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Tuesday, 21 August 2012
Page: 9398


Mr TONY SMITH (Casey) (17:22): In speaking on this Tax Laws Amendment (2012 Measures No. 4) Bill I will deal with each of the three schedules. I will deal with the first schedule, which is in many respects the most comprehensive schedule, last. I will deal with the less controversial schedules 2 and 3 initially.

This bill was introduced into the House on 28 June by the Assistant Treasurer and Minister Assisting for Deregulation, the member for Lindsay. The bill, as I just indicated, has three schedules. The first alters the living-away-from-home allowance rules, which is a budget measure. The second clarifies the GST treatment of certain transactions involving incapacitated entities. Finally, the third schedule clarifies the treatment of interest payable on sums overpaid or underpaid by the ATO and taxpayers in the case of amended assessments under the consolidation regime.

As I indicated, I will deal with those final two schedules first. Both are technical amendments that are necessary and cause the opposition no problem whatsoever. In respect of the clarification of GST treatment of incapacitated entities there is a bit of a history to this but, as with most measures, this is seeking to clarify the original intent of the GST legislation, following a court case. That is quite normal in these tax law amendment bills.

The third schedule, dealing with consolidation, is part of the tax treatment of consolidated entities. My colleague at the table at the moment, the member for McMahon, was dealing with consolidation when he was Assistant Treasurer, so it is a bit of an ongoing feast, isn't it, Minister? The government announced last November that no interest would be payable by the ATO if an overpayment of tax was made by a company and then a subsequent assessment finds a deduction is allowed. A company will not be liable to pay shortfall interest or administrative penalties if an amended tax return increases income tax liability because a deduction is subsequently disallowed. Both these changes are in relation to the amendment of the consolidation regime passed in the Tax Laws Amendment (2012 Measures No. 2) Bill 2012. Both schedules have a nil financial impact.

Let me now turn my attention to the first schedule if I may—that is, with respect to changes to the living-away-from-home allowance. What this bill proposes to do is to change the rules regarding that allowance to allow a deduction for employees for substantiated accommodation, food and drink expenses above ordinary weekly food and drink expense items. Essentially—I am referring now to the report of the Standing Committee on Economics that inquired into this bill and reported in the last 10 days or so, and specifically to the coalition members' report—the bill would, as those committee members articulate rather well, split the taxation treatment of the food and drink allowance. The first $42, that being ordinary weekly food and drink expenses, would be treated under fringe benefits tax legislation. Then additional reasonable expenses for food and drink would be treated as a tax deduction under the income tax legislation. I will come back to that particular aspect in just a second, because it is a moving issue as far as the government is concerned today.

The other aspect of the government's proposed changes in this legislation is to limit that allowance to a maximum period of 12 months, with fly-in fly-out workers being exempted from that limit. My colleague the member for Wright, with me in the chamber, is a member of that committee and has inquired into this legislation in some detail. I know he has some remarks to make later on in the debate.

I will return to that aspect of this proposal in the legislation essentially to split the taxation treatment between the fringe benefits tax and the income tax systems. It was that that particularly got the focus of all members on that economics committee. Recommendation 5 recommended that the living-away-from-home allowance and associated benefits be treated within one taxation system only. And it went on to say:

The committee supports retaining the taxation treatment of living-away-from-home allowances wholly within the fringe benefits tax system.

The government, as I said at the outset, introduced this legislation on 28 June. When they introduced this legislation the Assistant Treasurer said:

The government held two extensive consultation processes in relation to these reforms.

I have to say that with what has occurred at the committee and with what has occurred today every member of this House is right to doubt that statement from the Assistant Treasurer. It is worth checking whether he just says this as a matter of course in every tax law amendment introductory speech. But for the government to have introduced a proposal that would split taxation between the fringe benefits tax and the income tax system and claim they have had extensive consultations, I find that impossible. And not only do I find it impossible; members of the House economics committee found it impossible. You need only look at the submissions that were received. As the coalition members pointed out in arguing that the approach of splitting the tax treatment of food and drink should be abandoned, the submission to the committee by the legal firm Ashurst stated:

Such a system is likely to be unworkable in practice, will significantly increase compliance costs for employers and employees and will give rise to uncertainty.

If they were consulted with, they certainly were not listened to.

The Tax Institute, in its submission to the committee, also observed that the approach in the bill would introduce an additional compliance burden on the Australian Taxation Office, as pointed out by the coalition members on that committee. Those are just two opinions. And Robert Jeremenko from the Tax Institute pointed out that the tax treatment of the allowance should certainly be determined in either the income tax system or the fringe benefits sphere, not both as is currently the case under the bill. He said:

We will have a discussion, I am sure, about which one may be preferable. Let us be honest, the tax system does not need any help in being complex, and this is just a case in point. We do not need to cover both systems for this one.

The minister introducing this legislation claims that 'the government held two extensive consultation processes in relation to the reforms'. You cannot have it both ways. Either the consultation processes were not extensive or the minister and those working on this legislation with him did not listen to what was being said. As I said, the committee recommended that this recipe for difficulty and complexity be rectified. So today we have a situation where this bill has been scheduled a number of different times through the day, and just a few hours ago the government provided the opposition with some background on some amendments which, I am told by the clerks, have been moved in just the last couple of hours.

Essentially the government has told the coalition that the amendments will change that original proposal in the bill to ensure that the allowances are taxed entirely within the fringe benefits tax system rather than in the personal income tax system or a combination of both. The amendments which have been tabled, rushed in at this last minute, apparently also expand the definition of fly-in fly-out workers and drive-in drive-out workers for the purposes of the reforms. They will also expand the definitions in some respects and there are a number of other associated measures.

But my point is the obvious one. This is yet another case where the government has put forward a proposal that has proved wholly unworkable. They claim to have had extensive consultation. At the very last minute they realised they were heading completely down the wrong track and listened to the good work of the economics committee, the entire view of those members on the economics committee. So here we are debating this legislation with amendments moved at the very last minute. Well, it is good that they have listened, but, again, these are late amendments that are being circulated on the very day the bill is to be debated.

The coalition have maintained that there is no doubt that there are arguments for reform in this area, but the way the government has gone about it was to propose something that was poorly designed that would add a great deal of complexity. That is certainly not the path the coalition would have taken in government, and we are of course committed to a more streamlined tax system.

The amendments have been moved. As indicated earlier, my understanding is that the coalition have received from the government certain assurances. We will in this debate take the government at their word that their last minute announcements that have been circulated will give effect to what they claim will address the concerns that have been obvious and that have been highlighted in great detail after the government have tabled this legislation and after they say they have had extensive consultation. We will not be opposing the amendment or the legislation.