House of Representatives

Taxation Laws Amendment Bill (No. 4) 2003

Second Reading Speech

Mr Slipper (Parliamentary Secretary to the Minister for Finance and Administration)

I move:

That this bill be now read a second time.

The measures contained in this bill amend various taxation legislation.

Schedule 1 addresses a problem in the current income tax law which leads to the double counting of superannuation benefits where pensions or annuities are commuted and rolled over within the same fund or annuity provider.

The changes will treat such internal rollovers as eligible termination payments, bringing them under the application of the provisions of the income tax law. This will allow internal rollovers to be reported to the Commissioner of Taxation and the reasonable benefit limit rules to operate (as they do with external rollovers) to avoid double counting of the benefit when it is eventually paid out of the system.

Schedule 2 contains technical corrections and amendments to the uniform capital allowances system to ensure it operates as intended and interacts appropriately with related provisions. In particular, there will be finetuning of the provisions relating to mining capital and mining transport expenditures to ensure that these provisions operate as the government intended.

Schedule 3 formalises the treatment of income that is neither assessable income nor exempt income. Such amounts are not included in taxable income and do not reduce tax losses. Amounts of non-assessable non-exempt income have been in the income tax law since 1992 but this measure will, for the first time, bring them together in a single, coherent treatment, simplifying and improving the presentation of the law.

The measure also incorporates some technical amendments and corrects some anomalies in the existing law.

Schedule 4 makes minor corrections and consequential amendments to the rules concerning the carry forward and refund of tax offsets in the income tax law so that these rules operate as intended.

Schedule 5 introduces new withholding obligations to apply to certain payments to foreign residents. These new obligations are part of the next stage of business tax reform measures and will improve the compliance of foreign residents with their Australian tax obligations.

The new withholding obligations will apply to certain payments made to foreign residents that will be prescribed in regulations. The new provisions set out when withholding will be required and from whom a payer will be required to withhold. Withholding will also be required by an intermediary who receives an amount on behalf of a foreign resident. The amounts withheld will be available as a credit against the income tax assessment of the foreign resident. These new withholding obligations will minimise the compliance burden on Australian businesses by requiring withholding only for specified payments.

Schedule 6 makes amendments to ensure that the 'no Australian Business Number' withholding event will apply to enterprise-to-enterprise transactions in Australia. This resolves a technical problem that arose from the unintentionally narrow definition of 'carrying on an enterprise in Australia'.

This schedule also amends the 'no Australian Business Number' withholding rules to have the same geographical application as the ABN act. These amendments will ensure that the 'no Australian Business Number' withholding provisions are consistent with the A New Tax System (Australian Business Number) Act 1999, and that the original objectives of the 'no Australian Business Number' withholding provisions are fully implemented.

Lastly, in schedule 7, from 1 April 2003 the government will provide a fringe benefits tax exemption for certain payments to approved worker entitlement funds. The fringe benefits tax exemption applies to payments to approved worker entitlement funds that are required under an industrial instrument and are for the purposes of ensuring that an obligation to make a leave payment or payments when an employee ceases employment are met.

A worker entitlement fund will be approved if it is either a long service leave fund established and operating by or under Commonwealth, state or territory legislation, or if prescribed by regulation. Before a fund can be prescribed by regulation the Commissioner of Taxation must be satisfied that it meets certain criteria concerning the level of employer control, the use of fund assets, the types of payments that the fund can make and the maintenance of individual worker entitlement accounts.

The bill also provides an automatic capital gains tax rollover to a fund that amends or replaces its trust deed in order to be approved as an approved worker entitlement fund. The start date of this measure is also 1 April 2003. Full details of the measures in this bill are contained in the explanatory memorandum. I commend the bill to the House and present the explanatory memorandum.

Debate (on motion by Mr Rudd) adjourned.