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Thursday, 4 December 2003
Page: 23769

Mr ROSS CAMERON (Parliamentary Secretary to the Treasurer) (9:35 AM) —I move:

That this bill be now read a second time.

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

Schedule 1 to this bill amends the A New Tax System (Goods and Services Tax) Act 1999 to ensure that a GST registered supplier of an eligible first aid or lifesaving course is able to treat the supply as GST free.

The amendments in schedule 2 will amend the Income Tax (Transitional Provisions) Act 1997 to modify the general value-shifting regime so that the consequences arising under that regime do not apply to most indirect value shifts involving services. These amendments will ease compliance costs for taxpayers on the transition to consolidation.

The consolidation measure is an important business tax reform initiative that allows wholly owned corporate groups to elect to be treated as single entities for income tax purposes. The consolidation regime will promote business efficiency, improve the integrity of the Australian tax system and reduce ongoing income tax compliance costs for those wholly owned groups that choose to consolidate.

The general value-shifting regime is an important integrity measure designed to prevent the manipulation of tax rules by shifting value between assets by closely held entities that are not part of the same consolidated group. This new regime is complementary to the consolidation regime and reproduces the structural value-shifting integrity achieved by the consolidation regime to those groups outside consolidation.

The measure in this bill ensures that groups that consolidate during a transitional period do not incur compliance costs associated with setting up systems to identify service related indirect value shifts when those systems will not be needed after consolidation. The measure will reduce compliance costs for businesses during the transition to consolidation.

The measure would also allow groups that do not consolidate extra time to establish systems to track service related indirect value shifts that may require adjustments under the general value-shifting regime.

Schedule 3 will amend the Income Tax Assessment Act 1997 to improve the operation of the alienation of personal services income provisions. The Fringe Benefits Tax Assessment Act 1986 will be amended to remove the potential for effective double taxation of payments that are made non-deductible by the personal service income provisions and which may also be subject to fringe benefits tax. This schedule will also make further amendments to the Income Tax Assessment Act 1997 to allow an individual working through a personal services entity to deduct a net personal services income loss.

The amendments in schedule 4 will amend the Income Tax Assessment Act 1997 to specify the taxation treatment of sugar industry exit grants made under the Sugar Industry Reform Program. Sugar industry exit grants that are paid to taxpayers who leave the agricultural industry altogether will be exempt from income tax. Grants that are paid to taxpayers who leave the sugar industry but continue to carry on another agricultural enterprise will be included in assessable income.

Schedule 5 will amend the pay as you go withholding rules in the Income Tax Assessment Act 1997 so that the foreign resident withholding arrangements will apply as intended to alienated personal services payments that are payments of a kind prescribed in the regulations to be covered by those arrangements. This will facilitate the efficient collection of tax on the payments.

The amendments in schedule 6 will amend the Income Tax Assessment Act 1997 to ensure that mutual friendly societies that are life insurance companies which restructure by demutualising can benefit from the taxation framework that applies to other mutual life insurance companies which restructure by demutualising.

Schedule 7 will amend the simplified tax system provisions in the Income Tax Assessment Act 1997 to provide optional rollover relief where there are partial changes in the ownership of a simplified tax system partnership. Rollover relief will ensure that a taxable gain or loss will only arise when the partnership ultimately disposes of its depreciating assets. These amendments will remove a barrier that may be deterring some taxpayers from entering the simplified tax system.

Schedule 8 also makes amendments to the consolidation regime, under which wholly owned corporate groups are treated as a single entity for income tax purposes.

The amendments will provide additional flexibility in the transition to consolidation by allowing certain choices made by a head company to be revoked or amended before 1 January 2005. The amendments in this schedule also ensure that the rules governing eligibility for the research and development tax offset apply appropriately in cases where companies join or leave a consolidated group part way through an income year.

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

I commend this bill and present the explanatory memorandum.

Debate (on motion by Ms Roxon) adjourned.