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Monday, 22 November 2010
Page: 1810


Senator SHERRY (Minister for Small Business, Minister Assisting on Deregulation and Minister Assisting the Minister for Tourism) (8:39 PM) —Firstly, I would like to thank those senators who have contributed to this debate. Senator Xenophon, it seems to me that you never get tied up verbally; you are very good at your verbal gymnastics. I would like to thank both the senators who contributed to the debate. The bill itself contains a number of provisions, which I understand are supported by all sides of the chamber. There is a foreshadowed amendment in committee; we will deal with that when we get to the committee stage.

The amendments in schedule 1 ensure that recent changes to the GST act to create adjustments for third party payments deliver the appropriate outcomes in situations where there are payments between parties in a supply chain which indirectly alter the price received or paid for the things supplied. Where the taxable status of the supply alters as it moves through the supply chain, the payee obtains a refund under the Tourist Refund Scheme. These amendments take effect from 1 July 2010.

Schedule 2 amends the income tax laws to provide a capital gains tax rollover for taxpayers who replace an entitlement to water with one or more different water entitlements. This rollover ensures that capital gains tax is not a barrier to transformation. Transformation is the process by which an irrigator permanently changes their right to water against an operator into a statutory licence held by an entity other than the operator. Transformation facilitates water marketing and trading and the efficient use of water resources. Schedule 2 also allows termination fees to be recognised when calculating a capital gain or capital loss on an asset by including those costs in the asset’s cost base. This change applies to all assets and not just those relating to water.

The amendments in schedule 3 make minor policy changes and technical amendments to the taxation of financial arrangements provisions. The amendments provide certainty on the operation of the law and, in doing so, reduce compliance costs for taxpayers. The amendments in part 2 of schedule 3 extend the transitional arrangements for the application of debt and equity tax rules to 1 July 2010 for upper tier 2 capital instruments issued before 1 July 2001. The amendments in part 3 of schedule 3 extend the scope of a number of compliance-cost-saving measures and make technical amendments to ensure that foreign currency gains and losses provisions operate as intended. They are part of a package of amendments that was initially announced by the previous government on 5 August 2004, to apply from 1 July 2003. The amendments to the foreign currency gains and losses tax provisions will have retrospective application from 17 December 2003. However, affected taxpayers should not be disadvantaged by this as the initial announcement contained detailed information with respect to the amendments so that affected taxpayers could manage their tax affairs with the knowledge of the amendments and their impacts, beneficial and otherwise.

Schedule 4 amends the income tax laws to make it easier for takeovers and mergers regulated by the Corporations Act to qualify for the capital gains tax scrip-for-scrip rollover. These amendments carve out takeover bids that do not contravene key provisions of the Corporations Act, and approved schemes of arrangement, from having to meet the rollover requirement, but the target entity’s interest holders can participate in the arrangement on substantially the same terms. These amendments have been made in part because the income tax legislation does not need to regulate participation where the Australian Securities and Investments Commission already takes into account equality issues, including in administering its role in relation to the scheme of arrangement. These amendments ensure that the scrip-for-scrip rollover operates more effectively.

Schedule 5 implements the government’s 2010-11 budget measure to increase the threshold above which a taxpayer may claim the net medical expenses tax offset. From 1 July 2010 the claim threshold will increase from $1,500 to $2,000. It will thereafter be annually indexed to the consumer price index. The first indexation adjustment to the claim threshold will take place on 1 July 2011. These are important amendments which ensure the sustainability of support for taxpayers with higher unreimbursed medical expenses.

Schedule 6 amends division 30 of the Income Tax Assessment Act 1997 specifically to list two new organisations as deductible gift recipients—DGRs—extend the listing of one organisation and effect a name change for another. Taxpayers can claim an income tax deduction for certain gifts to organisations with DGR status. DGR status will assist the listed organisations to attract public support for their activities. This schedule specifically lists, or extends the listing of, the Mary McKillop Canonisation Gift Fund, the Xanana Vocational Education Trust and the One Laptop per Child Australia Ltd. The schedule also effects a name change for the Clontarf Foundation from the Clontarf Foundation Inc. to Clontarf Foundation.

Schedule 7 extends deductible gift recipient status to all volunteer fire brigades. Volunteer fire brigades aim to prevent, respond to and assist with recovery from a range of fire related emergencies, including preventing bushfires from reaching people in built-up communities. This legislation recognises the importance of the community service performed by volunteer fire brigades. This schedule allows all entities which provide volunteer based emergency services, including volunteer fire brigades, to access tax deductible donations and extends deductible gift recipient status to all state and territory government bodies that coordinate volunteer fire brigades and State Emergency Service units. I commend this bill to the Senate.

Question agreed to.

Bill read a second time.