Second Reading SpeechMr Costello, MP
That the bill be now read a second time.
Today, I am introducing the second group of bills which will implement a New Business Tax System for Australia. More legislation will follow later this year and in the new year. This bill introduces a range of capital gains tax reform measures and builds on those CGT measures already introduced into the House on 21 October 1999 and passed through this House yesterday.
The key measures included in this bill are:
- the streamlining of the existing CGT concessions for small business taxpayers;
- the introduction of a CGT exemption where a small business taxpayer sells an active asset which has been held for at least 15 years and the taxpayer is at least 55 years of age and intends to retire or is incapacitated;
- CGT rollover relief for shareholders in a company, or unitholders in a fixed trust, who exchange shares and units during a takeover of the company or fixed trust; and
- an exemption for certain non-resident tax exempt pension funds in relation to gains they make on venture capital investments.
The government's CGT reforms are an important aspect of the new tax system and are consistent with the government's objectives of making Australia's taxation system more internationally competitive and reducing compliance costs through simplification.
These are the measures which complete the legislation for the government's historic capital gains tax reforms. The legislation which passed through the House yesterday was to cut the assessable capital gain for individual shareholders by 50 per cent so that only 50 per cent of the capital gain for an individual would be taxable. The government's historic capital gains tax reforms involve doing away with the complexity of indexation and averaging-averaging being a measure which allowed the taking of a rate based on the average of a capital gain over a period of time-and reducing capital gains tax rates.
In addition, this legislation extends the government's historic capital gains tax reforms into other areas. It makes it possible for small business, where they have an active asset which they have held for 15 years and the person wants to retire or is incapacitated, to sell that active asset capital gains tax free. In particular, this will be of enormous benefit to farmers. Farmers, who might have worked a property for 15 years and who, heading up to the time of retirement, want to sell the property and use the proceeds to buy a house in town, can do that under these proposals capital gains tax free.
The changes in relation to rollover relief relate to where there is a takeover and somebody sells their shares because of the takeover and takes shares in the new company. They are essentially exchanging the scrip they have for the scrip of the company making the takeover. They will be able to do that capital gains tax free. That will give enormous benefits to small shareholders throughout Australia and it will free up the market for competitive takeovers and give an improvement in the economic benefits that that will bring.
Also, the changes will allow tax exempts from overseas that do not pay any tax in their home jurisdiction to come and invest in Australia, again capital gains tax free. It does not cost revenue because they do not come into the jurisdiction at the moment. If you allow them into the jurisdiction, such as the US pension funds, this will free up a lot of finance for venture capital. They will be able to provide venture capital that can be invested in new sunrise industries and they will be able to do that capital gains tax free.
As the member for Moreton reminds me, that will mean more economic growth and more jobs for Australia. This is a historic reform. I welcome the fact that it will have the support of the opposition. I have already indicated to the opposition that if we can stand this bill down until such time as they are ready then why not pass it today, get it into the Senate next week and get these historic changes through the Senate. These changes will be great for Australian small business, great for shareholders, great for economic investment and good for jobs. I commend this bill and present the explanatory memorandum.