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Wednesday, 3 October 1984
Page: 1159


Senator WALSH (Minister for Resources and Energy)(6.59) —I move:

That the Bills be now read a second time.

I seek leave to have the second reading speeches incorporated in Hansard.

Leave granted.

The speeches read as follows-

BANK ACCOUNT DEBITS TAX ADMINISTRATION AMENDMENT BILL 1984

The main purpose of this Bill, and a further Bill I will introduce shortly, is to permit three additional exemptions from the bank account debits tax. These exemptions were decided upon by the Government following a review of the tax and were announced by the Treasurer (Mr Keating) in the Budget Speech. A statement outlining the decision taken by the Government as a result of the review was issued by the Treasurer on 22 August 1984. As indicated in that statement, the Government confined its review of the tax to the exemption provisions pending the outcome of an enquiry into the distribution of taxing powers between the Commonwealth and the States.

Honourable senators will be aware of the numerous organisations and individuals who have made representations seeking exemptions from the tax in recent months. Those representations were given very careful consideration by the Government and it was concluded that it would be appropriate to grant three additional exemptions. The Government believes that the new exemptions will rationalise the existing exemption provisions while at the same time retain the original concept of a broad-based tax with few exemptions.

The present Bill will grant two new exemptions. First, it will extend the range of exemptions to include parents and citizens' associations and other support groups for institutions that are themselves exempt from the tax. Secondly, it will exempt local councils and government bodies in respect of any minor business activities they carry on. In addition, the Bill will clarify the operation of the legislation in relation to government bodies whose enabling legislation includes a provision generally exempting the body from Commonwealth taxes. The Bill will also modify requirements relating to the lodgment with the Australian Taxation Office of certain returns by banks.

I turn now to discuss in more detail the changes proposed by this Bill. Under the present law, a public benevolent or religious institution, a public or private non-profit hospital and a government or private non-profit school, college or university is exempt from tax. The Bill proposes that exemption also be granted to organisations whose function is to support one of those exempt institutions. The proposed exemption will thus apply to parents and citizens' associations and like bodies which exist to serve the interests of particular schools. Auxiliaries set up to raise funds for a hospital or a public benevolent institution such as an aged people's home will also be eligible for exemption. Exemption will not, however, extend to 'umbrella' support groups whose purpose is to promote in a more general way the interests of schools, hospitals or other exempt institutions nor to broadly based support groups such as community service clubs.

The new exemption will apply to debits made to accounts on or after the first day of the month following the month in which the amending Act receives the royal assent. The Bill also liberalises the exemption currently provided to certain government bodies. Under the present law, government bodies are eligible for exemption from the tax, except in relation to bank account debits resulting from transactions connected with a business undertaking or if their sole or principal function is to carry on a business. This policy of taxing all business activities of government bodies ensures equality of tax treatment with any private sector competitors but has meant that local councils that carry on business activities such as operating swimming pools, child care centres and caravan parks are subject to the tax in respect of those activities even where they represent an insignificant part of a council's functions and are not commercial in a real sense. Because transactions relating to such business activities are generally conducted through the council's main operating bank account, that account is not eligible for the issue of a certificate of exemption. Instead, the council is initially required to pay tax on all debits to the account and subsequently claim a refund from the Commissioner of Taxation of the tax paid on the non-business debits.

The Government believes that the administrative burden in these particular situations is disproportionate to the very small amount of revenue involved. Accordingly, the Bill will extend the scope of the exemption provided to government bodies that do not primarily carry on business undertakings so that such a government body will be eligible for exemption not only in respect of its non-business activities but also in respect of any business activities that form a minor or insignificant part of its functions. This will mean, for example, that a local council will no longer be subject to the tax in respect of business activities such as operating a swimming pool where, viewed overall, that activity represents a minor part of the council's functions. On the other hand, a council that carries on, for example, a substantial electricity supply undertaking will not be eligible for exemption in respect of debits relating to that activity. The change to the exemption arrangements for government bodies will also operate in relation to debits made on or after the first day of the month following the month in which the amending Act receives the royal assent.

This Bill is also to clarify the operation of the bank account debits tax law in relation to government bodies whose enabling legislation includes a provision exempting them from Commonwealth taxes. The intended operation of the existing law is that government bodies are entitled to exemption from the tax only if they satisfy the specific tests for exemption of government bodies contained within the bank account debits tax legislation. As mentioned earlier, those tests are designed to ensure that government bodies are not eligible for exemption in respect of substantial business activities. Nevertheless, legal arguments have been advanced that government bodies that carry on substantial business undertakings are completely exempt from the bank account debits tax if they have a general tax exemption provision in their enabling legislation. The amendments will make it clear that a government body will only be entitled to exemption from the tax if it satisfies the specific tests for exemption of government bodies contained in the bank account debits tax legislation. This particular measure will be made effective in relation to bank account debits occurring on or after 22 August 1984 which was the date on which the Treasurer announced that the law would be amended in this way.

The final measure proposed by this Bill will vary a machinery provision in the existing legislation which stipulates that banks must lodge an annual return relating to exempt accounts specifying the names and addresses of the account holders in alphabetical order. The Bill will replace the requirement to furnish a list of account holders in alphabetical order with a requirement that the bank furnish the return in an approved form containing such particulars as are required by the form. This is consistent with the existing provision relating to lodgment of returns for taxable accounts and will assist the Commissioner of Taxation in exercising appropriate control over the system of certificates of exemption. As is usual with amendments to the taxation laws, an explanatory memorandum giving technical details of the amendments contained in the Bill is being circulated to honourable senators.

I commend the Bill to the Senate.

BANK ACCOUNT DEBITS TAX AMENDMENT BILL 1984

This Bill will give effect to the proposals announced in the Budget Speech to exempt debits below $1 from the bank account debits tax and to increase the tax on debits of $10,000 or more from $1 to $1.50. At present, there is no minimum debit below which the tax does not apply. This means that the minimum rate of tax of 10c is charged on very small debits including on small debits for financial institutions duties levied by some States. The Bill will ensure that debits below $1 are not subject to bank account debits tax.

In order to offset the cost of the exemption of debits below $1 and the other new exemptions announced in the Budget, the Bill proposes to increase the rate of tax on debits of $10,000 or more from $1 to $1.50. This increase, like those two changes, will apply to debits made to accounts in the month following royal assent.

I commend the Bill to the Senate.

Question resolved in the affirmative.

Bills read a second time, and passed through their remaining stages without amendment or debate.