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Wednesday, 10 September 2003
Page: 19632

Mr HARTSUYKER (9:53 AM) —I rise in the House to speak on the Taxation Laws Amendment Bill (No. 8) 2003. This bill contains a number of proposals on areas covering income tax deductions for gifts, employee share schemes, reasonable benefit limits, the petroleum resource rent tax, the Australian Gas Light Company, the franking of distributions by cooperatives and technical corrections to the tax laws. The bill covers a number of different areas and is quite detailed, but I would particularly like to focus on the provisions contained in schedule 3 regarding franking of distributions by cooperatives and on how these provisions will impact on credit unions.

Credit unions are playing an increasingly important role in the financial sector, particularly in regional areas where branch closures and the downgrading of services by banks has been the trend. In these situations, credit unions are very important, providing competition in financial services and consumer choice. These matters are of great importance to regional communities.

In my electorate of Cowper, the Big River Credit Union has branches in Coffs Harbour, Yamba and Maclean. The Bananacoast Community Credit Union operates in Bellingen, Bowraville, Coffs Harbour—where there are two branches—Coramba, Dorrigo, Macksville—which also has two branches—Nambucca Heads, Scotts Head, Stuarts Point, Toormina, Urunga and Woolgoolga. The Bananacoast Community Credit Union is a great community example. It was started in 1970 by a group of banana growers who were having difficulty accessing finance. It grew from very modest beginnings and now has assets in the order of $400 million. It is a great story. We also have the Coastline Credit Union, which is based in Kempsey and has branches in both South West Rocks and Stuarts Point.

The competition generated by all these branches in the one electoral area—the electorate of Cowper—is enormous. But it also puts a lot of pressure on the banks. Regional communities do not like losing services, and they have very much welcomed the growth of credit unions and the expansion and improvement in services which credit unions have provided in areas such as business loans, personal loans, deposit services and so on. Credit unions also play a vital role in corporate sponsorship of community and charitable groups. Credit unions fulfil their social obligations, and this is not done to nearly the same extent by banks. In my electorate, people are flocking to credit unions.

Schedule 3 of the bill proposes an amendment to the tax laws that will make it easier for cooperative companies like credit unions to frank distributions to their shareholders. The amendments will give cooperatives a choice between making franked or unfranked distributions. The current arrangements under section 120(1)(a) and (b) of the Income Tax Assessment Act 1936 make it difficult for cooperatives to frank their distributions and pass on to their shareholders the benefit of franking credits arising from tax paid by the cooperative.

The amendments in this bill propose to give cooperatives the same access to imputation credits as are enjoyed by other companies, while maintaining the deduction available for unfranked distributions. In other words, in general terms, the distribution will be franked or the cooperative will be entitled to a deduction where the distribution is sourced from the assessable income from the year in which it is made. Furthermore, the amendments will allow a cooperative company to treat a distribution paid within three months after the end of an income year as if it were paid during that income year for determining whether a deduction is allowable under section 120(1)(a) or (b). This amendment recognises the difficulty of determining a company's final profits for the year until after the end of that year. These amendments will be retrospective and apply to non-share distributions by cooperative companies which were made after 1 July 2002, when the debt/equity rules first applied.

At the moment, the credit unions are not able to issue shares and therefore cannot distribute franking credits, although they can earn them in the same way as banks do in paying income tax. Schedule 3 of this bill proposes to amend that situation for cooperatives, and that will open up opportunities for credit unions. This will be important in allowing credit unions to continue to compete with the banks and provide choice for consumers. As I have said, consumer choice is vitally important for people living in regional communities, and it is these communities that have borne the brunt of the downsizing of many banks.

Eureka Strategic Research has released some interesting research findings about consumer attitudes towards financial institutions. These findings indicate there is a large gap between the satisfaction levels of credit union members and of customers of other financial institutions. Eighty-four per cent of the credit union members who were surveyed described their satisfaction with their credit union as being at an `excellent' or `very good' level. Customer loyalty amon-gst credit union members was also much higher than amongst bank customers. According to Eureka Research in 2003, 85 per cent of people with credit unions were extremely or very likely to recommend their credit union to other customers, whilst the four major banks only got that approval rating from 36 per cent of their customers and the other banks got it from 59 per cent.

I would like to commend the role played by credit unions in regional and rural communities. I am pleased that the changes that are proposed in schedule 3 of this bill will assist credit unions in their operations and in competing in the marketplace. I commend the bill to the House.