Senator FIFIELD (Victoria) (8.56 p.m.)-The Tax Laws Amendment (2004 Measures No. 6) Bill 2004 contains several reminders that this government’s record on taxation reform is one of its notable achievements. It was great that Senator Sherry urged the Senate to put this particular omnibus bill in a wider policy context; I am delighted to do that. It is remarkable what has been achieved, despite a hostile Senate, in relation to tax reform. Despite the efforts of senators opposite, the government was able to deliver, with the assistance of the Australian Democrats, a better tax system. Senators on this side of the chamber will never forget the contributions of Senator Murray or Mr Acting Deputy President, Senator Cherry, in his former capacity. And Senator Stott Despoja: although you did have some misgivings about elements of the new tax system, it is great to see you back here today.
The government delivered, amongst other things, four rounds of income tax cuts-including from 1 July this year. It also reduced the withdrawal rates on income support payments, halved the capital gains tax rate, reduced the company tax rate twice and funded the abolition of a range of state taxes. Contrary to Senator Sherry’s assertions, we have indeed returned more than the proceeds of bracket creep since we have been in government. This year, the GST is raising $35 billion, and all of that revenue is going to the states and territories. Senators opposite have complained about the treatment of the GST-that this government treats it as a state tax-yet I did not see anything in Labor’s election policy that would treat it differently.
All the states and territories are better off financially as a result of the GST. They have a secure and growing source of revenue, and it provides an opportunity for the states to reduce even more of their own taxes and provide adequate funding for vital services such as hospitals and schools. It was extremely heartening to see Mr Swan, in another place, urge his state Labor colleagues to complete the job of the new tax system and to further reduce their own state taxes. The Labor Party voted against the introduction of the GST. They voted against a secure and growing source of revenue for the states-a secure source of revenue for schools and hospitals. The Australian Democrats, by voting for that legislation, distinguished themselves from the Labor Party as a genuine party of reform-unlike the Australian Labor Party.
Senator Sherry-Distinguished and extinguished!
Senator FIFIELD-We are far more charitable on this side of the chamber. We have a long memory; we will not forget. This is an omnibus bill which continues the ongoing refurbishment necessary for our tax system to operate with efficiency and certainty. Schedule 1 of the bill relates to the consolidation regime. The regime was introduced from 1 July 2002 as part of this government’s business tax reforms. The amendments in this bill will improve the operation of that regime. The bill clarifies the consolidation membership rules and also provides clearer cost-cutting rules in relation to financial leases, some mining expenditure and low-value and software development pools. The bill also makes some changes which will help to reduce compliance costs.
Schedule 2 relates to the income of copyright collecting societies. Copyright collecting societies organise and administer some rights of copyright on behalf of the copyright owners. These societies are in general treated as trusts under tax law, and without the amendments in this bill the existing law would require that they pay the top marginal tax rate of 47 per cent on a substantial amount of the income collected on behalf of their members. This amendment will ensure that copyright collecting societies are not taxed on income they collect on behalf of copyright owners.
Schedule 3 contains amendments relating to the simplified imputation system. The simplified imputation system was a key component of the government’s business tax reforms and commenced from 1 July 2002. It improved and simplified the existing imputation rules, increased the flexibility in the way in which corporate tax entities frank distributions and provided consistent treatment across entities receiving franked dividends. The amendments contained in this bill are generally consequential amendments updating references to the new system within the tax law and updating some terminology. There are also some technical amendments in relation to exempt entities to ensure that the system operates as originally intended.
Schedule 4 relates to deductible gift recipients listed in the tax law. Every year there are similar amendments in one or more of the omnibus tax bills adding new organisations to those already listed. This is a very popular section of the law. It is one which, as Senator Coonan would know from her previous incarnation, keeps assistant treasurers busy from time to time. In this omnibus bill we have a list of fire and emergency services bodies to be added as gift deducible recipients. It is nice to see in this fairly dry and technical legislation that there is something unequivocally positive. This schedule in the bill provides a reminder that we have a sophisticated financial system and copyright law, but there is also a reminder for people who want to donate to these particular bodies that they can donate to the Victorian SES or the Queensland Fire and Rescue Service.
The amendments will also bring into legislation a new category of gift deductible recipient. Certain special schools had, in the past, been considered as deductible gift recipients by virtue of being public benevolent institutions. However, given that government schools cannot be a public benevolent institution under common law, these amendments will ensure that special government schools do qualify for gift deductible recipient status. Schools which qualify are those which provide special education for students who have a permanent disability and do not provide education for other students. This is probably one of the most important changes in this bill.
Schedule 5 of the bill extends a transitional rule allowing certain at-call loans to be a debt interest rather than equity for income tax purposes. Schedule 6 covers the government’s announcement to allow certain irrigation water providers to be eligible for the water facilities and landcare tax concessions which are available to primary producers. These changes will help irrigators to improve their services to primary producers.
Schedule 7 makes a small extension to the fringe benefits tax exemption for the costs incidental to the sale or acquisition of a dwelling by an employee relocating for work purposes. This change will mean that the employer does not have to wait for the previous dwelling to be sold before being eligible for the exemption. But the exemption will still be contingent on the former dwelling being sold within two years of the employee starting their new position.
Schedule 8 relates to capital losses for capital gains tax purposes. ‘CGT event G3’ might sound more like a crisis reminiscent of a Michael Crichton or Robert Ludlum novel, but it is actually an innocent reference to a provision under subdivision 104-G of the Income Tax Assessment Act 1997 which deals with capital gains tax in relation to shares. Specifically, the law currently relating to CGT event G3 currently provides that a liquidator can declare shares in a company to be worthless for capital gains tax purposes-not to downplay the significance of such an event for those involved, but it is hardly something worthy of a Michael Crichton book. As a further aside, I note that there is an event G1 but no G2 in subdivision 104-G, which is a mystery. The amendment in this bill will ensure that an administrator, not just a liquidator, can declare shares in a company to be worthless for capital gains tax purposes.
Schedule 9 relates to the GST, which, as I noted earlier, is providing $35 billion revenue to the states and territories this year. These amendments will remove an anomaly which previously allowed some services relating to the supply of residential premises in Australia to be GST free. It will help strengthen the GST base, ensuring that it continues to be a good source of revenue for the states and territories into the future.
Schedule 10 relates to the eligibility of adoptive parents for the government’s first child tax offset, otherwise known as the baby bonus, which has since been replaced by the new maternity payment, which commenced from 1 July 2004. The maternity payment and the baby bonus before it demonstrate the government’s commitment to assisting new parents with the costs of a new baby. The amendment will ensure that adoptive parents can also be eligible for the baby bonus after commencing caring for a child. Once given legal responsibility for the child, which can occur some months after adoptive parents begin caring for a child, the parents will be able to lodge a retrospective claim. This is a sensible and worthwhile thing to do.
Schedule 11 is a technical correction relating to the franking deficit tax offset provisions for life insurance companies. Schedule 12 covers amendments relating to the tax consequences of transferring life insurance business from one company to another. These amendments address some concerns which had been raised by the industry and are intended to ensure that tax is not an impediment in such circumstances.
It has been quite a while since senators opposite actually had the responsibility of running a tax system so they have probably forgotten that the job of continually renovating our tax system is an ongoing one; it is a job that is never done. This bill is the latest instalment in that effort and I commend it to the Senate.