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Monday, 7 March 2005
Page: 125

Senator MURRAY (8:49 PM) —The Tax Laws Amendment (2004 Measures No. 6) Bill 2004 is largely technical. It contains 12 distinct schedules, another 129 pages of taxation law and 175 pages of explanatory memorandum. Schedule 1 contains technical amendments to the company consolidation regime. The company consolidation regime was a recommendation of the Ralph review of business taxes. I, as Democrat taxation spokesperson, have been considerably involved in the process. The parliament has seen plenty of legislative changes since the introduction of consolidation on 1 July 2002. On various occasions I have stated that we are placing plenty of faith in the expertise of the Treasury and Taxation Office representatives and that I was always going to be nervous that the costs that they foresaw were going to be much less than those that would eventuate. I think that is likely to be proven true. However, we remain supporters of that tax consolidation regime as a contribution to market efficiencies, flexibilities and rationalisation.

During the past three years, company taxation receipts have been increasing at over 10 per cent per annum to over $37 billion. We supported lowering the company tax rate in return for broadening the base. We agreed with the government that the result would be increased, not decreased, revenue—and that has proven to be the case. It is sometimes said by those who are ignorant of these matters or who do not listen to what we actually say that the Democrats are supporters of high tax. We are not. We are supporters of high revenue sufficient to meet the legitimate and reasonable needs of Australians. Of course, that company tax situation is typical. We supported a tax cut as we knew it would deliver greater revenue because of the way in which it was structured.

Schedule 2 deals with the taxation of copyright collection societies and ensures that money received on behalf of authors and composers is not taxed at the full top marginal effective rate. Quite appropriately, this bill ensures that the income is taxed in the hands of the author or composer and not treated as trust income taxable in the hands of the trustee. Schedule 3 contains some minor technical amendments to the simplified imputation system. Schedule 4 establishes a new category of deductible gift recipient for special schools for students with a disability. Obviously the Democrats support this initiative. We are also pleased to see that this bill ensures DGR status for the various state fire and emergency service authorities. This is an area that my colleague Senator Cherry, who is presently in the chair, has lobbied on and taken a strong interest in.

Schedule 5 extends the transitional rules for the debt and equity rules. Some small businesses often inject funds into their businesses, but not all small business people have an accounting background and some do not recognise the difference between debt and equity. Most small businesses will simply consider that they have injected ‘their money’ into ‘their business’; they do not recognise the accounting difference. This transitional amendment allows them until 30 June 2005 to determine, for accounting purposes, if the injection of funds is debt or equity for taxation purposes.

Schedule 6 implements the government’s announcement that eligible irrigation water providers have access to the water facilities and land care tax concessions that are currently available to primary producers—a ‘levelling the field’ provision. Schedule 7 extends the fringe benefits tax exemption for relocation to the incidental costs associated with purchasing a new home. This is a minor but beneficial amendment.

Schedule 8 deals with the capital gains tax treatment of companies that are in liquidation. The rules allow an insolvency practitioner to declare that shares are worthless. This change allows shareholders to claim the capital loss immediately rather than waiting until the company is dissolved. There is often a long lag between the realisation that a company is worthless and going through the mechanics of dissolution. In the meantime, an accounting period may be missed, during which those who have experienced the capital loss could have had the opportunity to make the appropriate claims.

Schedule 9 was just put in to excite the Labor Party. If you put ‘GST’ into a bill, they automatically react in a Pavlovian manner, and we all smile and wave at each other and gesture. The GST is now well established as a very significant tax measure, delivering on its way to $40 billion in the next year or two. It has, of course, the need for constant tinkering. Schedule 9 ensures that nonresidents who own rental properties are input taxed for GST purposes. As Senator Sherry outlined, there was a technical loophole that allowed nonresidents to treat their rental properties as GST free and accordingly claim input tax credits. However, this amendment will ensure that residents and nonresidents are treated the same—another ‘levelling the field’ amendment.

Schedule 10 amends eligibility for the first child tax offset to make it available to adoptive parents. My colleague Senator Stott Despoja, working with our shared adviser, Kellie Caught, has lobbied the government for this change, and hopefully she will be relieved from her maternal duties and be able to speak to this positive development. If she does not, I merely commend the work she has done on it. Schedule 11 contains some technical amendments to the franking rules for life insurance companies. Schedule 12 also deals with life insurance companies. It corrects some technical anomalies dealing with the transfer of a life insurance business to another life insurance company.

The Democrats will be supporting the bill without amendment, although we do have a second reading amendment—which Senator Stott Despoja will speak to—which calls on the government to provide adoptive parents with the same rights and support as biological parents.