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Wednesday, 23 March 1994
Page: 2081

Senator SHERRY (Parliamentary Secretary to the Minister for Primary Industries and Energy) (4.08 p.m.) —Before we get a response to the matter raised by Senator Watson, I indicate that I will be covering it to a significant extent in the comments I make in response to Senator Harradine's amendment. Firstly, the government will not accept Senator Harradine's amendment for two major reasons. One is that it does not believe that the detail of Senator Harradine's amendment is sufficient to cover the issue he is trying to address. We do not believe it is correctly worded or sufficient in its coverage.

  Secondly, we are concerned about the retrospective element. Senator Harradine has been critical of the fact that the Assistant Treasurer's press release, in announcing that this matter does need to be dealt with, is prospective. That is a little harsh in that the tax treatment of trusts established before the date of the Assistant Treasurer's media release will be appropriate. They are not disadvantaged if they have been established before the date of the press release.

  The government, as Senator Harradine has pointed out, has announced that normal rates of tax are to apply to arms-length rates of income for property transferred for the benefit of a child as part of a legal settlement following a family breakdown. This change is meant to apply to a range of such transfers of property which are not conditional on orders for dissolution or nullity of a marriage.

  Senator Harradine's proposed amendment may not protect the position of all children for whose benefit property was transferred before the date of the effect of the government announcement. It may apply only to income from property transferred to provide for child maintenance. The most common situations in which property is transferred for a child's benefit in circumstances of family breakdown may not be dealt with by Senator Harradine's proposed amendment—for example, where parents cannot agree on the division of property between themselves but, nevertheless, agree to transfer some property for the benefit of their children.

  The question of the date of the application of the changes that the government announced in that press release is something the government is prepared to consider when the bill is introduced for these changes and is put before the parliament some time between now and the end of this year. We are prepared to look at that operative day. At that time it will be necessary to consider the commissioner's view on the operation of the law as it stood before the announcement. At this stage, the commissioner has only issued a draft taxation ruling on which comment has been invited. Finally, it would also be necessary to consider the date of application of other changes announced by the government as part of that legislative package. I am not sure whether that answers Senator Watson's question fully. That is the government's position in response to Senator Harradine's proposed amendment.