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Wednesday, 17 November 2010
Page: 2798


Mr SHORTEN (Assistant Treasurer and Minister for Financial Services and Superannuation) (4:50 PM) —in reply—I thank those members who have contributed to this debate on the Tax Laws Amendment (2010 Measures No. 4) Bill 2010. The amendments contained in schedule 1 ensure that the underlying policy objective of this bill is met. The underlying policy objective is that the appropriate amount of GST is collected and the appropriate amount of input tax credits claimed in situations where there are payments between parties in a supply chain which indirectly alter the price received or paid by the parties for the things supplied. These amendments will take effect from 1 July 2010, which is also the date of the effect of the original measure providing for GST adjustments for third-party payments.

Schedule 2 amends the income tax laws to provide a CGT rollover for taxpayers who replace an entitlement to water with one or more different water entitlements. This rollover ensures that the CGT is not a barrier to transformation. Transformation is the process by which an irrigator permanently changes their right to water against an operator into a statutory licence held by an entity other than the operator. Transformation facilitates water market trading and the efficient use of water resources. Schedule 2 also allows termination fees to be recognised when calculating a capital gain or capital loss on an asset by including these costs in the assets cost base. This change applies to all the assets and not just those relating to water.

In schedule 3, the taxation of financial arrangements provisions represent several major legislative reforms that affect a wide range of financial arrangements, including those of a complex nature. These reforms were implemented in four stages: stage 1 was the implementation of the debt equity provisions; stage 2 was the implementation of the foreign currency gains and losses provisions; and stages 3 and 4 focused on the tax treatment of hedges and tax timing treatment of financial arrangements other than hedges.

The taxation of financial arrangements provisions modernise the financial taxation system by better reflecting the economic and commercial substance of financial arrangements. The proposed TOFA amendments in this bill are primarily to make minor policy refinements and technical amendments and corrections to TOFA stages 3 and 4 provisions to clarify the law and to ensure that the law operates as intended. The amendments will improve tax certainty and reduce compliance costs and are the result of the ongoing monitoring and consultation undertaken by the government to ensure that the provisions operate as intended. The proposed amendments also extend the transitional period for the application of the debt equity provisions to 1 July 2010 for upper tier 2 capital instruments issued before 1 July 2001. The amendments will allow the issuers of certain upper tier 2 instruments to transition into the proposed upper tier 2 regulations.

This bill also contains a number of amendments to the foreign currency gains and losses provisions. These amendments will extend the scope of a number of compliance cost-saving measures in the tax law, as well as ensure that the provisions operate as intended. The development of the amendments has benefited from the consultation with industry representatives and professional bodies. These minor technical amendments to the foreign currency gains and losses and provisions are part of a package of amendments that was initially announced by the coalition government on 5 August 2004, to apply from 1 July 2003. These are good sensible changes, and on 13 May the Treasurer and the then assistant secretary announced that the government would proceed with these amendments and the amendments would have effect from 1 July 2003. The amendments will now apply from 17 December 2003 to be consistent with the commencement date of the foreign currency gains and losses provisions. However, affected taxpayers should not be disadvantaged by this application date as the initial announcement in 2004 contained a significant amount of detail with respect to the amendments so that affected taxpayers could manage their tax affairs or carry on their activities with the knowledge of the amendments and their impacts.

Schedule 4 amends the income tax laws to make it easier for takeovers and mergers regulated by the Corporations Act to qualify for the CGT scrip-for-scrip rollover. These amendments carve out takeover bids that do not contravene key provisions of the Corporations Act, and approved schemes of arrangement, from having to meet the rollover requirement, but the target entity’s interest holders can participate in the arrangement on substantially the same terms. These amendments ensure that the scrip-for-scrip rollover operates more effectively.

Schedule 5 implements the government’s 2010-11 budget measure to increase the threshold above which a taxpayer may claim the net medical expenses tax offset. The claim threshold will increase from $1,500 to $2,000, with effect from 1 July 2010. The amendments will also introduce annual indexation of the claim threshold to the consumer price index. The first indexation adjustment of the claim threshold will take place on 1 July 2011. The threshold above which a taxpayer may claim the net medical expenses tax offset has not been increased since the 2002-03 income year. Since that time medical costs and wages have increased significantly. This has made it easier for taxpayers to become eligible for the net medical expenses tax offset. These are important amendments that will help to reduce the long-term cost to the budget of a rapidly growing expenditure and ensure the ongoing sustainability of the net medical expenses tax offset.

Schedule 6 amends the deductible gift recipient provisions of the Income Tax Assessment Act 1997. Taxpayers can claim an income tax deduction for gifts to organisations that are DGRs. This schedule adds two new organisations to the act, namely One Laptop per Child Australia Ltd and the Mary MacKillop Canonisation Gift Fund. It also extends the period for which the Xanana Vocational Education Trust can receive deductible gifts until 30 December 2010. Making these organisations deductible gift recipients will assist them in attracting public support for their activities.

Schedule 7 amends the Income Tax Assessment Act 1997 to extend deductible gift recipient status to all volunteer fire brigades. This recognises the important community service performed by volunteer fire brigades. Volunteer fire brigades aim to prevent, respond to and assist with recovery from a range of fire related emergencies, including preventing bushfires from reaching people in built-up communities. Schedule 7 allows all entities providing volunteer based emergency services, including volunteer fire brigades, to access tax deductible donations and it extends deductible gift recipient status to all state and territory government bodies that coordinate volunteer fire brigades and state emergency service units.

This bill deserves the support of the parliament. It is good policy. The Gillard government is committed to tackling tax reform, and we have a clear plan. The government intends to simplify personal tax for 6.4 million Australians, to reward personal savings of over five million Australians, boost superannuation for 8.4 million Australians and expand superannuation concessions, and cut company tax for all taxes, including cutting and simplifying tax for up to 2.4 million small businesses. The government has a real tax plan, while the opposition’s tax plan is nothing more than a piece of paper where all the information is already publicly available. I encourage the opposition to cease and desist from cheap political stunts—

Opposition members interjecting—


Mr SHORTEN —my encouragement falls on deaf ears—and to assist the government to deliver real reform. Voting for today’s bill is one further step in this House. I commend this bill to the House.

Question agreed to.

Bill read a second time.

Message from the Governor-General recommending appropriation announced.