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Thursday, 23 August 2012
Page: 6225

Senator FEENEY (VictoriaParliamentary Secretary for Defence) (12:31): I table a revised explanatory memorandum relating to the Tax Laws Amendment (2012 Measures No. 4) Bill 2012, and 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—

Customs Amendment (Smuggled Tobacco) Bill 2012

The Gillard government is proud of its world-leading action to combat smoking.

And as part of the government's package of measures to reduce smoking rates in Australia, I am pleased to introduce the Customs Amendment (Smuggled Tobacco) Bill. This bill amends the Customs Act 1901 to create new offences for smuggling tobacco products and for conveying or possessing smuggled tobacco products.

The bill also strengthens the penalties applicable to the illegal importation of tobacco by adding a maximum penalty of ten years imprisonment to the existing financial penalties.

I announced the government's intention to create these new offences on World No Tobacco Day last month. They are yet another step by this government towards combatting smoking on all fronts.

Tobacco is not like any other legal product. When used as intended, it kills people.

Australia recognised the malign influence of cigarettes early and has made significant progress in reducing the smoking rate. Over the years Australia has prohibited advertising, removed sponsorships, restricted point of sale displays, and outlawed smoking in restaurants and many public places.

Thanks to these efforts, the proportion of Australians aged 14 years and over who smoke each day has fallen from 30 per cent in 1988 to 15 per cent today—one of the lowest in the world.

Despite Australia's success in reducing smoking rates over recent decades, tobacco remains one of the leading causes of preventable death and disease among Australians, killing over 15,000 Australians and costing the community over $ 30 billion each and every year.

About three million Australians continue to smoke every day—so it is incumbent on government to do all it can to stamp smoking out.

Packets are the best, and in Australia, now the only way tobacco brands can differentiate themselves and attract users.

That is why the Gillard g overnment has taken the world-first step to mandate that all cigarettes and other tobacco products be sold in plain, drab packs from 1 December this year.

This g overnment believes that all children have the right to grow up healthy and free from addiction, without becoming the victims of a very calculated marketing campaign to hook a new generation of smokers.

Our g overnment also increased taxation on tobacco by 25 per cent, which saw an immediate fall in the amount of tobacco sold.

We have introduced legislation to ban tobacco marketing on the internet; and

We have put nicotine replacement therapies on our Pharmaceutical Benefits Scheme—meaning these are cheaper for Australians to buy, particularly seniors and low income earners.

We have massively reduced duty free allowance—down to just 50 cigarettes (from 250).

But there is more we can do to continue that fight, such as taking action to ensure all tobacco consumed in this country is subject to mandated health pricing and packaging.

Illegal tobacco importations typically occur when an importer attempts to evade the duty payable on these imports. Given the high duty payable on tobacco, this generally occurs by misdeclaring the goods to the Australian Customs and Border Protection Service as non-tobacco products with a lower duty liability.

To date tobacco smuggling has not represented a major threat in Australia and Customs have been successful in intercepting hauls of illicit tobacco heading for Australia.

During 2010-11, Customs made 55 seizures of smuggled tobacco products in sea cargo, consisting of 82 million cigarettes and representing a potential revenue evasion of $135 million plus GST. This is a large number, but should be seen in context: Australians smoke around 22 billion cigarettes a year.

However, we must ensure that when Customs do intercept illicit tobacco, there are significant penalties in place to deal with those responsible.

The penalties must provide a strong deterrent to criminals involved in this activity - as well as demonstrate the seriousness with which the Government views such frauds against the Commonwealth, a nd harm against the community.

Currently smuggled tobacco is usually prosecuted under a general smuggling provision, with penalties ranging from two to five times the amount of duty evaded.

However, these pecuniary penalties for tobacco smuggling are not necessarily an effective deterrent, as many penalties currently imposed for tobacco smuggling are simply not paid.

The new offences in this bill clarify the law by creating specific offences in relation to tobacco smuggling. The bill creates an offence where a person imports tobacco with the intention of defrauding the revenue. It also creates an offence where a person conveys or possesses tobacco products which the person knows were imported with the intent to defraud the revenue.

A pecuniary penalty of up to five times the duty evaded will apply for both these offences.

In addition, the new offences attract a substantial maximum term of 10 years' imprisonment. A term of imprisonment is not currently available as a penalty for tobacco smuggling under the Customs Act. The new penalties will send a clear message to smugglers that they risk spending significant time in jail by bringing illegal tobacco into this country.

The introduction of this bill and the offences it creates reinforces my commitment, this g overnment's commitment, to fight smoking on all fronts.

I commend the bill to the Senate.

Tax Laws Amendment (2012 Measure No. 4) Bill 2012

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

Schedule 1 amends the tax laws to better target the tax concession for living-away-from-home allowances and benefits.

These reforms will better target the tax concession at people who are legitimately maintaining a home away from their actual home in Australia for an initial period.

The amendments implement the reforms that were announced as part of last year’s Mid-Year Economic and Fiscal Outlook, and also the reforms in this year’s budget.

Use of the tax concession for living-away-from-home allowances has dramatically increased over the past decade.

One of the issues raised at last year’s successful Tax Forum was the increasing exploitation and misuse of this tax concession.

The current tax rules have a number of deficiencies.

Firstly, people are able to access the tax concession even if they are not maintaining another home in Australia. This means that people who have sold their old home, or are renting it out, can still access the tax concession.

Secondly, people are able to receive the tax concession in relation to cash payments in excess of the actual amount they spend on accommodation and food.

And thirdly, people are able to access what was meant to be a temporary tax concession for long periods—often three or four years or more.

In November last year, the government announced two reforms to the tax concession as part of the Mid-Year Economic and Fiscal Outlook.

Temporary residents will need to be maintaining a home for their own use in Australia that they are living away from for work to be able to access the tax concession.

And all individuals will need to substantiate their actual expenditure on accommodation and food.

We announced that these reforms would apply from 1 July this year.

We announced two new reforms to the tax concession in this year’s budget.

Permanent residents will need to be maintaining a home in Australia for their immediate use and enjoyment at all times that they are required to live away from for work, to be able to access the tax concession.

And there will be a 12-month time limit on how long all people (other than fly-in fly-out and drive-in drive-out workers) can access the tax concession.

We announced that the reforms in the budget would apply from 1 July this year for arrangements entered into after Budget night, and from 1 July 2014 for arrangements entered into prior to that time.

The government held two extensive consultation processes in relation to these reforms.

In response to the submissions received, the government has taken the decision to defer the start date of the reforms from 1 July 2012 to 1 October 2012.

This deferral will give employers and employees more time to prepare for the new arrangements.

Some technical changes have also been made to the amendments in response to feedback on the exposure draft legislation.

The schedule moves the majority of a living-away-from-home allowance to the income tax system, so it is included in the assessable income of the employee.

Employees who satisfy the new requirements will be able to claim an income tax deduction for their accommodation and food expenses, so they pay no tax on the allowance.

Employees will be able to claim an income tax deduction for a maximum period of 12 months in respect of a particular work location.

The component of a living-away-from-home allowance that represents the ‘ordinary weekly food and drink expenses’ of an employee will remain in the fringe benefits tax system, in a similar way to the current treatment.

Employers who provide direct living-away-from-home benefits to their employees will be able to apply the otherwise deductible rule to reduce the taxable value of the benefits.

This will ensure the fringe benefits tax treatment mirrors the income tax treatment.

The government’s reforms to the tax concession for living-away-from-home allowances and benefits will provide savings of $1.9 billion over the forward estimates.

The tax concession will continue to support people who are bearing additional costs because they have to maintain a home away from their actual home in Australia for work purposes, for up to 12 months.

The reforms will not affect the tax concession for fly-in fly-out and drive-in drive-out arrangements, as these employees will not be subject to the 12-month time limit.

The reforms will not affect the tax concessions provided for ‘remote area fringe benefits’.

And they will not affect the tax treatment of travel and meal allowances.

Schedule 2 amends the GST law to ensure that in circumstances where a representative of an incapacitated entity is a creditor of that entity, the correct provision of the GST Act applies.

This will ensure certainty for entities involved in the mortgage lending sector, as well as reduced compliance costs for these entities.

The amendments restore the intended operation of the GST law following previous amendments to the GST Act. As a result of the previous amendments, there are circumstances where two conflicting provisions of the GST Act can apply to a mortgagee or other holder of a security interest in possession or control of a corporation's property.

These amendments will apply from the first quarterly tax period after Royal Assent.

Schedule 3 amends schedule 3 to the Tax Laws Amendment (2012 Measures No. 2) Act 2012 so that no interest or penalties are payable if an overpayment of income tax arises, or if additional tax becomes payable, under the recent amendments to the consolidation regime for consolidation events before 30 March 2011.

This will ensure that taxpayers who get deductions as a result of those changes to the consolidation regime do not receive interest in respect of tax they had previously overpaid. However, where interest has already been received by a taxpayer, the taxpayer will not need to pay back the amount received in most cases.

In addition, taxpayers will not have to pay interest and penalties if additional tax becomes payable because a deduction is disallowed as a result of the recent amendments.

These changes were announced as an important part of the recent amendments to the consolidation regime.

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

I commend this bill to the Senate.

Senator FEENEY: I move:

That the bills be listed on the Notice Paper as separate orders for the day.

Question agreed to.

Debate adjourned.