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Wednesday, 28 October 2009
Page: 11403


Mr CRAIG THOMSON (11:57 AM) —It is always a pleasure and an honour to follow the member for Casey. He always has some gems to share with the House in his contributions. I always used to see him as one of the progressive Liberal Party members and he—


Mr Chester —And he is!


Mr CRAIG THOMSON —Well he probably is because, unlike in the ETS debate where we have some of his colleagues harking back to views of the last century, the member for Casey is only stuck in the last decade. In terms of the Liberal Party and where he is, he is one of the progressives, which is good to see. It is always a little bit sad when you hear the member for Casey talking about the history of the Liberal Party through his rose coloured glasses. It almost brings a tear to your eye, talking about the glory days that used to be. But it is always a pleasure to follow him in terms of his contributions.

I rise to support theTax Laws Amendment (2009 Measures No. 5) Bill 2009. There are six schedules in this bill and I will endeavour to look at each one in a little detail. Firstly, schedule 1, as an overview, protects the GST revenue in light of an adverse Federal Court decision handed down on 12 December 2008. The decision in the Deputy Commissioner of Taxation v PM Developments Pty Ltd is contrary to the stated policy intention that the representative of an incapacitated entity is liable for GST on transactions within the scope of its appointment. It is also contrary to the Commissioner of Taxation’s administration of the law since the introduction of the GST. These amendments will amend the GST law with effect from 1 July 2000 to ensure the law achieves the stated policy objective.

Schedule 2 amends the pay as you go, or PAYG, instalment provisions to address unintended consequences arising out of amendments to those provisions contained in the Tax Law Amendment (Taxation of Financial Arrangements) Act 2009. The effect of the PAYG amendments to the TOFA Act is arguably to substantially change the basis on which a PAYG instalment liability is calculated but this had the potential to decrease PAYG instalment payments. Any decrease will result in deferral of revenue which will be recouped when the relevant taxpayer lodges the income-tax return.

Schedule 3 exempts from income tax the outer regional and remote payment made under the Helping Children with Autism package. Schedule 4 exempts from income tax those payments made under the Continence Aids Payment Scheme. Schedule 5 amends the Income Tax Assessment Act 1936 to extend eligibility for exemption from interest withholding tax to debt issued by the Commonwealth or Commonwealth authorities. Schedule 6 provides the Victorian Bushfire Appeal Fund independent advisory panel with greater scope to support communities affected by the 2009 Victorian bushfires.

Looking at these amendments in a little bit more detail, under schedule 1, the Federal Court decision in the Deputy Commissioner of Taxation v PM Developments Pty Ltd handed down on 12 December 2008 held that a liquidator is not liable for the GST arising from transactions occurring during the period of the liquidator’s appointment. Instead, the court held that the GST liability is a liability of the company in liquidation. The Federal Court decision is contrary to the stated policy intention that the representative of an incapacitated entity is liable for GST on transactions within the scope of its appointment. It is also contrary to the Commissioner of Taxation’s administration of the GST law. The proposed amendments are intended to restore the stated policy intention with effect from 1 July 2000, the introduction date of the GST, and we heard in such eloquent terms from the member for Casey his longstanding commitment to these laws. Transitional provisions will apply to ensure that the amendments do not adversely impact taxpayers who have complied with the commissioner’s interpretation of the law or who have acted in good faith.

The proposed amendments will provide that a representative of an incapacitated entity is liable or entitled to the GST consequences of transactions within the scope of its appointment. For example, when a representative sells an asset of an incapacitated entity, if the sale is subject to GST and the price therefore is GST inclusive the representative will be liable to pay GST of 1/11th of the sale price to the commissioner. Similarly, if a representative purchases assets as part of managing the affairs of an incapacitated entity he will be entitled to claim an input tax credit to offset the GST included in the purchase price. The imposition of liability on a representative only relates to post-appointment GST amounts that are in relation to transactions within the control of the representative. Pre-existing GST liabilities remain with the incapacitated entity.

The revenue impact of the court’s decision if no action is taken is estimated to be a reduction of $655 million over the forward estimates period, representing refunds of GST paid by representatives and ongoing revenue costs. The proposed amendments will have a nil or negligible impact over the forward estimates period as they seek to restore the status quo. We need to ensure that the GST revenue of $655 million which I have just outlined is protected over the forward estimates. The Federal Court decision is contrary to the stated policy intention that the representative of an incapacitated entity is liable for GST on transactions within the scope of its appointment. It is also contrary the Commissioner of Taxation’s administration of this law since the introduction of the GST. Retrospective amendment is not expected to adversely affect taxpayers but will protect the revenue by preventing claims for refunds of amounts paid by representatives of incapacitated entities.

Turning to schedule 2 of the bill covering the pay-as-you-go instalments and taxation of financial arrangements interaction issues, the amendment contained in this schedule reverses the changes the Taxation of Financial Arrangements Act made to PAYG instalment systems, thus preventing a potential decrease in the amount of PAYG instalments paid. In addition, the amendment ensures that where an entity has become liable to pay a decreased amount of PAYG instalment prior to the commencement of this bill there will be a catch-up payment of the decreased amount in the quarter that ends after the commencement of this bill. The government intends to undertake consultation on a more appropriate method of addressing the interactions between the PAYG instalment system and the TOFA Act on an ongoing basis.

The government is committed to the ongoing monitoring of the implementation of the taxation of financial arrangements reforms. The changes in schedule 2 address an unintended consequence arising out of the changes the TOFA reforms made to the PAYG instalment system. It is the intention of the government to develop a more appropriate method of dealing with the interactions between PAYG instalment systems and the TOFA Act.

Schedule 3 of the bill concerns the Helping Children with Autism package. Schedule 3 exempts from income tax the outer regional and remote payments made under the Helping Children with Autism package. This payment is designed to assist families with children who have been diagnosed with autism spectrum disorder and living in outer regional and remote areas to access early intervention and educational services. Exempting this payment from tax reflects the added difficulties that could be faced by families living in regional or rural areas in gaining access to these types of services. The exemption provides the recipients of this payment with certainty as to the tax status of those payments.

Schedule 4 exempts from income tax those payments made under the Continence Aids Payment Scheme. This scheme replaces the existing scheme which provides subsidised products direct to eligible recipients. The replacement of the direct provision of the products with a payment allows eligible recipients greater freedom in their choice of products and suppliers. Providing an income tax exemption for the receipt of this payment will ensure that no recipients are disadvantaged under the new scheme.

Schedule 5 covers exempting Commonwealth government securities from interest withholding tax. This proposal will make debt issued by the Commonwealth, including debt issued by the Australian Office of Financial Management and other Commonwealth authorities, such as Australia Post, eligible for exemption from interest withholding tax. This policy will improve neutrality in the tax system by providing Commonwealth debt, state debt and private sector debt with the same interest withholding tax treatment. It will also bring Australia’s tax treatment of Commonwealth government securities into line with most other countries, including the United States and the United Kingdom.

Foreign investors investing in AAA-rated sovereign bonds currently have a choice between purchasing AAA-rated IWT-exempt bonds, such as those from the US, Germany, United Kingdom and state governments, or purchasing AAA-rated Australian government bonds and potentially paying IWT. This places Australian government bonds issuance at a competitive disadvantage in the international market and potentially results in the Australian government bonds being issued at a higher yield than would be the case were an IWT exemption available. It is expected that making Commonwealth government securities eligible for the current general IWT exemption will increase demand for Commonwealth government securities from overseas investors who have previously been deterred by the tax. The taxation changes will have a net cost of $52.4 million across the forward estimates.

Finally, schedule 6 of this act addresses the 2009 Victorian Bushfire Appeal trust account. These amendments provide the Victorian Bushfire Appeal Fund independent advisory panel with greater scope to support communities affected by the 2009 Victorian bushfires. The panel oversees the expenditure of funds in the 2009 Victorian Bushfire Appeal trust account. The amendments permit funds in the appeal fund to be used for a broader range of purposes than the law would consider charitable, without jeopardising the charitable status of that charity that collects donations.

The amendments ensure that any funds transferred from the Red Cross to the appeal fund, which is not itself a charitable fund or institution, will be disregarded in considering the Red Cross’ status as a charitable institution and a public benevolence institution so long as the funds are used for the allowable purposes. The allowable purposes for which the funds may be expended are restricted to provide assurance to donors that their charitable donations will be used appropriately.

There are a number of allowable purposes but broadly they fit into three categories: Australian disaster relief fund purposes, public benefit purposes and other allowable purposes. Any purpose that is currently allowable under the general deductible gift recipient category of the Australian disaster relief fund will continue to be an allowable purpose. An allowable public benefit purpose would be a purpose to provide broad public benefits that are consistent with the purposes of one or more income tax-exempt entities, widely and publicly accessible, and provide commercial or private benefits only to an incidental and ancillary extent, if at all.

 ‘Public benefit’ means the organisation must have a purpose aimed at achieving a universal or common good and that its benefits are accessible and directed to the general community. There are a number of categories of entity which are made income tax exempt in tax law, generally in recognition of their value to the community. These categories include, amongst others, charitable institutions, community service organisations, cultural organisations, health organisations, sporting organisations and local government bodies. To be consistent with the purpose of an income tax exempt entity, the funds must be used for activities that would be undertaken by an income tax exempt entity. This is a wide category of newly permissible purposes for the panel and includes rebuilding or establishing community centres, youth centres, halls or libraries and other similar purposes which meet the requirements of a public benefit purpose. They are very important in helping to rebuild these communities.

Other allowable purposes include: the provision, without any requirement for annual assessments, of long-term assistance to orphaned minors; reimbursement of individuals or organisations who have paid for either Australian disaster relief fund activities or public benefit activities to be performed; provision of support to individuals who, because of the bushfires, have lived or are living in transitional housing—grants of up to $15,000 per household may be provided; assistance to individuals who are primary producers—the amendment allows the appeal fund to make grants of up to $10,000 to primary producers, which are open to be used for repair and restoration of farm activities, including re-fencing properties; and provision of assistance to families whose owner-occupied principal residence has been destroyed or damaged, ignoring the legal ownership structure of the residents—this has relevance to individuals who may use company or trust structures to own their residence.

Recognising the truly unprecedented circumstances of the 2009 Victorian bushfires, the government is implementing legislative changes that widen the permitted use of donations by the fund. These amendments will give the Victorian Bushfire Appeal Fund Independent Advisory Panel extra flexibility to support bushfire affected communities as they recover and rebuild. This decision follows a significant amount of support from the Rudd government over the past six months. This includes appointing a Parliamentary Secretary for Victorian Bushfire Construction—Mr Shorten, the member for Maribyrnong—to spearhead reconstruction efforts and providing a range of financial and other assistance to individuals, families, businesses and communities affected by these fires. As you can see, the amendments in this bill cover a broad range of issues, all of which make our tax system a fairer one. I commend the bill to the House.