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Tuesday, 15 June 2004
Page: 23610

Senator MURRAY (8:22 PM) —I rise to speak to the Tax Laws Amendment (2004 Measures No. 1) Bill 2004. This is another 64 pages of taxation legislation. It is an omnibus bill covering a range of largely non-controversial areas. The 11 schedules to this bill are as follows. Schedule 1 will amend the Income Tax Assessment Act 1936 to broaden the list of eligible medical expenses under the medical expenses tax offset to include payments made in maintaining properly trained dogs for guiding or assisting people with a disability. Schedule 2 will amend the income tax law to provide an income tax deduction for certain expenses incurred in travel between workplaces following a recent tax case which has challenged the long accepted deductibility of such travel. Schedule 3 will amend the Income Tax Assessment Act 1997 to improve the operation of the test that is used to determine when an entity controls a discretionary trust for the purpose of applying the small business capital gains tax concessions.

Schedule 4 will amend the transitional arrangements of the Energy Grants (Credits) Scheme which deal with the treatment of claims for fuel purchased in the three years preceding the introduction of the scheme. The changes will rectify an anomaly that may result in an unintended entitlement to concessional treatment in certain circumstances under the energy grants scheme that did not previously exist in the schemes that it replaces. Schedule 5 will amend the Income Tax Assessment Act to ensure that GST net input tax credits are excluded from the reduced cost base and other relevant amounts used for the purposes of working out the amount of a capital gain or capital loss.

Schedule 6 will amend the A New Tax System (Australian Business Number) Act 1999 to put beyond doubt the scope of the purposes for which protected Australian business number information is able to be disclosed to Commonwealth agency heads and states and territories' department heads. Schedule 7 will amend the income tax law to provide an income tax deduction for contributions of cash or property to deductible gift recipients where a minor benefit is received in return. Schedule 8 will amend the Income Tax Assessment Act 1936 to ensure that a trustee cannot shelter trust income at the prevailing company tax rate by creating a present entitlement to a private company without paying it and then distributing the underlying cash to a shareholder of the company. The rules replace the former section 109UB of the Income Tax Assessment Act that had a similar but more limited application.

Schedule 9 will amend part III of the Income Tax Assessment Act 1936 to ensure a deduction available to certain resident companies for on-payments for certain unfranked or partly franked non-portfolio dividends of their wholly owned foreign parents continues to be available to taxpayers. This deduction was inadvertently made inoperative with the removal of the intercorporate dividend rebate within wholly owned companies in connection with the introduction of the consolidated regime applying generally after 30 June 2003. Schedule 10 will amend the Income Tax Assessment Act 1997 to require charities, including public benevolent institutions and health promotion charities, to be endorsed by the commissioner in order to access all relevant taxation concessions. The amendments in schedule 10 will also require any charities so endorsed to display their charitable status on the Australian Business Register. Schedule 11 will amend the Income Tax Assessment Act 1997 to update the specifically listed deductible gift recipients.

This bill was examined by the Senate Economics Committee, on which I sit, and the contentious schedules examined were 7, 10 and 11. Schedule 7 allows a tax deduction for the net amount of a tax deduction above $250, where the value of any minor benefit received is no more than the lesser of 10 per cent of the donation or $100. For example, if the Cancer Council has a fundraising dinner for which it charges $500 and the actual cost of the dinner is $50, a tax deduction will be available for the remaining $450. Evidence provided was that this concession was too limited to be of any real benefit to most charities. As noted in our minority report to the Senate committee, the Democrats believe that that $250 represents too high a threshold for ordinary Australians to contribute to charities even if they are getting a tax deduction.

Schedule 10 expands the requirements for charities to be endorsed by the Taxation Office. Currently, to obtain an income tax exemption or deductible gift recipient status, the charity must obtain endorsement by the ATO. This bill will extend the endorsement to claims of GST concessions and, more importantly, the fringe benefits tax concessions available to PBIs. Due to the fact that a vast range of charities have been self-assessing as PBIs for a long time, the endorsement requirement may cause considerable angst for the sector. The Treasurer announced in a budget release that, despite conducting a Board of Taxation inquiry, the government had decided to walk away from codifying the charities definition inquiry recommendations. The government has amended the bill so that it applies from 1 July 2005, not the original 1 July 2004, but we see this as simply deferring the inevitable confusion within the sector. In the Senate Economics Committee, ACOSS stated that it was opposed to schedule 10 on the basis that it would deepen the concern and confusion surrounding the definitions of `charitable' and `public benevolent' status. My colleague Senator Cherry has been working extensively on this issue for several years, and he and I have tried hard in this area of charities.

The issue of schedule 11 involved the potential for tax abuse via donations to the Country Education Foundation. Evidence given before the committee was that this would not be possible. The Democrats support the bill, but I have recorded our reservations with reference to schedules 7 and 10.