16-June-2005
Speeches, The Economy, Law and Order
Mr ROBB (Goldstein) (11.18 a.m.)—I rise today to speak on the Tax Laws Amendment (2005 Measures No. 2) Bill 2005. As the member for Hunter has observed, it is indeed a big week in the parliament for tax measures. It is a big week because the minor parties in the Senate have agreed to allow the schedules relating to $21 billion worth of tax cuts for all Australians to be allowed. They will get them, now, on 1 July, so it is great news for all working Australians. They will get their cuts despite the trenchant opposition of the Labor Party to these tax cuts and the debacle they have got themselves into over these measures. So it is a great week.
This bill makes eight amendments to our current taxation system, including amendments to the Income Tax Assessment Act, the Taxation Administration Act, A New Tax System (Goods and Services Tax) Act and the Fringe Benefits Tax Assessment Act. I welcome the support of the opposition to all these provisions in the bill. They are technical amendments designed to improve the operation of the tax system in a number of ways.
Notwithstanding the comments of the member for Hunter, the Assistant Treasurer has been very effectively dealing with improvements progressively that could be expected to occur following, in many cases, the introduction of a major rebalancing of the tax system towards greater reliance on indirect tax, as occurred in the new taxation system—again, in the face of trenchant opposition for no good reason from the Australian Labor Party. So a lot of these issues are progressive technical improvements which have been very effectively pursued by the Assistant Treasurer.
The first measure amends the simplified imputation system. Currently a company is entitled to a franking deficit tax offset in an income year if it has incurred a liability to pay a franking deficit tax in that income year. If a company’s franking deficit at the end of the income the year exceeds the franking credits in its franking account by more than 10 per cent, the amount of the tax offset is reduced by 30 per cent. The amendment that is in the bill today will allow them, in certain situations, to pay franked dividends due in the income year in which they first incur an income tax liability without incurring the penalty that reduces their franking deficit tax offset by 30 per cent for that year. It is a significant initiative which will provide a significant benefit to those companies.
The second measure in this bill amends the Income Tax Assessment Act 1997 to provide an automatic capital gains tax rollover for the transfer of assets of registrable superannuation entities that merge during the transitional period to comply with licensing requirements under the superannuation safety reforms.
The new superannuation safety arrangements that the government is implementing are designed to strengthen the prudential regulation of superannuation funds. Some of the superannuation funds have been unable to comply with the new licensing requirements and have been required to merge with other funds that have been able to be registered. This has had some unintended capital gains tax consequences. After some detailed consultation with the superannuation industry, this bill will insert subdivision 126-F into the Income Tax Assessment Act 1997 to ensure that any capital gain or loss that would have been recognised when a fund that was unable to be registered merged with a new fund will now be disregarded and any capital gain or loss will be deferred until a later disposal of that asset by the licensed fund. This will apply only during the transition period, between 1 July 2004 and 30 June 2006.
The third measure in this bill will amend the Income Tax Assessment Act 1997 so that capital allowance deductions will be allowed for the acquisition of indefeasible telecommunications rights. There is currently a discrepancy between the treatment of acquiring indefeasible rights to use domestic telecommunication cables, known as domestic IRUs, and the acquisition of international IRUs. This amendment will allow for a capital allowance deduction to be available for the cost of purchasing telecommunication site access rights and domestic IRUs. This will apply to expenditure after 12 May 2004.
The fourth measure in this bill relates to the system of PAYG instalments. Currently, taxpayers are able to choose to pay PAYG on an annual basis. However, they can become ineligible to pay PAYG instalments annually for various reasons. Currently, when a taxpayer does become ineligible to pay PAYG annually, there is some confusion and difficulty in how they move to the payment of quarterly payments. This amendment seeks to simplify the movement of companies from annual to quarterly payments of PAYG instalments. When a taxpayer has made an annual payment and then becomes ineligible to make annual payments, they will not make their first quarterly payment until the next financial year, thus reducing compliance costs—again, another useful initiative to improve the operation of the system.
The fifth measure in this bill updates the current list of organisations with deductible gift recipient status. Deductible gift recipient status aids organisations in raising funds, so I congratulate Freedom across Australia, Rotary and Leadership Victoria, the National Police Memorial, the Page Research Centre—and I expect some excellent work to come out of the Page Research Centre—and the Russian Welfare Aid to Russia Fund.
The sixth measure of this bill relates to the application of GST to the purchase of real property. These amendments will remove unintended outcomes which arise from the interaction of various provisions of the A New Tax System (Goods and Services Tax) Act which have allowed some property owners to reduce their GST liability on supplies of real property by manipulating various special rules. This amendment also clarifies the margin scheme and ensures that, when an entity joins a GST group, appropriate adjustments are made to the input tax credits.
The seventh amendment relates to the taxation treatment of superannuation annuities that have been split upon the breakdown of a marriage. The Family Law Act has recently been amended to ensure that annuity products, such as annuities purchased from life offices, will be treated in the same way as rolled-over superannuation moneys. These amendments will ensure that the taxation treatment of splitting these annuity products is the same.
The final measure in this bill relates to the removal of the condition that contributions to an approved workers entitlement fund must be required under an industrial instrument in order to be eligible for an exemption from fringe benefits tax.
The bill makes eight distinct but important amendments to our taxation system. It is part of an effective and ongoing assessment of the effectiveness of our various taxation acts, and I commend this bill to the House.