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Wednesday, 3 September 2008
Page: 4357

Senator HURLEY (9:43 AM) —The Tax Laws Amendment (2008 Measures No. 4) Bill 2008 does indeed have three parts. The first one, schedule 1 on demutualisation is, I understand, supported on all sides. Demutualisation of mutual funds seems to be an increasing trend. This action was triggered by that increasing trend and the bill will ensure that people who became shareholders in MBF after it demutualised this year do not pay any extra tax on the shares that they acquired. This is a sensible measure and one that was supported by the Senate Standing Committee on Economics.

The schedule which evoked most controversy was schedule 2, which deals with family trusts and fulfils an election commitment by the Labor Party. It reverses a change to the act that was made only last year. These amendments revoke much of that act. It was indeed a pre-election commitment by the Labor Party. Therefore, the Labor government believes that it has some mandate to do what it is doing in this amendment. It is part of the budget measures.

I will not talk about the nature of family trusts or indeed about the ideological positions on it. If the Labor Party had an ideological problem with family trusts, presumably we would have taken far more drastic action than is being taken here.

The opposition has criticised it as a tax increase measure and claims that this is what the Labor government is all about, conveniently ignoring the schedule before, which decreases the tax take. The provisions relating to demutualisation mean that some tax that would have been collected is forgone. Not this current year but next year, the financial impact is estimated to be a reduction in tax of some $2 million. In the following year, that reduction will be $1 million. So the logic of that argument defies me. Both of these measures are a result of policy and budget decisions by the Labor government that have been part of a difficult balancing effort in making sensible changes to various aspects of the budget.

There was also quite a lot of discussion during the Senate inquiry hearings about just how much money would be saved by this measure. Senator Coonan, in her speech on the second reading, quoted the figure of $1 million, which is the figure the opposition prefers to use. It does indeed save, as we heard in evidence, $1 million in the 2008-09 year, but that goes up to $6 million in the three subsequent financial years. This is indeed a tax-saving measure for the government. It will increase the tax take, but the policy was taken to the people of Australia at the election last year and so it is justified. It is a position that has been consistently held by the Labor Party, and indeed Senator Coonan noted that the Labor Party opposed measures brought in last year by the then Liberal government. The Labor Party has behaved perfectly consistently on this policy decision. It believes in the policy and it has implemented it as the government.

The opposition has also said that the Senate Economics Committee ignored evidence given by a number of people—people who did not like having to implement changes to the family trust structure. That is completely understandable. It does involve a small expense and a reconsideration of family trust structures. These structures are very useful, particularly in rural communities for farmers but also for professional people in both rural and city areas. Clearly, they are widely used. We heard evidence that there are between 400,000 and 500,000 family trusts around Australia.

The committee did take into account that this would cause some inconvenience and problems for some people who hold family trusts—not all of them, because it very much depends on the circumstances. The committee considered that very carefully. There was a submission from Treasury. The committee as a whole considered that the questions raised by the people who provided evidence in opposition to the measure were answered. This was a pre-election commitment by the Labor Party, an integral part of the budget measures and part of the government’s difficult juggling task in trying to produce a budget which addressed the difficult challenges that we are facing. This is a measure that should be supported. The Senate should support it.

We have been through this many times in this chamber recently. The government were required, because of the difficult economic circumstances that we found ourselves in when we came into government—high inflation and rising interest rates—to produce a difficult budget. In order to do that, the government said that they had to make some tough decisions. They said that a surplus would be required in order to put downward pressure on inflation. This measure assists in that process. It is part of a pre-election commitment. I strongly support the measure on those grounds.

A government is put in place to govern. Putting the budget in place is one of the most difficult features of that, particularly given the global economic circumstances in which we find ourselves today. Therefore I think the government deserves support. It is sound on a policy basis. It is sound on a consistency basis, and it is sound on the basis of fulfilling a pre-election commitment. Whatever criticisms the opposition may make of this government, they cannot criticise the fact that it has been rigorous in implementing pre-election commitments. Therefore, it is incumbent upon the opposition to give support to all of these measures and not just pick out the measures that might cause a reduction in revenue, such as the demutualisation, but to give support to this bill as a whole.