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Thursday, 24 June 2010
Page: 4274


Senator FIFIELD (10:57 AM) —I rise to speak on the Tax Laws Amendment (2010 Measures No. 3) Bill 2010. This bill makes changes to the superannuation co-contribution scheme, thin capitalisation rules for authorised deposit taking, financial transactions involving security and intelligence agencies, the taxation of unexpended income of special disability trusts and the definition of a managed investment trust. In speaking on this bill, I firstly touch on the changes to special disability trusts, which make up schedule 4. Special disability trusts were established by the former coalition government in 2006 at the instigation of then senator Kay Patterson and the intention was to assist families and carers in making financial provisions for the current and future care of a family member with a severe disability. The former government provided incentives to open up such trusts by ensuring they received gift concessions up to $500,000 and an assets exemption up to $551,750, which is indexed annually.

However, the unexpended income of those trusts was taxed at the top marginal tax rate, as is the case with other trusts. The changes in this bill, outlined in schedule 4, will reduce the tax rate of unexpended income of a special disability trust from the highest marginal rate to the beneficiary’s personal tax rate. The coalition is supportive of moves to provide additional incentives for families to set up special disability trusts and to meet the financial challenges in caring for a person with a severe disability. Special disability trusts are by no means the answer for all families with a child with a severe disability. They will be of great assistance for some but certainly they are not the solution for all.

As I think is becoming more widely known in Australia, regrettably, the level of support that you receive if you have a disability is determined not so much by the need that you have but by the manner in which you acquired your disability. If, for instance, you were in a motor vehicle accident, a transport accident scheme will probably look after your long-term care needs. If you are in a workplace accident, a workers compensation scheme will probably cover you. However, if you acquire your injury by falling off the roof at home or if you are born with a disability, the level of support that you receive is significantly less. There is a fundamental inequity. The solution for many families and for many individuals who have a disability is to shift from a system which is based on rationing, more often than not, to one which is based on meeting the need that a person has. A shift to a new system is, I think, ultimately the way that a solution will be found for many Australians with a disability. That is something which is, as I mentioned before, very much in the public domain at the moment. The Productivity Commission is currently undertaking an inquiry to look at the concept of a national scheme, and the coalition has indicated that when the Productivity Commission reports in the middle of next year we will consider very seriously the recommendations of the Productivity Commission review.

This legislation also seeks to remove the indexation of the superannuation co-contribution income thresholds for the 2010-11 and 2011-12 financial years, as outlined in schedule 1. Schedule 1 also removes the legislative increase in the maximum co-contribution. Currently the maximum co-contribution amount was scheduled to increase from $1,000 to $1,250 in 2012-13 and to $1,500 in 2014-15. The amendments in schedule 1 will mean that the maximum co-contribution amount will remain at $1,000.

Schedule 2 amends the thin capitalisation rules for authorised deposit-taking institutions to reflect the new accounting treatment of certain assets under the Australian equivalents to International Financial Reporting Standards that the industry adopted in January 2005. Those assets that are affected are Treasury shares; the value of business in force component of the excess market value over net assets, MVONA; and capitalised software costs.

Schedule 3 will allow the Director-General of Security and the Director-General of the Australian Security Intelligence Service to exempt certain financial transactions from Australian tax law. Schedule 3 will allow certain transactions to certain entities to be exempt from tax law to ensure that information related to national security remains secret.

Lastly, schedule 5 expands the definition of a managed investment trust in relation to the withholding tax rules to provide a closer alignment between the withholding tax rules and the capital account election rules that were passed by the parliament with the support of the coalition earlier this year. The MIT withholding tax definition will be expanded to include wholesale managed investment schemes and government-owned managed investment schemes. The changes will also amend the MIT withholding tax definition to introduce a trading business test for trusts that would otherwise qualify as an MIT and will clarify the operation of the definition where there is only one member. The opposition supports this legislation.