Senator MINCHIN (Industry, Science and Resources) (4:42 PM) —I table a correction relating to the explanatory memorandum for the Taxation Laws Amendment Bill (No. 2) 1998 and move:

That these 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—

PRIVATE HEALTH INSURANCE INCENTIVES BILL 1998

This is an important bill for it proposes a measure that will prove to be of enduring benefit to the Australian health system, and to the Australian public, namely to cut the cost of private health insurance by 30 per cent through a rebate outlined in this bill. What this effectively means is that for the majority of Australians, private health insurance will once again become tax deductible.

This is one of the simplest, most effective and most important changes that could be made to restore balance in our health system by working to slow the drop-out from private health insurance.

The proposed cut in the cost of private health insurance will help the private sector, take pressure off public hospitals and help restore much needed balance to our health care system.

For the last two and a half years, my office has been virtually deluged with letters from people saying they wanted to maintain their private health insurance but couldn't afford to keep it. Particularly from older Australians, the comments I have heard time and time again is we can't afford to have it but we can't afford to be without it.

We set about tackling this virtual haemorrhaging of the private sector in health by spending about one-twentieth of what we spend in the Commonwealth's annual health budget and about one thirtieth of overall health spending in Australia in the Private Health Insurances Incentives Scheme.

It was an investment that did achieve some important successes in slowing down the drop out rate for people who have private health insurance

According to the Australian Health Insurance Association, there are now some 200,000 Australians with private health insurance who would otherwise have dropped out without the help of the Incentives scheme.

It's certainly better than doing nothing—which is the only solution proposed by the Opposition. If anything, the continued but slower drop out is proof of need for further action.

Making private health insurance 30 per cent cheaper for the 700,000 or so policy-holders on annual incomes of less than $20,000 is a policy of which I am proud.

The rebate upholds people's choice and will relieve some of the burden of their financial sacrifice as they pay extra for a doctor of their choosing, a hospital of their choice and an operation when they need it.

The Government's 30 per cent rebate is both entirely reasonable and necessary, when you consider that one third of total health finding one third of total health funding comes from health funds and from individuals.

More than one in every three operations—and one in four bed-days—are provided in private sector.

In recent years private hospitals have been shouldering more of the burden as public hospitals—mostly consciously—have treated fewer people who are privately insured. In 1991 27 per cent of privately-insured people were treated in public hospitals; this is now around 15 per cent.

In some specialties—for example, complex knee surgery—more than half of all operations conducted in any one year are provided in private sector.

These services are mostly financed by private health insurance funds—that is, by pooled contribution income from almost six million Australians who, despite the significant cost, choose to be privately insured.

Each year the premiums paid by these people to their health funds, and paid from the funds to hospitals and other providers, makes a larger contribution to our overall health bill in Australia than the Medicare levy funded by almost every Australian taxpayer. Health funds contribute $4.5 billion; the Medicare levy about $3.6 billion.

Although the public and private sectors are sometimes seen as competing foes, notably on the left of politics, it is important to note that private health funds contribute around $400 million a year into our public hospital budgets.

People who ignore or disregard this major contribution by the private sector will find that the pressure on the public purse and public hospitals will only increase.

Supporting private health insurance restores some much needed equilibrium in Australia's health system.

To do this is to put balance back into the health system and help relieve the greatest source of pressure on the public sector in health.

Certainly, I believe that high quality health care should be provided to every Australian and am fully committed to Medicare as a universal health care system and to our public hospital system.

A record $31.34 billion dollars of funding for public hospitals—which represents a 17.6 per cent increase in funding in the next five years compared to the last five years—is a clear sign that the Commonwealth is more than playing its part in supporting the public hospital system. That is a substantially greater increase than what was achieved under the last negotiation by the previous Labor Health Minister, Graham Richardson.

Yet, this additional funding for public hospitals will only be stop gap if nothing further is done to support the viability of the private health sector and to address the reasons for dropout from private health insurance in the first place.

The truth is we know the principal reason why people are dropping private health cover and that is the overwhelming problem of cost.

In fact, to fail to do anything to address these crucial issues would be unreasonable—and simply short sighted.

To do nothing could well spell the end of the private sector and only lead to increasing and intolerable strains on the public sector.

That's why it would be a serious mistake if this legislation were blocked or delayed.

It would also be a serious miscalculation to assume that the same amount of money would be spent elsewhere in the public hospital system.

Australians value a mixed system of public and private health care. The balance has contributed to the high quality system that we have in place today. Australians value choice, and this Government recognises the contribution Australians wish to make to their own health care.

We don't believe this choice is in any way "contentious", as the Member for Jagajaga wrote some years ago in her National Health Strategy.

Those views are flawed because they haven't taken into account that, in fact, in the latest health care agreements recently signed, every time health insurance levels drop one percent, the extra cost on the States, at a marginal rate, is estimated to be $83 million. This is what the Commonwealth has undertaken to pay the states for continuing to decline private health Insurance.

Given that those who argue against this rebate are not proposing to do anything and will simply put private health insurance on the back-burner, we can safely assume that the dropout rate from private health insurance will follow the long term trend of two percent a year.

So by July 2001, if we do nothing, the Government would have to find exactly $500 million extra to the states each and every year correspondingly just to stay standing still.

In other brilliant words, in three years time, we will be where we are now—possibly even worse, will have failed to address one of the root causes of the problem.

This 30 per cent cut in the cost of private health insurance will make a genuine and lasting difference and will preserve the integrity of our health care system, of Medicare and of the public hospitals.

This bill and the accompanying bills—the Private Health Insurance Incentives Bill 1998 and the Taxation Laws Amendment (Private Health Insurance) Bill 1998—introduce the private health insurance initiative announced in the Government's tax reform package, Not a New Tax, a New Tax System.

The benefit will assist families and individuals with the cost of private health insurance by providing a 30 per cent cut in that cost of premiums from 1 January 1999. It will not be means tested and will cover premiums for all hospital and ancillary cover.

Those with health cover will be able to collect the benefit in one of three ways—either as a tax rebate, or as a direct payment or as a premium reduction from their health fund. This

approach provides maximum flexibility for those who pay health insurance premiums and those who are, therefore, able to collect the benefit. They will be able to choose which of the methods best suits their needs.

This initiative builds on and replaces the existing private health insurance incentives scheme.

It is a welcome move as is evidence from recent comments of AMA Federal President, Dr David Brand, coming from an organisation that is not always complimentary of the Government.

It is clear from those comments that the AMA understands that this measure is critical to the future of both public and private health in Australia.

In a submission to non-government parliamentarians, the AMA has also referred to the strong support from the community for this initiative.

According to a Morgan Research, that submission quotes, nearly 70 per cent of Australians support the idea of a rebate for private health insurance.

Another point made in the submission is the claim that there are more than 180,000 jobs directly involved in the private health sector and many more in related services.

These jobs are at risk if the Labor Party allows private insurance to collapse or if we continue to merely put it on the back-burner.

The viability of our public hospital system is very seriously threatened by the continuing decline of private cover. At worst, the submission claims, governments would have to provide an additional 25,000 hospital beds in the public system at a current cost of $3 billion a year.

It is clear that those who understand the health care system, as Dr Brand does, also understand this 30 per cent cut in the cost of private health insurance is critical to the private health sector, and is critical to the future of the public system.

PRIVATE HEALTH INSURANCE INCENTIVES AMENDMENT BILL 1998

This bill amends the Private Health Insurance Incentives Act 1997.

The amendments provide for the transition arrangements for the move from the existing incentives scheme to the Government's private health insurance benefit. This new benefit is introduced in the Private Health Insurance Incentives Bill 1998 which I have just given in the second reading speech.

The new arrangements will provide a benefit of 30 per cent of health insurance premiums to all Australians who have private health cover.

The incentives scheme will be repealed on 1 July 1999.

TAXATION LAWS AMENDMENT (PRIVATE HEALTH INSURANCE) BILL 1998

This bill amends the Income Tax Assessment Act 1997 to provide for a tax offset, otherwise known as a tax rebate, to encourage people to take out or maintain private health insurance.

The tax offset is complementary to the benefits available under the Private Health Insurance Incentive Bill 1998 which can be obtained either as a direct payment from the Government or a premium reduction.

ANTI-PERSONNEL MINES CONVENTION BILL 1998

The Anti-Personnel Mines Convention Bill 1998 will give effect to Australia's obligations as a party to the Convention on the Prohibition of the Use, Stockpiling, Production and Transfer of Anti-Personnel Mines and on their Destruction (the Ottawa Convention) and will provide a legislative basis for the Convention's national implementation.

I take great personal pleasure in introducing a bill which represents an important step towards a goal this Government is committed to: that is, a future world without landmines.

The scourge of landmines—the senseless, random taking and blighting of innocent lives—is a peculiarly vicious, late twentieth century form of terror which all responsible peoples and governments must strive to end—everywhere and forever. The appalling dimensions of the humanitarian and economic crisis being faced by so many countries, including in Australia's region, require this.

It was for this reason—because we understood that bold steps were required to address the global landmines problem—that this Government as one of its first acts on assuming office announced its support for a global ban on landmines and—pending the achievement of this—declared an indefinite national moratorium on the use of landmines by the Australian Defence Force—notwithstanding the fact that the ADF has had no association with the indiscriminate or irresponsible use of landmines. This was a significant break with the caveated policies of the past and underlined our absolute determination to end the human suffering caused by a weapon incapable of distinguishing soldier from civilian.

Since that time, Australia has played a leading role in international efforts to find a comprehensive and lasting solution to the global landmines crisis. Indeed, building international support for an effective, global landmines ban has been—and remains—one of the Government's key arms control objectives.

It was therefore with considerable pleasure and great pride that I signed the Convention on the Prohibition of the Use, Stockpiling, Production and Transfer of Anti-Personnel Mines and on their Destruction (the Anti-Personnel Mines Convention) on behalf of Australia when it was opened for signature in Ottawa on 3 December last year. In so doing, Australia joined over 120 other countries—well over half the community of nations—forswearing the use, production and transfer of anti-personnel landmines and undertook to destroy its stockpile of anti-personnel mines, consistent with the provisions of the Convention.

Signing the Ottawa Convention was the quickest, most absolute way for a government to commit itself to this objective, and it was right that Australia, with its strong humanitarian record, took this stand in support of a global landmines ban. For us, the bottom line was that because landmines are so commonplace, so deadly, and have been so widely and insidiously misused over recent decades, the only sane, humane response is to eliminate them.

I am proud of that decision.

Of course, the global battle against landmines is not yet over and now is certainly not the time for complacency. The international community must now build on the norm established by the Ottawa Convention. We owe it to the victims of landmines past, present and future to continue working through all possible avenues to ensure that major traditional producers and exporters of landmines which remain outside the Ottawa Convention are brought into the process of finding a lasting, effective solution to the landmines problem. The next step will be to get negotiations underway as soon as possible in the Conference on Disarmament on an agreement to ban transfers of landmines as a way of complementing the Ottawa Treaty and tightening the clamps on the global supply of landmines. Australia is leading the way on this front and we will continue to work hard on this long after the issue has left the media headlines.

Neither will we lose sight of the ongoing urgent need to do something concrete and compassionate about the millions of landmines which are already in the ground and which continue to claim innocent victims on a daily basis. We will continue to lead the way in assisting countries such as Cambodia to rid themselves of the continuing deadly legacy of landmines, drawing not only on our financial resources but also on the experience and courage of our deminers and the talent and innovative thought which our scientists and our engineers have applied to the technological challenge which these silent killers continue to pose.

The bill before the House gives life to Australia's obligations under the Convention. Part 2 of the bill makes it an offence to engage in activities prohibited under the Convention and provides appropriately severe penalties of ten years imprisonment for offences committed under clause 8 relating to the Convention prohibitions.

Part 2 of the bill creates offences relating to placement, possession, development, production, acquisition, stockpiling and transfer of anti-personnel mines by Australian citizens or members of the Australian Defence Force or on territory under Australian jurisdiction or control. The offence would be punishable by either imprisonment for 10 years or a fine of $66 000 (or both) for an individual; or a fine of $1 100 000 for a corporation.

Part 2 of the bill also provides a specific exemption to this obligation, namely for the retention or transfer of a minimum number of anti-personnel mines necessary for the development of, and training in, mine detection, mine clearance, or mine destruction techniques. The bill authorises the Minister for Defence to grant permission to place, possess, produce or acquire, stockpile or move anti-personnel mines for the purposes of the development of, or training in, mine detection, mine clearance, mine destruction or mine deactivation. This is fully consistent with the Convention (Article 3) and would ensure that Australia's skills base in mine detection, mine clearance and mine destruction techniques is not inadvertently compromised.

Part 3 of the bill deals with the powers of fact-finding missions which may be mandated under the Convention to assess whether Australia is in compliance with provisions of the Convention.

Part 4 of the bill provides for information gathering necessary to ensure full compliance with the obligations and reporting responsibilities contained in the Convention.

I commend the bill to the House and present the explanatory memorandum to the bill.

TAXATION LAWS AMENDMENT BILL (NO. 2) 1998

The bill is being reintroduced with amendments to the bill that was debated and passed by the House of Representatives on 1 December 1997.

The bill gives effect to a number of important measures previously announced by the Government to protect the integrity of the income tax base, to make some technical changes and to seek to act on the recommendations of the Small Business Deregulation Taskforce to reduce the compliance burdens faced by small business across Australia.

Base Protection and Technical Changes

Denial of certain capital losses

Under the existing law, corporate groups may multiply capital losses through manipulation of the capital gains tax provisions. The bill amends the tax law to remove the benefit of such losses, where the loss was created by the rolling over of an asset before 3pm on 29 April 1997. However, losses already used prior to the announcement of the measure at 3pm on 29 April 1997 will not be affected. These provisions will not apply to small businesses, nor to certain assets used in manufacturing.

The bill also amends the anti-avoidance provisions of the income tax law to apply those provisions to capital loss creation schemes in the year in which the losses are created. The amendments apply to capital losses resulting from schemes entered into after 3pm on 29 April 1997.

Deductible expenditure and CGT cost bases

The bill gives effect to changes to the capital gains cost base provisions, announced as part of the Government's 1997-98 Budget.

The bill will ensure that taxpayers will no longer be able to include amounts of expenditure as part of the cost base or indexed cost base of an asset to the extent that the expenditure is deductible or is eligible for a heritage conservation rebate or a landcare and water facility tax offset.

The amendments are consistent with the principle that an item of expenditure should either be deductible for income tax purposes or included in the CGT cost base of an underlying asset, but not both.

The amendments will apply to assets acquired after 7.30 pm on 13 May 1997. However, expenditure incurred before 1 July 1999 in respect of underlying land or buildings acquired on or before 13 May 1997 will not be subject to the measure.

The amendments in respect of the heritage conservation rebate and the landcare and water facility tax offset only apply to expenditure incurred on or after the day these measures are introduced into the Parliament.

Depreciation

As announced in the 1997-98 Budget, the bill will amend the income tax law to ensure that, for tax exempt entities that became subject to taxation before 3 July 1995, depreciation deductions and balancing adjustments are based on the notional written down values of their depreciable assets as if the entity had always been subject to taxation.

Average calculated liabilities of life insurance companies

The bill will amend the income tax law to require life companies to use average calculated liabilities, rather than calculated liabilities at the end of the year of income, as the basis for determining income associated with immediate annuity policies, policies issued by overseas branches and the income and capital gains to be allocated to each class of assessable income.

The amendments apply from the first year of income on or after 29th April 1997. However, the amendments will apply to the preceding year of income if a significant event occurred in one of the insurance funds of a life company in the period from 29th April 1997 to the end of that year of income.

Passive income of insurance companies

The bill also contains amendments announced in the 1997-98 Budget to correct a deficiency in the formulae used to calculate the passive income of controlled foreign insurance companies that are subject to accruals taxation and derived on or after 1st July 1997.

Dividend imputation and RSAs

The bill will amend the income tax law to ensure that no franking credit or debit arises from the payment or refund of tax where those amounts are attributable to the Retirement Savings Account business of a life assurance company.

Effect of bankruptcy on carrying forward tax offsets

The bill will amend the income tax law for the 1997-98 and later income years to prevent a taxpayer who has become bankrupt from using a carried forward landcare and water facility tax offset in certain circumstances.

Company tax instalments

The bill will amend the income tax law from the 1995-96 income year to exclude superannuation funds, approved deposit funds, and pooled superannuation trusts from the grouping provisions contained in the company tax instalment system.

Changes To Assist Small Business

Fringe Benefits Tax

The bill will amend the fringe benefits tax law to, amongst other things, give effect to changes foreshadowed by the Prime Minister in his statement on 24th March.

The amendments will:

. extend and simplify the exemption for taxi travel;

. exempt certain small businesses from fringe benefits tax on certain car parking benefits;

. simplify the `arranger' provisions;

. remove the burden of keeping records in certain circumstances for small business; and

. exempt benefits arising from an employer's participation in an approved student exchange program.

Details of the commencement of these changes are outlined in the Explanatory Memorandum.

All of the measures demonstrate the Government's commitment to reducing FBT compliance costs for employers and, in particular, for small businesses.

Payments of tax by small companies

The bill will amend the company tax instalment provisions of the income tax law to allow entities classified as small to pay their tax obligations later than currently required. Consequential changes to the date for determining classification are also being made.

Full details of the measures in the bill are contained in the explanatory memorandum circulated to honourable senators.

I commend the bill to the Senate.

Debate (on motion by Senator Quirke) adjourned.

Ordered that the Anti-Personnel Mines Convention Bill 1998 and the Taxation Laws Amendment Bill (No. 2) 1998 be listed on the Notice Paper as separate orders of the day.