondly, this bill ensures that copyright collecting societies are not taxed on income they collect on behalf of members.

Broadly, the provisions will ensure that copyright collecting societies that are appropriately structured and administered, are exempt from income tax on certain types of income that they derive and hold pending allocation to recipients. The provisions will also ensure that any amounts of income that are exempt at the society level, are included in the assessable income of recipients once these amounts are distributed to them.

The third measure ensures further implementation of the simplified imputation system, including anti-avoidance rules in relation to exempt entities that are eligible for a refund of imputation credits; and consequential amendments to the income tax laws to replace references to the former imputation system with those of the simplified imputation system and to update terminology of the former imputation system to equivalent provisions of the simplified imputation system.

Schedule 4 to this bill amends the lists of specifically-listed deductible gift recipients in the Income Tax Assessment Act 1997. This includes adding certain fire and emergency services bodies as specifically-listed deductible gift recipients. Deductible gift recipient status will assist these organisations to attract public support for their activities.

Lastly, this bill will extend an existing transitional rule in the debt/equity rules for at-call loans to 30 June 2005. This will give business extra time to assess existing loans and adjust their arrangements if need be.

Full details of the measures in this bill are contained in the explanatory memorandum.

I commend this bill.

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NEW INTERNATIONAL TAX ARRANGEMENTS (MANAGED FUNDS AND OTHER MEASURES) BILL 2004

The bill I am introducing today further modernises Australia's international tax regime, as part of the government's ongoing review of international tax arrangements. It builds on legislation directed at the superannuation and funds management industries, which passed Parliament last week. It also follows legislation for a participation exemption and important reforms to Australia's tax treaty policies reflected in the new tax treaty with the United Kingdom signed in August 2003.

This bill focuses on making the Australian managed fund industry more attractive to foreign clients. Australia has a significant managed funds industry facilitated by strong economic performance, a highly educated workforce, low-cost infrastructure, advanced regulatory systems, and sophisticated financial markets.

Schedules 1 and 2 make changes designed to reduce taxation impediments to further growth in this area. These changes will allow Australian managed funds to become more internationally competitive, increasing their attractiveness to non-residents.

Under current capital gains tax arrangements, non-residents investing in assets through an Australian managed fund may be taxed more heavily than if they invested directly in those assets or through a foreign fund. Measures in Schedule 1 will eliminate these distortions. Complementing this, measures in both Schedules 1 and 2 will reduce taxation of foreign source conduit income earned by non-residents via interposed Australian managed funds.

Schedule 1 makes three key changes to the income tax law.

It amends the law to disregard a capital gain or capital loss made by a foreign resident from disposing of its interest in an Australian fixed trust if the underlying assets of the trust are not Australian assets. A second amendment will disregard a capital gain made by a foreign resident in respect of the taxpayer's interest in a fixed trust, if the gain ultimately relates to an asset of the trust which is not an Australian asset. In both cases, had the underlying asset been directly held by the foreign investor, Australian capital gains tax would not apply.

Reflecting the conduit principle of international taxation, foreign source income flowing through an Australian trust to non-residents is not taxed in Australia. However, under current arrangements when a trust interest is sold, previously distributed foreign source income is, on a delayed basis, subject to Australian capital gains taxation. On the other hand, non-residents investing directly, or through an offshore managed fund, do not pay Australian capital gains tax in respect of the foreign source income. A third amendment will eliminate this distortion.

Schedule 2 amends the rules for determining the source of income derived by certain residents of treaty partner countries. The interaction of treaty source rules and other treaty rules relating to non-resident beneficiaries of income derived by business trusts operating in Australia has implications for the managed funds industry. This interaction may result in foreign source passive income derived by those foreign beneficiaries through an Australian trust being treated as sourced in Australia and therefore taxed in Australia.

For example, if a New Zealand resident invests in an Australian managed fund investing offshore, this interaction inappropriately exposes the New Zealand beneficiary to Australian tax on conduit income. The amendments ensure the domestic source rules rather than treaty source rules (which have a wider potential reach) apply in this case. The effect of this amendment would be to relieve the conduit income from Australian taxation.

The amendments will align the tax treatment of foreign residents investing through managed funds that derive income from sources outside Australia with the tax treatment that would apply if those foreign residents made such investments directly.

Schedule 3 implements three measures fine tuning interest withholding tax arrangements, consistently with other recent developments in the tax law. These changes will allow Australian businesses generally to take advantage of global opportunities to lower their cost of debt and to facilitate efficient business structures.

The first measure broadens the range of financial instruments eligible for interest withholding tax exemption by adding `debt interests'. The second treats payments of a non-capital nature made on certain Upper Tier 2 hybrid capital instruments issued by banks, as interest for interest withholding tax purposes. Finally, the bill facilitates the transfer of additional assets and debts from Australian subsidiaries of foreign banks to their Australian branches without losing interest withholding tax exemptions.

The size of Australia's funds management pool and its prospects for continued growth, are drawing global firms to establish operations in Australia. The resultant clustering of activity and the concentration of expertise has created a robust domestic industry. This infrastructure provides a framework for Australia to become the funds management hub for the Asia-Pacific region and these reforms will remove impediments to achieving that goal.

I note the strong business support for the bill. The business community has played a valuable and constructive role in helping develop the proposed legislation. This bill again demonstrates that the Government has listened and been responsive to industry calls for specific tax reforms to remove distortions from the tax system and allow Australian businesses to grow.

The future of the Australian economy is fundamentally linked to global prosperity and to Australians being a part of that prosperity. 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.

Full details of the measures in this bill are contained in the explanatory memorandum.

I commend this bill.

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CUSTOMS TARIFF AMENDMENT (OIL, GAS AND OTHER MEASURES) BILL 2004

The Customs Tariff Amendment (Oil, Gas and Other Measures) Bill 2004 contains several amendments to the Customs Tariff Act 1995 (the Tariff).

First, the Bill creates a new item 22 in Schedule 4 of the Tariff. The item replaces the existing item 22, which relates to goods for use in oil and gas exploration, to reflect changes in technology in the oil and gas industries and to extend the coverage of the item.

The new item, and the new by-law that will be made for it, will reduce the cost of certain goods imported for use directly in connection with the exploration for, and discovery of, oil and gas deposits and the pre-production development of wells on those deposits, by allowing duty-free entry of those goods, provided that substitutable goods are not available from Australian manufacturers.

These amendments not only address industry concerns but also, by reducing the costs of imports, maximise the recovery of Australia's petroleum resources, which is consistent with the Government's objective of encouraging a supportive environment for investment and enhanced productivity.

Secondly, the Bill amends Additional Note 3(a) to Chapter 22 in Schedule 3 of the Tariff by inserting a 22% upper limit on the alcohol content of grape wine which is defined by the Note.

This amendment will ensure that the customs duty payable on imported grape wine with more than 22% by volume of ethyl alcohol is the same as the excise duty payable on comparable locally produced grape wine.

The Bill will also correct the country code abbreviations for Poland and Wake Island, specified in Schedule 1 to the Customs Tariff, to align those codes with those used by the International Organization for Standardization.

The above corrections will have no effect on the duty applicable to goods imported from Poland or Wake Island or on the margins of tariff preference accorded those countries.

Debate (on motion by Senator Mackay) adjourned.

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