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Monday, 22 February 2010
Page: 694
Senator CARR (Victoria —Minister for Innovation, Industry, Science and Research) [5:44 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—

International Tax Agreements Amendment Bill (No. 2) 2009

Today I introduce the Bill to give the force of law to a new tax treaty with New Zealand, a second Protocol to the tax treaty with Belgium, and an Agreement on the allocation of taxing rights over certain income with Jersey.

Tax treaties facilitate trade and investment by reducing barriers caused by double taxation. The extremely close and significant economic relationship between Australia and New Zealand increases the importance of maintaining up to date tax arrangements between both countries. The new tax treaty, signed in Paris on 26 June 2009, strengthens and enhances this relationship.

The treaty updates and modernises the bilateral tax arrangements between Australia and New Zealand. The Bill will insert the text of the new treaty into the International Tax Agreements Act 1953 and repeal the existing treaty.

Responding to the needs of both Australian and New Zealand taxpayers, the new treaty comprehensively updates the existing tax treaty arrangements with New Zealand. Key outcomes from the treaty include:

  • reduced withholding taxes on certain intercorporate dividends, and their complete removal on others;
  • the removal of withholding tax on interest payments made to unrelated financial institutions or to the Australian and New Zealand governments;
  • lower royalty withholding tax;
  • the extension of treaty benefits to Australian managed investment trusts;
  • the cross recognition of the tax exempt status of pensions in both Australia and New Zealand; and
  • a short-term secondment provision which will preclude individuals from being caught up in the other country’s tax system when they are seconded to that other country for less than 90 days.

Integrity provisions in the treaty will ensure that the reduced withholding tax rates are only available to those genuinely entitled to them. In addition, as New Zealand does not have a comprehensive capital gains tax, the treaty allows Australia to tax capital gains derived by Australian residents who relocate to New Zealand for up to six years after they cease to be an Australian resident, thereby preventing the double non-taxation of such capital gains.

The treaty will enter into force following the last notification that both countries have completed their domestic requirements which, in the case of Australia, includes enactment of this Bill.

The Bill will also amend the definition of ‘dual listed company arrangement’ in the income tax law to align it with the corresponding provision in the treaty with New Zealand.

The Government is committed to the implementation of international standards of tax transparency. The second Protocol to the tax treaty with Belgium upgrades the exchange of information provisions in the tax treaty between Australia and Belgium by enhancing the ability of the Belgian and Australian tax authorities to exchange taxpayer information, and to exchange on a wider range of taxes.

In particular, the new provisions provide that neither tax administration can refuse to provide information solely because they do not require the information for their own domestic purposes, or because the information is held by a bank or similar institution.

The Government is a global leader in combating cross-border tax evasion. The enhanced provisions with Belgium are an important tool in Australia’s efforts in this regard, by increasing the probability of detection when taxpayers participate in abusive tax arrangements.

The Tax Information Exchange Agreement, together with the Agreement for the allocation of certain taxing rights, signed with Jersey earlier this year are further evidence of the Government’s commitment in this area.

The Bill gives effect to the Agreement on the allocation of taxing rights between Australia and Jersey, which will help prevent double taxation of certain cross-border income derived by individuals who are residents of Australia or Jersey. The Agreement also provides an administrative mechanism to help resolve transfer pricing disputes that may arise between taxpayers and the revenue authorities of Australia or Jersey.

The Joint Standing Committee on Treaties has considered, and recommended that binding treaty action be taken, in respect of all three treaties.

Full details of the amendments brought forward in the Bill are contained in the explanatory memorandum.

National Health Security Amendment (Background Checking) Bill 2009

This Bill amends the National Health Security Act 2007 to enhance Australia’s capacity to secure certain biological agents that could be used as weapons. Such a biological agent is also known as a security sensitive biological agent, or SSBA, and includes the agents of diseases such as anthrax, smallpox and the plague.

The regulatory scheme for SSBAs currently includes stringent requirements relating to the notification of the type and location of SSBAs in Australia, along with standards that must be met by organisations handling SSBAs. These standards relate to matters such as the secure handling, disposal and movement of SSBAs, along with background checking requirements for relevant personnel.

The Bill I am introducing today enhances the SSBA regulatory scheme by enabling me to determine that background checking of persons who handle or dispose of SSBAs, is conducted by the Australian Background Checking Service, otherwise known as AusCheck, of the Attorney-General’s Department.

The proposed amendment to the Act is consistent with the report of the Senate Standing Committee on Legal and Constitutional Affairs which has recommended that a principal Act authorise the establishment of a background checking scheme that is to be conducted by AusCheck.

Given the importance of background checking to the SSBA regulatory scheme, I have ensured that the proposed change has been subject to extensive consultation with experts. This has included consultation on the need for background checking and that it should be conducted by AusCheck. The Department of Health and Ageing has consulted with agencies responsible for obtaining and assessing information about the risks and threats posed by biological agents (such as ASIO), public health laboratories, state and territory government agencies and other experts in SSBAs.

AusCheck will coordinate the background checks that will consist of an assessment of a person’s criminal history and security checks against a set of disqualification criteria. The details of the SSBA background checking scheme will be set out in the SSBA Standards and the AusCheck regulations. Those details will also be subject to further consultation.

I am confident that the Bill before us appropriately enhances the security of the existing regulatory scheme for SSBAs, ensuring that we continue to deliver on our international commitments and the national imperative to actively improve our capacity to maintain adequate controls on biological agents. This builds on the Rudd Government’s continuing commitment to protect all Australians from potential threats.

Tax Laws Amendment (2009 Measures No. 6) Bill 2009

This Bill amends various taxation laws to implement a range of improvements to Australia’s tax laws.

This Bill typifies the busy work ethic of the Rudd Labor Government. In this case through another instalment in finalising a raft of outstanding taxation issues in the period before the Government considers the recommendations of Australia’s Future Tax System. Some of these issues were inherited from the previous Government.

Schedule 1 abolishes the exception to capital gains tax events E1 and E2, widely known as the ‘trust cloning’ exception. This is consistent with the policy principle of taxing capital gains that arise where there is a change in ownership of an asset.

Schedule 1 also provides a limited capital gains tax roll-over for the transfer of assets between fixed trusts with the same beneficiaries, each of which has the same interests in each trust.

This will ensure that capital gains tax considerations are not an undue impediment to the restructure of those trusts, whilst ensuring that subsequent changes to the manner and extent to which beneficiaries can benefit from the trusts are subject to appropriate tax consequences.

Schedule 2 removes significant income tax impediments to mergers between complying superannuation funds. These amendments will permit eligible entities to roll-over capital losses and revenue losses under the merger, and to transfer previously realised capital losses and revenue losses.

The loss relief will be available for complying superannuation funds that merge with another complying superannuation fund with five or more members. The loss relief will preserve the offsetting value of the losses, thereby removing a potential barrier to superannuation fund consolidation.

This measure will assist in maintaining a robust and efficient superannuation sector. The measure has a limited period of application from 24 December 2008 until 30 June 2011.

Schedule 3 amends the Income Tax Assessment Act 1997 to clarify the circumstances in which income derived by life insurance companies in respect of immediate annuity business qualifies as non-assessable non-exempt income.

The annuity conditions that must be satisfied for an annuity policy to qualify for exemption have been rewritten to make the law clearer and to clarify the circumstances in which they apply. These changes have been sought by business groups and apply from 1 July 2000.

The amendments also ensure that the annuity conditions do not apply to immediate annuity policies that provide for superannuation income streams.

This ensures that life insurance companies are taxed on superannuation income stream business in the same way as all other superannuation income stream providers. These changes apply from the 2007-08 income year.

Schedule 4 amends the list of deductible gift recipients (DGRs) in the Income Tax Assessment Act 1997. Taxpayers can claim income tax deductions for certain gifts to organisations with DGR status. DGR status will assist the listed organisations to attract public support for their activities.

This Schedule adds two new organisations to the Act, namely the Green Institute and the United States Studies Centre. It also changes the name of one organisation currently listed in the Act from the ‘Dymocks Literacy Foundation Limited’ to ‘Dymocks Children’s Charities Limited’.

Schedule 5 exempts from income tax the income recovery subsidy payment for the north western Queensland floods of January and February 2009.

This payment was available to Australian resident employees, small business persons and farmers over 16 years of age who could demonstrate they experienced a loss of income as a direct result of the north west Queensland floods in January/February 2009.

Eligible recipients must also have demonstrated that they derived an income or resided in the affected area within a designated time period. The payment was a Newstart-like payment designed to provide immediate financial assistance to disaster victims.

Schedule 6 clarifies the excise law to ensure that imported high strength spirits blended with domestically produced high strength spirits are free of duty under the concessional spirits scheme, with effect from the date of Royal Assent.

These spirits are generally not intended for consumption as an alcoholic beverage and the proposed changes will allow current practice to continue.

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

Debate (on motion by Senator Carr) adjourned.

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