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Tuesday, 12 June 2007
Page: 57


Senator SCULLION (Minister for Community Services) (4:05 PM) —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—

TAX LAWS AMENDMENT (2007 MEASURES No. 3) BILL 2007

This Bill makes numerous improvements to Australia’s tax laws.

Schedule 1 to this Bill makes amendments to the tax integrity rules concerning private company distributions to shareholders and their associates. The amendments in this schedule reduce both the extent to which taxpayers can inadvertently trigger a deemed dividend under Division 7A of the Income Tax Assessment Act 1936, and the punitive nature of the provisions.  The amendments remove the automatic debiting of the company’s franking account when a deemed dividend arises under Division 7A.

The amendments give the Commissioner of Taxation a discretion to disregard a deemed dividend that has arisen because of an honest mistake or omission by a taxpayer, providing greater flexibility to administration of the provisions. Further, certain shareholder loans will be able to be refinanced without triggering a deemed dividend, and Division 7A compliant loans will be exempted from fringe benefits tax.

These measures will reduce ongoing compliance costs for private companies and reduce tax penalties, especially for the many small businesses that use a company structure.

Schedule 2 makes amendments to ensure that certain superannuation contributions made prior to 1 July 2007 are subject to the contributions cap in the Simplified Superannuation system.

This measure ensures that contributions, such as those made by a friend during the Simplified Superannuation transitional period, are included in the non-concessional contributions cap calculation for that period.

Schedule 3 makes amendments to allow a trustee of a resident testamentary trust to choose to be assessed on capital gains of the trust. The changes will ensure that an income beneficiary of a resident testamentary trust need not be assessed on capital gains of the trust from which they will not benefit.

Schedule 4 to this Bill makes amendments to allow non-dependants of a member of the Australian Defence Force or any Australian police force, or an Australian Protective Service Officer, killed in the line of duty, to access the same concessional tax treatment for lump sum superannuation death benefits as dependants. This means that from 1 July 2007, eligible non-dependants will pay no tax on the lump sum superannuation benefit left to them by someone who has died in the line of duty.

The Government will also be making ex gratia payments to eligible non-dependants who received a lump sum superannuation death benefit payment over the period from 1 January 1999 to 30 June 2007. These payments will be equivalent to the additional tax paid on the superannuation death benefit and will be administered by the Australian Taxation Office.

Schedule 5 will extend by one year, an existing transitional period under the thin capitalisation rules. The transitional period allows taxpayers to elect to use current or former accounting standards to make certain calculations. The extension will enable a thorough assessment of the impact on the thin capitalisation rules of adopting Australian equivalents to International Financial Reporting Standards. It will also provide time to develop and consult on any changes to the rules that may be considered appropriate.

Schedule 6 to this Bill repeals the dividend tainting rules and makes two consequential amendments.  The first consequential amendment ensures that distributions from a share capital account continue to be unfrankable. The second modifies the general anti-avoidance rule that applies in relation to the imputation system. When considering whether to apply the rule, the Commissioner of Taxation will be able to take into account whether a distribution is sourced from unrealised or untaxed profits.

The changes will apply in relation to distributions made on or after 1 July 2004.  This will ensure that taxpayers do not inadvertently trigger the dividend tainting rules by accounting entries required under the Australian Equivalent of the International Financial Reporting Standards.

Schedule 7 clarifies the types of financial instruments that are eligible for the exemption from interest withholding tax (IWT) to correct an unintended broadening of the exemption. In addition to debentures, only non-debenture debt interests that are non-equity shares, syndicated loans, and instruments prescribed by regulation will be eligible for the IWT exemption. This realigns the exemption with the Government’s policy intent and enhances the integrity of the tax base.

It will still be necessary for these debt interests to satisfy the public offer test.  In the case of syndicated loans, modifications have been made to the public offer test so that it operates appropriately and accommodates market practices.

Schedule 8 to this Bill inserts new rules to ensure that investment in forestry managed investment schemes is encouraged to facilitate the continued expansion of our plantation forestry estate and to reduce our reliance on both native forests and overseas imports.

Investors will be eligible for income tax deductions for any contributions they make to new schemes for developing plantation forests in Australia, provided a 70 per cent direct forestry expenditure rule and some other requirements are met.

To address the Government’s concerns about the level of commissions charged, this measure incorporates an arm’s length pricing rule and a requirement that all of the trees are established within 18 months.

Consistent with the rules for existing schemes, the schedule includes a rule for a manager of a new scheme to include investors’ contributions received in its assessable income in the income year the contributions are first deductible to the investors.

The Government expects that secondary market trading of interests in forestry schemes will introduce pricing information and increase the liquidity of forestry scheme investments. To facilitate a deeper secondary market for forestry scheme investments, the schedule inserts new rules to allow trading of interests in existing schemes. Initial investors who hold existing or future interests will be subject to a four year holding period, market value pricing rules, and are required to return sale or harvest proceeds on revenue account.

The schedule also clarifies the income tax treatment of sale or harvest proceeds received by secondary investors and the deductibility of payments by secondary investors to the schemes.

Schedule 9 makes amendments to require Australian trustees to collect tax from trust taxable income that is payable to the trustee of a foreign trust.

Therefore, after these changes, Australian trustees will be required to pay tax on the taxable income of the trust attributable to any foreign resident entity, whether an individual, company or trust.

Schedule 10 to this Bill enables Australian managed funds to collect a non-final withholding at a single rate—the company tax rate—on distributions of Australian source income that is not a dividend, interest or royalty. Investors will then be able to claim a credit for the amount withheld when they lodge an Australian income tax return to determine their final tax liability.

Currently Australian trusts and Australian custodians face different withholding obligations depending upon whether the foreign resident is an individual, company, trust or foreign superannuation fund.

This schedule will improve the efficiency of Australia’s managed funds industry and provide greater certainty to the industry.

Full details of the measures in this Bill are contained in the explanatory memorandum.


TAX LAWS AMENDMENT (SMALL BUSINESS) BILL 2007

This Bill implements changes to various tax Acts to standardise the primary eligibility criterion for the small business tax concessions.  These changes will reduce the compliance costs for many Australian small businesses.  They substantially simplify the tax law to make it easier for small business to determine eligibility for a number of concessions.

This Bill also implements several related 2006-07 Budget announcements:

  • first, increasing the capital gains tax maximum net asset threshold from $5 million to $6 million;
  • second, increasing the goods and services tax cash accounting threshold from $1 million to $2 million;
  • third, extending the roll-over relief available under the uniform capital allowance system to small business entities that have adopted the simplified depreciation rules.

The current tax laws contain a number of special arrangements for smaller businesses, variously defined.  In the past, there have been different threshold criteria for determining who is a small business for particular concessions. The differences, however sensible when considered individually, have been a source of complexity and unnecessary compliance costs for small businesses.

This Bill amends the income tax law to create a single definition of small business, based on aggregated annual turnover of less than $2 million.

Entities that do not meet the small business entity definition can still test their eligibility for small business concessions according to existing methods for capital gains tax, fringe benefits tax and pay as you go instalments.

Full details of the measures in this Bill are contained in the explanatory memorandum.


INDIGENOUS EDUCATION (TARGETED ASSISTANCE) AMENDMENT (2007 BUDGET MEASURES) BILL 2007

The primary purpose of this Bill is to amend the Indigenous Education (Targeted Assistance) Act 2000 by appropriating additional funding of $26.1 million over the 2007 and 2008 calendar years to improve opportunities for Indigenous students in the school, vocational education and training and higher education sectors.

This funding will be used for the expansion of the Indigenous Youth Mobility Programme, the expansion of the Indigenous Youth Leadership Programme, the provision of infrastructure funding for boarding school facilities and, where government and non-government education providers agree, the conversion of Community Development Employment Projects (CDEP) programme places into ongoing jobs in the education sector.

The Australian Government places great importance on achieving better educational outcomes for Indigenous students. To achieve this, new investment is necessary in the areas of school, vocational and technical education and higher education sectors.  The Australian Government is committed to developing the capacities and talents of Indigenous people so they have the necessary knowledge, understanding, skills and values for a productive and rewarding life.

The proportion of young Indigenous people living in remote areas who reach Year 12 is approximately half that of their metropolitan peers, and only one in ten actually completes Year 12.  Approximately one in four 15-19 year old Indigenous people lives in a remote area.

Up to 1610 students will benefit from the expansion of two successful programmes, the Indigenous Youth Mobility Programme and the Indigenous Youth Leadership Programme. The increase in the number of Scholarships offered under the Indigenous Youth Leadership Programme and the places available under the Indigenous Youth Mobility Programme will allow more young Indigenous people to access high quality education and training to make informed life choices.

The Indigenous Youth Mobility Programme will be expanded by around 860 places over the next four years (2007/08 to 2010/11).  In the 2008 calendar year, $2.6 million will be used to increase the number of places available in that year.

The number of scholarships available through the Indigenous Youth Leadership Programme will increase by 750 over four years (2007/08 to 2010/11).  Over the 2007 and 2008 calendar years, $4.0 million will be used to increase the number of scholarships available in these two years.

The increased funding for these two programmes will provide support for Indigenous young people to relocate from remote and regional areas to access high standards of education, training and employment opportunities not otherwise available to them.

Indigenous students will benefit from funding of $14.1 million over two years to provide infrastructure funding to existing boarding schools catering for significant cohorts of Indigenous students.  This will facilitate the urgent upgrade of accommodation facilities to prevent a loss of existing boarding places.

Approximately 200 Indigenous people will benefit from the provision of funding of $5.3 million to convert, where government and non-government education providers agree, Community Development Employment Projects (CDEP) programme places into ongoing jobs in the education sector.

In the 30 years since CDEP began, Indigenous people have been delivering services for all levels of government. Through this initiative, CDEP participants will gain the full benefits of employment including wages, leave, superannuation, training and professional development.

The initiative will be available to both government and non-government schools and systems.

I commend the Bill to the Senate.


HEALTH INSURANCE AMENDMENT (DIAGNOSTIC IMAGING ACCREDITATION) BILL 2007

This bill will make a number of amendments to the Health Insurance Act 1973 to establish a framework for the introduction of an accreditation scheme for practices providing diagnostic imaging services covered by the Radiology Quality and Outlays Memorandum of Understanding.  The Radiology MoU is one of four collaborative agreements the Government has with the diagnostic imaging industry and profession to manage Medicare funded imaging services.

The Radiology MoU covers the majority of diagnostic imaging services with the exception of cardiac imaging, nuclear medicine imaging and obstetric and gynaecological ultrasound.  It accounts for around 80 percent of the diagnostic services covered by Medicare.

In 2005-06 approximately 12.6 million services were claimed under the Radiology MoU, attracting in the order of $1.2 billion in Medicare benefits.  These services were rendered from around 3,100 practice sites.  The Radiology MoU represents 12% of total Medicare expenditure.

The introduction of an accreditation scheme is one of the key initiatives of the Radiology MoU to support the high quality delivery of services under Medicare. 

Accreditation is a process of externally reviewing an organisation’s performance against a defined set of standards. Accreditation is generally recognised as a means of assisting the health care industry to review and improve systems that support the delivery of safe and high quality health care.  The accreditation process provides:

  • a means of ensuring that minimum standards of practice operation are met;
  • a benchmark for maintaining that competence; and
  • feedback to enhance overall quality in a professional discipline over time.

Accreditation is based on standards and processes devised and developed by, or in association with, health care professionals themselves. 

Under the new accreditation scheme, all practices providing services covered by the Radiology MoU will need to be accredited in order for Medicare benefits to be payable for those services. 

Accreditation will ensure that all sites conform to a set of uniform standards when rendering these services.

For patients, accreditation will provide:

  • assurance that radiology services meet or exceed minimum industry standards;
  • assurance that the same level of service quality is provided irrespective of where or by whom the radiology service is rendered; and
  • confidence in the health care system because appropriate processes are in place to protect their privacy, the handling of complaints and physical safety.
  • For practices, accreditation will provide:
  • confidence that their practice has systems to support the delivery of high quality radiology services;
  • assurance that legislative and technical requirements are met or exceeded;
  • assurance that staff are technically competent and confident to provide quality radiology services;
  • economic benefits through the implementation of robust, streamlined and efficient administrative processes;
  • savings from reduced outlays for less than optimal services redistributed to the providers of high quality services; and
  • potential savings in medical indemnity insurance.

Accreditation will also provide a mechanism by which the Government can be assured that services supported by Medicare are being provided only by organisations that are performing against an endorsed set of standards

The Radiology accreditation scheme will complement a number of health care accreditation schemes already operating in Australia, many of which are also linked to financial incentives or Government funding. 

The bill will create a framework for the introduction of the Radiology accreditation scheme.  However, it has been designed to allow for the introduction of accreditation schemes for other diagnostic imaging services without further amendments to the Act should Parliament support extending accreditation to those services in the future.


NATIVE TITLE AMENDMENT (TECHNICAL AMENDMENTS) BILL 2007

The Native Title Amendment (Technical Amendments) Bill 2007 will make a large number of technical and minor amendments to the Native Title Act 1993.  These amendments are one of the six components of the package of native title system reforms which have been underway since 2005. Together with the Native Title Amendment Bill 2006, this bill will implement the bulk of legislative change stemming from the native title system reforms.

The Bill is the result of significant consultation with people involved in all parts of the native title system, and the amendments in it reflect issues raised for consideration by those stakeholders.

The Bill contains around 40 different measures which, when taken together, will increase the effectiveness of the processes in the Native Title Act.

While many of the amendments will clarify ambiguities in the Native Title Act, some will have a more substantive effect.

The Bill will amend provisions relating to future act and Indigenous Land Use Agreement processes, processes for making and resolving native title claims, and the obligations of the Registrar in relation to the registration of claims.  Provisions in the Bill will also clarify the scope of alternative state regimes under section 43 and establish a more flexible scheme for payments held under right to negotiate processes.

The technical amendments part of the Bill will commence by Proclamation, a measure designed to give adequate time to all parties to understand and prepare for the changes.

As well as making a number of technical amendments to the Native Title Act, the Bill will also partially implement two recommendations of the Report on Prescribed Bodies Corporate which was released in October last year, and will amend provisions relating to representative bodies to complement the reforms made by the 2006 Bill.

While these amendments are minor and technical in nature, they will substantially improve the workability of the Native Title Act. These changes, together with the amendments made by the Native Title Amendment Bill 2006, will result in system-wide improvement to processes for future acts and for the resolution of native title claims, without undermining the existing balance of rights and interests under the Native Title Act.

I commend the Bill.

Ordered that the resumption of the debate be made an order of the day for a later hour.

Ordered that the Tax Laws Amendment (2007 Measures No. 3) Bill 2007 and the Tax Laws Amendment (Small Business) Bill 2007 be listed on the Notice Paper as one order of the day, and the remaining bills be listed as separate orders of the day.