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Tuesday, 15 June 2004
Page: 23612

Senator COONAN (Minister for Revenue and Assistant Treasurer) (8:28 PM) —I thank Senator Sherry and Senator Murray for their contribution and for their indication of support. The Tax Laws Amendment (2004 Measures No. 1) Bill 2004 provides a tax deduction for contributions of cash or property to deductible gift recipients where an associated minor benefit is received. I intend to highlight some of the main features of the omnibus bill. Currently, a personal tax deduction under the income tax law is only allowed for gifts to deductible gift recipients—that is, where the donor does not derive any material advantage or benefit in return for the gift. The amendment provides that, if a minor benefit is received by a person in return for making a contribution of cash or property, a tax deduction will be available based on the value of the contribution less the value of the minor benefit. The measure will not apply to fundraising events held by political parties, as earlier speakers have noted, which are not deductible gift recipients. This is yet another example, I would submit, of the government leading the way in making it easier for individuals to give to their communities. The new arrangements can but enhance the ability of deductible gift recipients in Australia to use special events, such as dinners, to fundraise.

Schedule 10, which I want to mention, will require charities, public benevolent institutions and health promotion charities to be endorsed by the Commissioner of Taxation in order to access relevant tax concessions. In addition, endorsed charities will now have their charitable status displayed on the Australian Business Register. These changes are part of the government's response to the report of the inquiry into the definition of charities and related organisations. The changes will allow greater scrutiny of the use of tax concessions by charities, improve public confidence in the provision of taxation support to the charitable sector and provide charities with certainty of their entitlements. I would like to foreshadow that I will be moving amendments to postpone the endorsement measure until 1 July 2005 in order to ensure that charities have sufficient lead time to comply with the new arrangements.

The third charities related measure will 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 CGT concessions. These concessions are available only to those businesses that control assets of less than $5 million. Currently, in working out the assets controlled by a small business trust, the assets of any potential beneficiaries are included. This means that, where a small business trust has a charity as a potential beneficiary, the test inappropriately includes the assets of that charity in determining access to the CGT concessions. The changes will ensure that those businesses are not prevented from accessing the capital gains tax concessions simply because of the assets held by a charitable beneficiary. In doing so, small businesses will be encouraged to include charities as beneficiaries of these trusts. The bill also updates the specifically listed deductible gift recipients in the Income Tax Assessment Act 1997. It adds to these lists new recipients announced since 10 December 2002. Deductible gift recipient status will assist these organisations to attract public support for their activities.

The bill broadens the list of eligible medical expenses under the medical expenses tax offset to include payments made in maintaining a dog that is properly trained for guiding or assisting a person with a disability. This will offer taxpayers with hearing dogs and assistance or service dogs the same treatment under the medical expenses tax offset as is currently available to taxpayers who maintain a dog that is trained to guide or assist the blind. The bill provides an income tax deduction for transport expenses incurred in travel between workplaces. For example, the expenses of travelling directly from one job to a second job will be deductible. Expenses incurred in travelling between two places of unrelated income-earning activity were previously allowed as deductions under a longstanding interpretation expressed in published tax rulings and in TaxPack. However, the High Court decision in the Payne case overturned the former interpretation and held that expenses incurred in travelling between two places of unrelated income-earning activity were not deductible under the general deduction provisions; hence the amendment inserts a specific provision into the income tax law to ensure that the deductibility of such expenses is reinstated.

On trusts and improving the operation of integrity rules, the bill inserts certain rules dealing with payments, loans and forgiven debts made by a trustee to a private company shareholder or a shareholder's associate. These amendments address issues concerning the effectiveness and fairness of certain antiavoidance provisions contained in the current law. Broadly speaking, the amendments will more effectively ensure that a trustee cannot shelter trust income at the prevailing company tax rate and then distribute the underlying cash to a beneficiary. In addition, the amendments have been designed with targeted safeguards to ensure that ordinary commercial transactions are not inadvertently caught by the rules.

I should mention, in relation to comments that were made concerning the government's response to the Board of Taxation report on the taxation of discretionary trusts, that in fact the board did and does support the government's decision not to tax discretionary trusts as it does companies. In fact, the government has introduced a number of trust integrity measures over recent years to address loopholes. Consistent with the board's findings, the government has now introduced rules that replace section 109UB, as earlier speakers have noted, and extend the scope of the former provision by catching a broader range of transactions but at the same time providing some flexibility by preventing legitimate commercial transactions from being penalised. In addition, I should say in the government's defence that other loopholes and areas addressed include the use of non-resident trusts to transfer funds offshore, the inappropriate utilisation of losses, tracing distributions through to the ultimate beneficiaries, personal services income rules and, of course, revised social security means test treatment of private trusts and private companies. So I do not think that it can be said that the government has simply put trusts on the backburner when quite clearly the government has moved to address the issues identified in the Board of Taxation report and indeed beyond it.

The bill also clarifies the transitional arrangements governing the replacement of the Diesel Fuel Rebate Scheme and the Diesel and Alternative Fuels Grants Scheme with the Energy Grants (Credits) Scheme. Technical amendments are also being made to ensure that the GST which may later be recovered does not count as part of the cost of an asset when calculating capital gains tax. The changes to the Australian business number rules will also ensure that the law operates as intended to prevent situations that require businesses to provide duplicate information to government. Further technical amendments will remove an unintended disincentive for foreign companies to invest in Australia through holding companies. Although there are indeed, as Senator Murray has said, a large number of pages in this omnibus bill they address—as he has also said—largely uncontroversial measures that most definitely needed attention. I commend this bill to the Senate as meeting the policy objectives for the reasons that I have outlined.

Question agreed to.

Bill read a second time.