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Thursday, 4 March 2004
Page: 25996


Mr ROSS CAMERON (Parliamentary Secretary to the Treasurer) (12:19 PM) —It is my pleasure to sum up the debate on the Tax Laws Amendment (2004 Measures No. 1) Bill 2004. I particularly want to thank the member for Pearce for her contribution. The bill has allowed her to advocate for the interests of three groups which are not always popular or receiving the attention they deserve but which are nonetheless of great importance to the community. She has been a very sustained and committed advocate for Australians with disabilities by trying to improve the deal that they get. She has also been prepared to sponsor causes which have not always been popular, such as the needs of refugees and asylum seekers, and in this bill her support for the arts and for philanthropic endeavour is noted and appreciated.

The bill makes amendments to the income tax law and other laws to give effect to several taxation measures. Firstly, the bill amends the Income Tax Assessment Act 1936 to broaden the list of eligible medical expenses under the medical expenses tax offset to include payments made in maintaining a dog that is properly trained for guiding or assisting a person with a disability. This will offer taxpayers with hearing dogs and assistance or service dogs the same treatment under the medical expenses tax offset as is currently available to taxpayers who maintain a dog that is trained to guide or assist the blind.

Secondly, the bill provides an income tax deduction for transport expenses incurred in travel between workplaces. For example, the expenses of travelling directly from one job to a second job will be deductible. The expenses incurred in travelling between two places of unrelated income earning activity were previously allowed as deductions under a longstanding interpretation expressed in published taxation rulings and in Tax Pack. However, a High Court decision known as Payne's case overturned the former interpretation and held that expenses incurred in travelling between two places of unrelated income earning activity were not deductible under the general deduction provisions. The amendment inserts a specific provision to the income tax law to ensure that the deductibility of such expenses is reinstated.

The third measure will improve the operation of the test that is used to determine when an entity controls a discretionary trust for the purpose of applying the small business capital gains tax concessions. These concessions are available only to those businesses that control assets of less than $5 million. In working out the assets controlled by a small business test, the assets of any potential beneficiaries are included. This means that, where a small business trust has a charity as a potential beneficiary, the trust inappropriately includes the assets of that charity in determining access to the capital gains tax concessions. The changes will ensure those businesses are not prevented from accessing the capital gains tax concessions simply because of the assets held by a charitable beneficiary.

Schedule 4 amends the Energy Grants Credits Scheme (Consequential Amendments) Act 2003. The Energy Grants Credits Scheme replaced the Diesel Fuel Rebate Scheme and the Diesel and Alternative Fuels Grants Scheme from 1 July 2003 by providing a credit for the use of diesel and specified alternative fuels in certain on-road and off-road activities. This amendment will clarify the application of the transitional provisions to ensure that an entity will be entitled to an energy grant for fuel purchased or imported in the three years before 1 July 2003 if that fuel was intended for a use that would have qualified for a credit in the three years before 1 July 2003. The amendment will ensure that no entitlements have inadvertently been created under the Energy Grants Credits Scheme that did not exist under the previous schemes.

Schedule 5 amends the Income Tax Assessment Act 1997 to ensure that GST which may later be recovered does not count as part of the cost of an asset when calculating capital gains tax. The outcome under the existing law is inappropriate because taxpayers who make a capital gain on the disposal of a capital gains tax asset can include GST net input tax credits in the cost base of the asset in many circumstances, even though the relevant GST expenditure is effectively recouped. Consequently, the amount of capital gain on disposal of the asset is inappropriately reduced by the amount of the GST net input tax credits. Similarly, taxpayers who make a capital loss on the disposal of a CGT asset can include GST net input tax credits in the reduced cost base of the asset, even though the relevant GST expenditure is effectively recouped. Consequently the amount of capital loss on disposal of the asset is inappropriately inflated by the amount of the GST net input tax credits. These amendments insert a new general rule which ensures that input tax credits do not distort the calculation of capital gains tax in these ways.

Schedule 6 to this bill amends the A New Tax System (Australian Business Number) Act 1999. This will ensure that the law operates as originally intended and that the objectives of the Australian business number system are fully implemented. The amendments will clarify when protected Australian business number information can be disclosed to Commonwealth agency heads and state and territory department heads. This measure will make it easier for businesses to conduct their dealings with Australian governments, as the amendments will prevent situations that require businesses to provide duplicate information to government.

Schedule 7 provides a tax deduction for contributions of cash or property to deductible gift recipients where an associated minor benefit is received. Currently, a personal tax deduction under the income tax laws is allowed only for gifts to deductible gift recipients—that is, where the donor does not derive any material advantage or benefit in return for the gift. This amendment provides that, if a minor benefit is received by a person in return for making a contribution of cash or property, a tax deduction will be available based on the value of the contribution minus the value of the minor benefit. This measure will not apply to fundraising events held by political parties, which are not deductible gift recipients. It will extend tax deductions to contributions made at fundraising events where the contributor receives a minor benefit and will cover two fundraising scenarios: where a contribution is made to attend a fundraising event, such as buying a ticket to attend a dinner, and the purchase by successful bidding of goods and services at fundraising auctions. So the measure will not cover every fundraising scenario but will broaden the range of tax concessions available to assist the fundraising efforts of deductible gift recipients.

Schedule 8 inserts certain integrity rules dealing with payments, loans and forgiven debts made by a trustee to a private company shareholder or shareholder's associate. These amendments address issues concerning the effectiveness and fairness of certain antiavoidance provisions contained in the current law. Broadly speaking, the amendments will more effectively ensure that a trustee cannot shelter trust income at the prevailing company tax rate and then distribute the underlying cash to a beneficiary of the trust through the use of a private company beneficiary. In addition, the amendments have been designed with targeted safeguards to ensure ordinary commercial transactions are not inadvertently caught by the rules.

Schedule 9 will correct an anomaly in the current law to ensure that deductions for on-payments of certain unfranked non-portfolio dividends by a resident company to its wholly owned non-resident parent company will continue to be available to certain resident companies. Non-resident companies that receive unfranked dividends are generally subject to dividend withholding tax. Where a non-resident company invests in Australia through a resident holding company, a special deduction to that holding company ensures that it does not pay tax on dividends received but that the foreign parent company is subject to dividend withholding tax—otherwise there would be a disincentive for foreign companies to invest in Australia through holding companies. However, with the introduction of consolidation, this deduction was inadvertently turned off. This measure will ensure that this deduction will again be available to Australian resident holding companies wholly owned by a foreign parent company.

Schedule 10 will require charities, public benevolent institutions and health promotion charities to be endorsed by the Commissioner of Taxation in order to access relevant taxation concessions. In addition, endorsed charities will now have their charitable status displayed on the Australian Business Register. These changes are part of the government's response to the report of the inquiry into the definition of charities and related organisations. The changes will allow greater scrutiny of the use of taxation concessions by charities, improve public confidence in the provision of taxation support to the charitable sector and provide charities with certainty of their entitlements.

Lastly, the bill updates the list of specifically listed deductible gift recipients in the Income Tax Assessment Act 1997. It adds to these lists new recipients announced since 10 December 2002. Deductible gift recipient status will assist these organisations to attract public support for their activities.

The member for Kingston suggested that the circulation of the explanatory memorandum to the bill involved some duplicity or deception on the part of the government. I feel duty bound to correct the record in that regard. A small number of errors were found in the explanatory memorandum to this bill. A correction to the explanatory memorandum has been circulated and the shadow minister's office was advised that these corrections were being made.

The only error of substance was the reported financial impact of the measure which provides a deduction for contributions relating to fundraising events. The financial impact for this measure was incorrectly published in the original explanatory memorandum as being nil when the estimated cost is $3 million per annum. This cost of $3 million was in fact previously published by the government in the Mid-Year Economic and Fiscal Outlook. I just wanted to assure the shadow minister that there was no intended deception.


Mr Cox —I did not think you were being duplicitous but I still think it is an underestimate of the real figure.


Mr ROSS CAMERON —Other errors are minor and relate to the terminology used to describe the Australian Business Register and the Australian Business Registrar. I note that the shadow minister interjected that it had not been his intention to imply deliberate duplicity but to say that the figure was an underestimate of the actual cost. We can happily have an argument over its cost. I simply note the substantial point that the bill involves a generous contribution by the government in relation to the attraction of charitable gift making and benevolence in this country. It is the strength of our fiscal outlook—the fact that we have such low levels of government indebtedness; the fact that we are maintaining low interest rates while having high levels of employment and economic growth—that allows the government to introduce bills such as this, which on so many fronts offer a better deal to Australian taxpayers. I commend the bill to the House.


The DEPUTY SPEAKER (Mr Wilkie)—The original question was that this bill be now read a second time. To this the honourable member for Kingston has moved as an amendment that all words after `That' be omitted with a view to substituting other words. The immediate question is that the words proposed to be omitted stand part of the question.

Question agreed to.

Original question agreed to.

Bill read a second time.