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Thursday, 2 November 2000
Page: 18925


Senator IAN CAMPBELL (Parliamentary Secretary to the Minister for Communications, Information Technology and the Arts) (9:57 AM) —I 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—

WOOL SERVICES PRIVATISATION BILL 2000

The Wool Services Privatisation Bill 2000 is the final step to deliver privatisation of the wool industry services provider, the Australian Wool Research and Promotion Organisation (AWRAP) and its operating subsidiary, The Woolmark Company. It passes ownership of the management of wool industry services into the hands of wool growers and reduces Government's involvement to oversighting statutory funding and accountability. The process to establish the most appropriate structure to replace AWRAP has been comprehensive, and well supported by wool growers. It has been a strong example of Government and industry working together to achieve a common goal.

The initial impetus for reform stemmed from the low demand and poor prices for wool over the last decade. In response to the uncertainty felt by many in the wool industry, the Government appointed the wool industry Future Directions Taskforce in December 1998, chaired by the Hon Ian McLachlan AO, to define the issues facing the wool industry and to identify appropriate responses. The Government supported the broad thrust of the recommendations in the Taskforce report.

A voluntary wool grower ballot, known as WoolPoll 2000, was conducted in March this year, with wool growers indicating their preferences for a 2 per cent wool tax to be invested in R&D, technology transfer and delivery and some information services. In response to the WoolPoll result, the wool tax rate was lowered to an interim rate of 3 per cent from 1 July 2000. This interim rate is to cover the costs of transition to a mainly research and innovation body, and from a Government authority to private ownership. The levy will be further reduced to 2 per cent as soon as these costs are met following the establishment of the new arrangements.

Following WoolPoll, a process to identify the most appropriate Corporations Law structures to replace AWRAP was undertaken in conjunction with the wool Interim Advisory Board (IAB) and the Woolgrower Advisory Group (WAG). The preferred structure received unanimous endorsement from the IAB and the WAG.

The new structure

The bill provides that AWRAP will be converted to a Corporations Law holding company limited by shares, to be called Australian Wool Services Ltd. It is proposed that AWRAP's successor will have two principal subsidiary companies. The boards to be established under the new arrangements will be responsible primarily to their shareholders, rather than to Government.

One subsidiary of the holding company, nominally called “CommercialCo”, is expected to be AWRAP's current subsidiary, The Woolmark Company. CommercialCo will be involved in the commercial development of the Woolmark and its sub-brands and the commercialisation of intellectual property matters.

The other subsidiary, nominally called “R&DFundCo”, will manage the proceeds from the wool levy and will outsource wool industry R&D. It will also manage intellectual property arising from this research.

The creation of the two subsidiaries allows for transparency and contestability in the expenditure of levy funds, as well as maximising the commercial potential of the assets.

These arrangements also provide flexibility for the new main Board to consider the demerging of the holding company from its subsidiaries within 12 to 24 months, leaving the two subsidiaries as stand-alone commercial companies directly owned by shareholders.

Wool tax to a wool levy

The bill allows for the establishment of a wool levy to replace the current wool tax. This change will see the compulsory industry contribution arrangements harmonised with all other agricultural industry levies. The wool levy will continue at the same rate as the wool tax, currently 3 per cent. The establishment of the wool levy will also help in the future conduct of wool levy rate ballots and will also assist to maintain the accuracy of the shareholder register by ensuring accurate wool levy information is passed onto the register managers.

Shareholder arrangements

A List of Eligible Woolgrowers as provided for in the bill allows for shares in the holding company to be issued to eligible wool growers. This list of shareholders will form a dual-class register which gives voting entitlements to shareholders in relation to activities of the R&DFundCo subsidiary and the CommercialCo subsidiary.

The bill also provides for a period in which incorrectly issued shares can be removed from the register to ensure its accuracy.

Wool growers will be invited to apply for shares by providing evidence of wool tax paid over the three-year period to 30 June 2000. The establishment of a voluntary shareholder register is a major logistical exercise. At this stage, the intention is that I will sign off on the list of woolgrower shareholders in time for the company to be established on 1 January 2001, subject to appeal procedures and dispute resolution procedures being completed by the company over the following 6 months.

Taxation Issues

In relation to tax treatment, Government worked on the simple principle that neither the new company nor its shareholders should be disadvantaged in moving to the new privatised arrangements. To achieve this, the bill includes provisions which exempt the company and shareholders from certain taxes in relation to specific steps involved in the re-structure process.

There will be a nil cost base for CGT purposes for shares issued in the new arrangements. This was a decision based on two good reasons. Firstly, wool growers will not pay for the shares they receive and in the payment of their wool tax for industry research and other services, there was no expectation that this would lead to realising equity. Secondly, growers have already been able to claim a deduction for the wool tax they have paid which results in their share allocation. To establish a cost base now would essentially mean wool taxpayers would receive a double benefit.

Accountability

Whilst Government is committed to minimising its involvement in the new arrangements, as long as payments continue to be made to the company by the Government, it is appropriate for Government to responsibly monitor the expenditure of those payments. The bill provides for the Government to enter a contract with the company in relation to payments of wool levy and matching Government R&D contributions.

Commencement

The bill provides for the new arrangements to commence on a date to be proclaimed. This is to ensure that all outstanding issues are completed prior to the privatisation of AWRAP and its subsidiary, The Woolmark Company. It is intended that this will be before 1 January 2001.

HR Strategy

Consistent with the Government's policy for guiding decision-making on staffing and employees conditions matters in privatisation processes, a strategy is being developed to ensure that AWRAP staff are transferred to the new arrangements without breaching their employment contracts.

Inaugural Board

It has always been intended that the new Board will be drawn from the existing IAB and supplemented as necessary where additional members or skills-mix are required. The new Board will not have a Government member, consistent with the commitment to the wool industry to minimise Government involvement in the new arrangements.

Benefits of privatisation

The process to privatise AWRAP is in response to industry calls for reform. The new arrangements differ from AWRAP in a number of key areas which address industry concerns:

wool taxpayers will be the owners of the new arrangements;

there will be full contestability and transparency between the receipt and expenditure of the wool levy and matching R&D funds;

the Government's role will be limited to that required for accountability for the wool levy and matching R&D funds received, and ensuring efficient and effective service delivery;

shareholders in CommercialCo will have the opportunity to realise future capital gain as a result of share trading; and

the new companies will operate as commercial entities under the Corporations Law.

Conclusion

The privatisation of AWRAP is part of a larger process to enable the wool industry to assume ownership of its service delivery body, and for it to be accountable to levy payers as shareholders. Industry and Government have worked closely together to produce this important result for the wool industry. The good work done by the IAB, under the leadership of Mr Rodney Price and by the Woolgrower Advisory Group, under the leadership of Mr David Webster, have ensured that the process has run smoothly and to schedule.

I take great pleasure in commending this bill.

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CHILD SUPPORT LEGISLATION AMEND-MENT BILL (No. 2) 2000

This Government values families and children and has worked to improve the circumstances of all Australian families. The major benefits of the family assistance package and the $240 million Stronger Families and Communities Strategy are prime examples of the Government's commitment to families and children.

This bill builds upon these initiatives by addressing key issues for the wellbeing of Australian families following separation. It provides for a fairer Child Support Scheme that addresses the needs of parents and children alike, and that encourages parents to continue to be involved in the lives of their children.

A package of child support measures was announced in the Budget to address key concerns of separated parents. The measures in this bill will improve the Child Support Scheme in a balanced way, resulting in a fairer scheme.

The first suite of amendments will modify the administrative formula to introduce a specific and transparent allowance for the costs of contact of between 10% and 30%. This provides a modest acknowledgment of the costs to non-resident parents of ongoing contact. It also distinguishes between those parents who have little or no contact and those who have regular contact with their children. Non-resident parents typically face fixed costs, such as providing a separate bedroom, household items and clothing, as well as the recurring costs of food, health care and entertainment. By recognising that parents incur costs during contact, the measure will improve the ability of non-resident parents to maintain contact with their children. Contact with both parents is important for the emotional needs and development of children. If parents have ongoing contact with their children, they are also more likely to meet their child support obligations.

The measure used to set the upper limit (or “cap”) on payer taxable income that can be subject to child support formula assessment will be aligned with that used in relation to the payee's income. The result will be a lower cap of around $79,000. The current level of the cap means that some high-income payers are paying more in child support than the costs of their children. The new level of the cap will address this. The new cap will still see resident parents of these children receiving child support of over $12,000 a year for one child, $18,000 for two children and higher amounts for three or more children.

Parents who take on additional work to support their new family will be able to apply to the Child Support Agency to have the additional income excluded from the assessment of child support. Parents will have the income disregarded only if they can demonstrate that the income was earned for the sole purpose of providing support to the children in their new family. To qualify, the additional income cannot be earned as part of the normal earning pattern of the parent prior to establishing the new family. The amount of income that can be excluded will be limited to a maximum of 30% of the parent's total income. This measure will assist parents in their efforts to improve the position of their new family, without unduly affecting their first family.

The fairness of the means testing arrangements for Government provided family assistance will be improved by allowing a full deduction for all child support paid. Currently, if a payer forms a new family, only half of the child support they pay is deducted from their household's income when their entitlement to family assistance is calculated. A full deduction will mean that child support payers with children in new families will have their family tax benefit and child care benefit assessed on income that reflects the actual income available to their new family.

Among the non-Budget measures in the bill are changes that reflect the relocation in late 1998 of the Child Support Agency from the Australian Taxation Office to the Department of Family and Community Services. These changes will mean that the Commissioner of Taxation is no longer the Child Support Registrar. Instead, the Registrar will be the General Manager of the Child Support Agency. The changes are designed to ensure a seamless transition to the new arrangements and will ensure the CSA continues to operate effectively by preserving the existing arrangements for exchange of information between the ATO and the CSA.

Amendments made by the bill will also enable the Registrar to issue a departure prohibition order to prevent a payer who has persistently failed to meet his or her child support obligations from leaving the country. In practice, the CSA will use this power if the payer is able to pay the outstanding debt but has consistently refused to do so and other attempts to collect this debt have been unsuccessful. If the payer makes satisfactory arrangements to pay the debt, the CSA will be able to revoke the order and will also be able to authorise a specific departure if appropriate. The provisions are consistent with the existing departure prohibition order scheme in place in relation to taxation debtors.

The requirement is being removed, in the CSA's change of assessment process, for the CSA to provide each party with a copy of all documents provided by the other in support of his or her application - instead, the CSA will provide only the application without the supporting documents. This change is intended to protect the privacy of both parents in that process.

The bill will set up a regulation making power to allow certain amounts to be excluded from income so that the current $260 annual minimum child support liability will not apply.

Other amendments will overcome problems that have arisen when a child has (effectively) run away from his or her parents to live with a third party against the parents' wishes, and the third party carer applies for child support from the parents. This change relates to situations in which the child is living with someone other than his or her parents. The carer in this situation will not generally be an eligible carer if the parents have not consented to the child living with that person. However, if it would be unreasonable for the child to live with the parents (because there has been extreme family breakdown or the child's safety would be at risk), the person can be an eligible carer.

A range of technical amendments are also being made to overcome drafting errors or omissions, and unintended consequences of previous changes to the legislation.

Debate (on motion by Senator O'Brien) adjourned.

Ordered that the bills be listed on the Notice Paper as separate orders of the day.