Taxation Laws Amendment (Landcare and Water Facility Tax Offset) Bill 1998

Second Reading Speech

Senator Ian Campbell (Western Australia - Parliamentary Secretary to the Treasurer)

I move:

That this bill be now read a second time.

I seek leave to have the second reading speech incorporated in Hansard.

Leave granted.

The speech read as follows

The Taxation Laws Amendment (Landcare and Water Facility Tax Offset) Amendment Bill 1998 contains provisions which give effect to commitments in the Government's election statement, Reviving the Heartland , to "give farmers a choice between accelerated deductions for Landcare works under subdivisions 387-A and 387-B of the Income Tax Assessment Act 1997 (the act) or a tax rebate/credit set at the marginal tax rate of 34 cents in the dollar for qualifying expenditure".

This is a significant initiative as part of the $1.25 billion Natural Heritage Trust to deliver the Government's objective of repairing past land and water degradation and achieving a faster, more effective shift to sustainable agriculture in Australia. Importantly, it provides an incentive for landholders to invest in works which are needed to ensure their future in agriculture and rehabilitate Australia's natural environment.

The Government's policy objective in implementing the landcare and water conserving and conveying facility rebate is to assist low income farmers who, because of their low incomes, are most in need of assistance to invest in landcare works.

Subdivisions 387-A and 387-B of the act contain provisions which allow certain taxpayers to claim income tax deductions for landcare expenditure and for expenditure on conserving and conveying of water respectively. Low income farmers who have a low effective tax rate have a much smaller incentive to invest in such works compared with higher income farmers who are likely to have a higher effective tax rate.

This bill introduces an alternative tax rebate for low income farmers so as to improve their incentive to invest in landcare works. Taxpayers with taxable incomes of up to $20,700 a year will have the alternative of claiming a tax rebate in relation to eligible expenditure incurred from the start of the 1997-98 income year. There is a maximum rebate of $1,700 (based on expenditure of $5,000) for expenditure in a particular year that would otherwise be tax deductible under each of subdivisions 387-A and 387-B. This means the rebate can be claimed for up to $10,000 of eligible expenditure in any year if there is expenditure of $5,000 under each subdivision.

The rebate for landcare expenditure is claimable in full in the year of the expenditure. This matches the treatment of the income tax deduction for such expenditure available under Subdivision 387-A. The rebate for expenditure on facilities for water conservation and conveyance is claimable equally over the three years beginning with the year of the expenditure. This matches the treatment of the income tax deduction for such expenditure available under Subdivision 387-B. In circumstances where taxpayers have chosen to take the rebate but have an insufficient income tax liability with which to absorb it, they will be able to carry forward the unused portion of their rebate.

No taxpayers will be adversely affected by this measure. This proposed rebate provides an incentive for those taxpayers whose low taxable incomes would reduce the benefit of deductions to undertake new landcare and water conserving and conveying works. The economic benefit they can derive from the rebate reducing their tax liability can substantially exceed the benefit of taking income tax deductions at their marginal tax rate.

The Government has set aside funding of $80 million over 4 years for the rebate. This funding will come from the Natural Heritage Trust Fund. There will be no additional compliance costs imposed on those taxpayers who wish to claim the rebate instead of the deductions otherwise available to them. They will simply have to maintain records of expenditure in the same manner as for the deductions.

I commend the bill to the Senate.

Debate (on motion by Senator Chris Evans) adjourned.