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Monday, 16 November 2009
Page: 11740


Dr EMERSON (Minister for Small Business, Independent Contractors and the Service Economy, Minister Assisting the Finance Minister on Deregulation and Minister for Competition Policy and Consumer Affairs) (7:21 PM) —I would like to thank those members who contributed to this debate on the Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 and the Income Tax (TFN Withholding Tax (ESS)) Bill 2009. Schedule 1 of the Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 amends the tax laws to improve the fairness and integrity of the taxation rules that apply to shares or rights granted under an employee share scheme. The government has consulted extensively on these reforms and worked with stakeholders to develop the most effective and workable reforms while maintaining the current support for employee share ownership schemes, particularly for low- and middle-income workers. Tax on the discount for shares and rights acquired under an employee share scheme will be paid upfront, except where there is a real risk of forfeiture or where it comes from a capped salary sacrifice base scheme and the scheme satisfies the existing conditions for a qualifying employee share scheme.

These reforms will better target the employee share scheme tax concessions to low- and middle-income earners and decrease taxpayers’ ability to evade or avoid tax. The new rules will also protect Commonwealth revenues, which are vital to supporting jobs and investing in nation building. The changes will boost integrity through reporting. Employers will be required to report shares and rights acquired under an employee share scheme both at issue and at an employee’s taxing point. The new measures better target support to low- and middle-income earners by introducing an income test to the upfront concession. The $1,000 upfront tax exemption will be means tested and will only be available to taxpayers with an adjusted taxable income of less than $180,000 a year, in line with the top marginal tax bracket.

Corporate governance will be improved by requiring schemes to feature a real risk of forfeiture to gain access to the deferral tax concessions. Eligibility for the deferral treatment will flow from the structure of the scheme rather than from a choice made by an employee. Removing the employee’s election to defer will decrease the employee’s ability to avoid tax.

Schedule 2 protects the integrity of the taxation system by preventing abuse of the non-commercial losses rules. This measure was announced by the Treasurer in the 2009-10 budget. Taxpayers with an adjustable taxable income over $250,000 will no longer be able to automatically apply losses from non-commercial business activities against their other income. They will now have to apply to the Commissioner of Taxation and demonstrate that their business is commercial in nature. The bill and the explanatory memorandum provide certainty to taxpayers about what information they can use when applying for discretion and what factors the commissioner will look at to determine whether a business is commercial in nature. The Income Tax (Transitional Provisions) Act 1997 is also amended to clarify the status of discretions granted before the commencement of this schedule and to recognise the government’s small business and general business tax breaks.

Schedule 3 requires superannuation providers to transfer the balance of a lost member’s account to the Commissioner of Taxation where the account balance is less than $200 or where the account has been inactive for a period of five years and the provider is satisfied that it will never be possible to pay an amount to the member. This measure excludes accounts that support or relate to a defined benefit interest. The first transfer will occur early in the 2010-11 income year. At present, lost account balances are only paid to the commissioner in very limited circumstances. This measure will help to address the growing problem of lost superannuation accounts, potentially reducing the number of such accounts by 40 per cent. This measure also assists providers, as they will no longer need to administer or apply member protection to small accounts that are transferred. This will improve equity for other fund members. Individuals who have their accounts transferred to unclaimed moneys will be able to reclaim these amounts from the commissioner. The mechanism proposed to achieve the payment of lost superannuation accounts to unclaimed money is similar to that currently used for the payment of unclaimed money from superannuation providers to the Commissioner of Taxation. This measure will result in a gain to government revenues estimated at $238 million over the forward estimates by bringing forward the payment to unclaimed moneys of accounts which are unlikely to be claimed. I commend this bill to the House.

Question agreed to.

Bill read a second time.

Message from the Governor-General recommending appropriation announced.