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Wednesday, 10 September 2003
Page: 19762

Mr SLIPPER (Parliamentary Secretary to the Minister for Finance and Administration) (7:13 PM) —Initially, I would like to thank those honourable members who have made a contribution to this very important debate on the Taxation Laws Amendment Bill (No. 7) 2003. This bill makes amendments to the income tax law and other laws to give effect to several taxation measures. Schedule 1 to this bill will provide tax exemptions for Australian residents who receive compensation payments from overseas funds relating to the Second World War. Under current income tax law, some of these payments are exempt from tax but others are taxable. This measure ensures that payments received by Australian residents from foreign funds in connection with persecution suffered or property lost during the Second World War are tax free. Schedule 2 to this bill updates the list of specifically listed deductible gift recipients in the Income Tax Assessment Act 1997. It adds to these lists new recipients that have been announced since October last year. Deductible gift recipient status will assist these organisations to attract public support for their activities.

There has been quite a lot of debate about schedule 3, and I understand that my friend will be moving certain amendments in relation to it. Schedule 3 simplifies the listing in the tax law of the specifically listed deductible gift recipients. It allows any new specifically listed deductible gift recipients to be prescribed in regulations. It also provides for the transfer of all existing specifically listed deductible gift recipients from the Income Tax Assessment Act 1997 to regulations, and there is a very good reason for that. This simplification is part of the government's response to the report of the inquiry into the definition of charities and related organisations. It will allow continued scrutiny by the parliament but will make legislative amendments concerning specifically listed deductible gift recipients less administratively costly and more timely. This measure also allows deductions for cash donations to deductible gift recipients to be spread over a period of up to five years. This will ensure that cash and property gifts are treated similarly and will make it more attractive for taxpayers to make donations to deductible gift recipients earlier.

Schedule 4 will amend the Crimes (Taxation Offences) Act 1980 to correct a technical deficiency with the deeming mechanism in this act and to include Criminal Code harmonisation amendments to clarify the interpretation of offences under the Criminal Code. Schedule 5 introduces a measure which will allow certain entities with foreign losses to be excluded from a consolidated group on a transitional basis, notwithstanding that they are wholly owned by the group's head company. Entities will have up to three years to recoup their foreign losses prior to joining the group rather than being subject to consolidation rules which may impact harshly in some circumstances.

Schedule 6 will make amendments to ensure that the goods and services tax interacts appropriately with the consolidation regime. In particular, the amendments will provide that certain supplies made as a consequence of the statutory operation of the consolidation law or as a result of agreements that were entered into because of consolidation will not be taxable supplies. These changes will ensure that entities are afforded similar goods and services tax treatment under the consolidation regime as the treatment they received in a preconsolidation environment.

Schedule 7 amends the Income Tax Assessment Act 1997 to include imputation rules for life insurance companies, replacing the current rules set out in the Income Tax Assessment Act 1936. The amendments form part of the ongoing implementation of the reform by the government of business taxation in respect of the imputation system. Schedule 8 amends the overseas forces tax offset provisions of the Income Tax Assessment Act 1936 to exclude periods of service for which the more generous income tax exemption for foreign employment income is already available.

Schedule 9 to this bill amends the law to provide an automatic capital gains tax rollover for financial service providers on transition to the new financial sector reform regime. This measure will encourage financial service providers to move to the new regime by removing potential tax impediments. Schedule 10 changes tax laws so that a foreign limited partnership or a US limited liability company will be treated as a partnership rather than as a company. This will alleviate unintended and inappropriate outcomes from the current treatment, especially under the international tax rules. In order to prevent investors with limited liability obtaining unlimited access to tax losses relating to these entities, the government has introduced a limit on the losses that may be claimed. The limit is based upon the amount invested in the foreign entity by the investor. The new rules will generally apply from the 2003-04 income year. In addition, changes are being made to the way in which these foreign entities have to be treated for some past income years under the international tax rules. This will remove considerable uncertainty surrounding these years and lead to fairer results. The new rules will provide a better alignment of Australian and foreign tax rules for Australians operating offshore. Also, schedule 11 to the bill makes a number of technical amendments to the Income Tax Assessment Act 1936, the Income Tax Assessment Act 1997 and other tax related legislation.

In the debate prior to this summing up speech, a number of members made contributions. A number of opposition members made accusations and in fact got their facts wrong. The member for Kingston claimed that he did not accept administrative ease and timeliness as the real reasons for this measure. I want to point out to the member for Kingston that, under the current law, organisations that do not fall under the general categories may achieve deductible gift recipient status by being specifically listed in the gift provisions of the Income Tax Assessment Act 1997. Schedule 3 of the Taxation Laws Amendment Bill (No. 7) 2003 contains a provision to require the specifically listed deductible gift recipients to be prescribed by regulation from 1 July 2003. This will not only allow continued scrutiny by parliament but make the process less costly administratively and more timely.

The member for Kingston has worked himself up into a lather over this issue, and I understand his subsequent amendments relate to this point. What we really want to point out is that the new arrangements will be more administratively sensible. It is not as though we are seeking to deny the parliament the right of scrutiny, because, as we all know, regulations are disallowable instruments. The member for Kingston also said that he was opposed to elements of this legislation, and I think he was talking about the government in some way having this agenda to actually gag charities. Nothing could be further from the mind of the government; we have no desire to gag charities.

The process of achieving specific listing will not change as a result of the provisions in schedule 3 of the Taxation Laws Amendment Bill (No. 7) 2003. Specific listing would still be ultimately a change in tax law rather than an exercise of any ministerial discretion provided under that law. Each organisation seeking specifically listed deductible gift recipient status would still be considered by the government on a case-by-case basis. The provision requires that specifically listed deductible gift recipients be prescribed by regulation. As I said before and will say again, this enables continued scrutiny by the parliament but makes the process more administratively sensible, more timely and less costly. Endorsement as a deductible gift recipient is a separate process from endorsement as a charity, and I know that the opposition has sought to fudge this particular distinction.

The member for Curtin referred to the simplified imputation system for life insurers. She quite rightly reminded the chamber of the government's commitment to tax reform, and in particular she noted the amendments in this bill that will give further effect to the simplified imputation system. This streamlined imputation process will reduce compliance costs incurred by life insurance companies.

The member for Mitchell said what is obviously an axiom. He referred to the need to encourage the philanthropic dollar towards charities. The member is quite right. I suspect that everyone on both sides of the House would support that principle. I thank the member for his contribution. The requirement for specifically listed deductible gift recipients to be prescribed by regulation makes this less costly and more timely for organisations. It certainly makes for more certainty for both the organisations and the donor.

The member for Kingston and the member for Reid referred to the exemptions and asked why they were limited to the Second World War. The exemptions are limited to payments made in connection with the Second World War and they are consistent with the current income tax exemptions for pensions, annuities and allowances paid for persecution by forces of an enemy of the Commonwealth during the Second World War. Extending the exemption to payments made for conflicts other than the Second World War would be difficult to define, and it would be difficult to ensure that the exemption was focused on victims of persecution and wrongs committed in recognisable conflicts.

I could go on at length in relation to other matters that members have mentioned—in fact I could pick to bits, piece by piece, the speech made by the member for Kingston. I think there is a general desire—hopefully it is not just a pious hope—that this legislation will pass the parliament tonight. Before I sit down, though, I want to emphasise that the second reading amendment moved by the member for Kingston is clearly not accepted by the government. I commend the legislation to the House.

Question agreed to.

Original question agreed to.

Bill read a second time.