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Tuesday, 28 August 2001
Page: 30408


Mr SLIPPER (Parliamentary Secretary to the Minister for Finance and Administration) (5:29 PM) —I move:

That the amendment be disagreed to.

The amendment made by the Senate would exempt taxpayers who enter into perpetual conservation covenants under the Regional Forest Agreements Private Forest Reserve Program from the income tax and capital gains tax consequences of their actions. While the government does support measures to promote greater participation in perpetual conservation covenants and to enhance the protection of Australia's unique, fragile native ecosystems, the government does not believe that the amendment made by the Senate is the best way to achieve this. It is limited to covenants granted under the Regional Forest Agreements Private Forest Reserve Program, and there are technical defects in the capital gains tax amendment which could mean an unintended windfall gain to a taxpayer who created a conservation covenant. Instead, the government has announced two measures to encourage land-holders to enter into conservation covenants.

The first is a change to the capital gains tax rules to ensure that land-holders who set aside land for conservation in perpetuity are not disadvantaged when compared to other landowners. Under the government amendments, at the time of entering into the covenant the landowner will apportion the cost base of the property between that part subject to the covenant and the remaining property. This will have the effect that capital gains tax will be paid on the difference between the cost base for the covenant land and any consideration received. Since many covenants will be on pre September 1985 land, no capital gains tax will be payable. In other cases, if the land has been held for 12 months or more, the 50 per cent discount will apply. Also, small business owners who grant covenants may be able to access the small business capital gains tax concessions.

The other measure, announced by the Prime Minister, will allow an income tax deduction for landowners who donate land to gift deductible recipients for conservation purposes. The law will be amended to extend the existing gift provisions in relation to donations of land and other property to land-holders entering into perpetual covenants for no consideration with deductible gift recipients such as approved environmental organisations. The government's view is that these proposals are a better way to proceed than the amendments made by the Senate.