Senator JACINTA COLLINS (5:21 PM) —The Taxation Laws Amendment Bill (No. 3) 1998 —or the Taxation Laws Amendment Bill No. 7 1997, as it was titled before it went before the Senate Economics Legislation Committee—includes a large number of unrelated taxation matters. Whilst, like others, I might be tempted to focus on the very important issue of choice of funds in superannuation, I am leaving those issues to my colleagues because I think it is equally important in the brief time I have in my speech during the second debate to deal with some of the other measures covered by this bill. In my speech I will be focusing on the restriction of choices in relation to anti-avoidance measures included in amendments to schedules 8 and 9 and the savings rebate scheme.

These tax measures beg the question of why are we proceeding with this bill in the climate of anticipation of the government's tax plan for the election; why are we proceeding now with these measures? It was put to the committee that it was a priority of the government to proceed with the issues relating to superannuation, but there were other options than to try to rush, as this government did—or, in Senator Murray's words, to squeeze—this process through the parliamentary process.

The other big question I will be focusing on in this speech is how effective will these anti-avoidance measures and the savings rebate scheme be, given the limited consideration that has occurred of the proposals in the bill. In fact, we have considered various amendments also, as it became obvious that the original framing was inadequate. If in our consideration there are still areas of serious concern, why proceed now? Why not wait until these measures can be incorporated into the wonderful tax plan that we are all anticipating will come from the government in the next few weeks?

I would like to refer to comments made by Labor members of the Economics Legislation Committee in their report on these issues. We said quite clearly that Labor senators considered that the whole process adopted regarding this bill reflected poorly on the government and, regrettably, on the Senate process. The report was brief because we had very limited opportunities to consider concerns raised by various parties. Labor senators noted in the report:

The government has engaged in an appalling process which involved rushed hearings and inadequate public consultation. The Assistant Treasurer released 49 amendments to the legislation at 4 p.m. on Friday, 27 March, in the full knowledge that the hearings on the legislation were scheduled for the following Monday morning. Not surprisingly, the witnesses were not adequately able to deal with the legislation and the amendments and the quality of evidence was compromised.

To attempt to overcome this disgraceful performance by the government, the Labor senators proposed to the Senate that the committee report in May. This motion was amended, by the government and the Democrats, to the current inadequate reporting schedule. However, this action by Labor at least ensured another day of hearings was facilitated on 3 April 1998. Incredibly, when this further hearing was held, witnesses to the committee still did not have the complete bill to provide evidence about. In addition, the witnesses had to deal with the untenable situation where the government had introduced further legislation, Taxation Laws Amendment Bill (No. 4) 1998 , earlier in the week, which impacts on the operation of the bill before the committee. Why is the government pushing through these initiatives when we are waiting for that very broad plan?

I reiterate that it reflects the management by the government of these tax bills, but it also reflects the management that the government is going to put in relation to the overall tax debate. Adopting Senator Murray's phrase, I think we will be looking at a squeeze on the GST, where it will be impossible to have a rational assessment of the overall proposals in an attempt to squeeze through an alternative measure. The government does not want to line up some of these measures before us now with the GST, so it is trying to push them through now.

Let me start with schedule 8, with respect to dividend streaming. Senator Cook, in his speech during this debate, has already addressed this issue and applied what I will call the Parer test of efficacy. Again, the big question is: how effective will these measures be? Senator Cook and I are awaiting the minister's response about whether these anti-avoidance measures will void the behaviour of the likes of Senator Parer in avoiding their obligations.

With respect to schedule 9, there are two areas I would like to comment on. The relevant amendments look at distributions from private companies. This area covers measures directed at $110 million over three years, according to the Treasurer, Peter Costello, in what he is calling tax rorts.

Senator Cook briefly touched on a concept called notional dividends, which are declared as shares not yet issued but disguised as non-taxable loans. Again, we have another Parer test. The really concerning thing about this Parer test arose in questioning before the Australian Taxation Office during the estimates process. The tax office indicated that they do not even understand the concept of notional dividends. If this is the case, the tax office has a fair bit of work to do in order to bring themselves up to speed if they are going to enforce this legislation and deal with practices in relation to these sorts of avoidance rorts. If these fairly blatant ones, which have become public through Senator Parer's behav iour, cannot be dealt with, what are they going to do with the more complex cases?

I would appreciate the minister's views on the arrangement masterminded by Senator Parer on whether notional dividends disguised as shareholder loans will be caught by this legislation. If the minister is unable to provide an appropriate answer in his speech at the conclusion of the second reading debate, then I suggest that he should be prepared for the committee stage, where we will be seeking—in the more detailed discussions of the bill—an explanation as to how they would apply. We will not have very effective anti-avoidance measures if we are not able to pick up this sort of behaviour, but that also does not seem to concern the government greatly.

Another area in relation to schedule 9 that Senator Murray touched on was that of employee ownership schemes. Senator Murray had a concern—and it was raised in discussions in relation to the bill—that such schemes might be caught up in schedule 9. Whilst the Labor Party supports employee ownership schemes and incentives towards such schemes, we do not do so with respect to schemes that would operate at the expense of revenue. In other words, not all schemes are appropriate as employee ownership schemes. Again, the Parer test highlights the issue that, in some cases, employee ownership is really a fraud because it is not open to employees—it is only open to some very select employees who get a massive tax advantage.

Let us look at the QCMM (ESP) scheme and highlight the problem there. The employee share plan was, in essence, an executive remuneration scheme for Senator Parer and his fellow directors. Ralph Willis described such schemes—in response to Peter Costello's announcement that the then opposition would oppose a crackdown on such arrangements—as schemes designed to convert salary into shares or share rights in order to take advantage of the open-ended tax deferral opportunities.

As in the Parer case, three associated companies—QCMM Pty Ltd, AQRM Pty Ltd and Tremell Pty Ltd—collectively contributed $2.7 million to QCMM (ESP) Pty Ltd in consideration of the issue of UNC employer class shares. However, the purchase of these shares was tax deductible, yet, in essence, no economic loss was borne by the companies involved. Parer and his fellow directors, in turn, subscribed for employee class shares—Senator Parer, employee class shares! QCMM (ESP) Pty Ltd paid to the value of 1c each. They then became entitled to the pool of $2.7 million, through the creation of employee contribution accounts, in proportion to the number of shares they had subscribed for. In Senator Parer's case, it was a total of 44 one cent shares.

The tax lurk is that the companies can immediately claim $2.7 million in tax deductions yet no tax is payable by any of the holders of the employee class shares until they redeem them with QCMM (ESP) Pty Ltd. This is where the unlimited tax deferral opportunity arose, and I am interested in how the minister will respond in relation to whether the proposed amendments will effectively deal with this sort of rort.

Lastly, I would like to look at the government's discredited savings rebate. This measure is so important to the government that we are only now debating it, one year after it was announced, and it is within a mixture of unrelated tax measures. The fact that we are debating it after the 1998-99 budget has been announced shows how important the government thinks it is. What we know, though, is that, far from making a contribution to national savings, it will actually lead to dissavings, thus Senator Cook's suggestion that it should be called the dissavings rebate.

When announced last year, it carried with it a $3.8 billion cost to revenue over three years. So before we see any contribution to national savings—again, the efficacy test—this $3.8 billion has to be made up through increased private sector savings. The cat was let out of the bag—although we had been saying it for some time—that to qualify for the savings rebate all you had to do was receive income outside of the PAYE system. As Annamaria Carey of the Taxation Institute stated:

The savings rebate in reality is a tax cut because income—not savings—is the sole criteria for the rebate.

So we have a tax cut before the government's income tax cuts that are meant to be coming. Why are we dealing with this now if this is meant to fit in with an overall tax reform? The answer is obviously that it is not genuine.

It is also significant that 74.5 per cent of all income generated in Australia is from salary and wages and therefore will not qualify for the rebate, as opposed to trusts and partnerships which comprise 7.4 per cent of all income and gross rent at 3.4 per cent. This means that the two top sources of income in Australia after salary and wages, which only comprise 10.8 per cent of all income generated in Australia, will qualify amongst other sources for the savings rebate. And, as we know, there are not too many battlers out there with partnerships and trusts, unless we are talking to the battlers from Brighton or the struggling families from Toorak.

But, as we know, this government—particularly half of its front bench—has put its trust in trusts. Who is at the epicentre of the trust owning members of the coalition? It is none other than Senator Parer. Who stands to gain from the savings rebate? Again, it is the Parer test. We have Parer, a battler, a struggler—he has remained in the ministry—and the very type of person that this government intends to benefit from the savings rebate! After all, there are hundreds of thousands of struggling Australian families out there with $60,000 just sitting in the bank earning five per cent interest, or $3,000, in order to qualify for the maximum rebate!

But the best part is that every beneficiary of the Parer family coal trust who receives $3,000 by way of suspect trust distribution—the things we are trying to avoid—will receive the full $450 rebate and, what is more, they do not even have to save it. Not a bad lurk, one might say. But, for Senator Parer and his like, this is par for the course or probably a bit at the low end of the tax minimisation scale. For some, paying tax has become an optional exercise and this government now subscribes to the Parer principle: don't pay what you don't have to and, importantly, don't get caught.

We will continue to highlight the hypocrisy of this government: it wants to impose a GST on battling Australian families yet is quite happy to allow or, I should say, assist the likes of Senator Parer to milk the system for what it is worth, regardless of the public cost. I therefore seek an explanation, again related to the Parer test, from the minister on how the mere distribution of moneys from a trust such as Senator Parer's contributes to national savings when the money is received by beneficiaries who do not even have to save it.

Senator Calvert —Mr Acting Deputy President, I raise a point of order. I have sat and listened with interest to Senator Collins's contribution but she continually addresses our colleague by his incorrect title. He is a senator and she is making some assertions that I do not believe are correct. Nevertheless, I am not going to take her up on that, but perhaps you might draw to her attention her inconsistencies in the way in which she addresses Senator Parer.

Senator Conroy —On the point of order, I was not aware that Senator Collins was at any point directly addressing the minister, so I think it is a point of order that you should rule out of order.

The ACTING DEPUTY PRESIDENT (Senator McKiernan) —I do not think there is a point of order, but it is proper that the senator's proper title be used whenever it is appropriate. Senator Collins, I did hear you, on a couple of occasions, refer to the `Parer family trust', which I understand is the proper title of the trust, but I would remind you that if it is appropriate you should use the senator's full title.

Senator JACINTA COLLINS —Thank you, Mr Acting Deputy President. Perhaps that gives me the note on which to conclude my remarks. I had indeed intended to be very careful when referring to Senator or Mr Parer to use his title, but, of course, I was counter-indicating that with what I have characterised as the Parer test. I will perhaps conclude my remarks with what was the final Parer test. I will be seeking an explanation from the minister as to how the mere distribution of moneys from a trust such as Senator Parer's contributes to the national savings when the moneys received by the beneficiaries do not even have to be saved. I look forward to this explanation.