Senate

Taxation Laws Amendment Bill (No. 2) 2002

Second Reading Speech

Senator Ellison (Minister for Justice and Customs)

I table a revised explanatory memorandum relating to the Taxation Laws Amendment Bill (No. 2) 2002 and move:

That this bill be now read a second time.

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

Leave granted.

This bill makes amendments to the income tax law and other laws to give effect to the following measures.

The imputation rules in the Income Tax Assessment Act 1936 will be amended to take account of the reduction of the company tax rate from 34% to 30%. The measures preserve the value of franking credits accumulated prior to the rate change whilst minimising compliance costs for corporate taxpayers. These amendments will apply from 1 July 2001.

As a consequence of the deferral in the Review of Business Taxation life insurance policyholder proposals until 1 July 2002, the commencement date of the proposals to tax friendly societies on investment income received that is attributable to funeral policies, scholarship plans and income bonds sold after 30 November 1999 will also be deferred. Friendly societies will remain exempt from tax on th

This bill further amends the Income Tax Assessment Act 1936 so that neither the intercorporate dividend rebate nor a related deduction are allowed in respect of any unfranked dividends paid to or by a dual resident company.

The Income Tax Assessment Act 1997 will be amended to remove scope for double refunds of excess imputation credits to both a trustee and a beneficiary and a consequential amendment will be made to the Income Tax Assessment Act 1936.

Amendments to the Income Tax Assessment Act 1997 are also required to deny refunds of excess imputation credits to non-complying superannuation funds and non-complying approved deposit funds. It has become apparent that, if their access to excess imputation credits is not prevented, these entities could be used as a vehicle to access tax benefits inappropriately through artificial schemes to produ

The technical amendments are required to the Income Tax Assessment Act 1936 to enable the franking rebate provisions to clarify that registered charities and gift-deductible organisations which are trusts, are eligible for refunds of imputation credits in respect of distributions received indirectly through another trust.

The amendment to the Income Tax Assessment Act 1936 will broaden the class of taxpayers eligible to claim the Senior Australians Tax Offset. The following taxpayers will also be eligible to claim the Senior Australians Tax Offset:

·
Veterans who were eligible to receive a pension, allowance or benefit under the Veterans' Entitlements Act 1986 but did not receive one; and
·
persons who were eligible to receive an age pension on alternative grounds to the residency test.

The amendment to the Medicare Levy Act 1986 will make a minor technical correction.

This bill further amends the Income Tax Assessment Act 1997 to ensure that taxpayers who received shares in Tower Limited as a consequence of the demutualisation of Tower Corporation (a former New Zealand resident mutual company) in October 1999 are not subject to capital gains tax at the time their membership rights ceased to exist. The amendments also specify the cost base for shares received in

The bill also contains amendments to the gift provisions of the income tax law to give effect to announcements the Government has made over the past several months that gifts of $2 or more to certain organisations are to be tax deductible. These organisations include those engaged in health and education, and those that recognise the contribution our war veterans have made to Australia.

The bill amends the income tax law to recognise a new demutualisation method for non-insurance mutual entities. Members of non-insurance mutual entities that demutualise using the new method will qualify for the concessions currently available to members of such entities that demutualise using one of the existing demutualisation methods.

The bill will amend the Income Tax Assessment Act 1997 to insert a capital gain tax roll-over for a policyholder/member of a mutual insurance company who becomes absolutely entitled to certain shares held on trust as part of a demutualisation. The amendments will apply from 10 December 1999.

Lastly, this bill makes a number of technical corrections to the Income Tax Assessment Act 1936, the Income Tax Assessment Act 1997 and other tax related legislation.

Full details of the measures in this bill are contained in the explanatory memorandum.

I commend this bill.

Debate (on motion by Senator Crossin) adjourned.

Ordered that the bills be listed on the Notice Paper as separate orders of the day.