Tax Laws Amendment (2004 Measures No. 6) Bill 2004

Second Reading Speech

Senator Hill (Minister for Defence)

I move:

That these bills 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 tax laws to implement a range of changes and improvements to Australia's taxation system. Most of these amendments lapsed when Parliament was prorogued, but the Government is moving to bring them back as soon as possible, to try to give more certainty to taxpayers waiting for these changes.

Firstly, the Government is continuing with its roll-out of consolidations.

These measures give greater flexibility and certainty to consolidation membership and loss rules. The bill clarifies the consolidation cost setting rules with respect to finance leases, certain types of mining expenditure, and low-value and software development pools. It also reduces compliance costs by relaxing the notice requirements under the inter-entity loss multiplication rules in some circumstances and allowing more flexibility in relation to some previously irrevocable elections. Generally, these amendments take effect from the 1 July 2002, which is the commencement date of the consolidation regime.

Secondly, this bill ensures that copyright collecting societies are not taxed on income they collect on behalf of members.

Broadly, the bill will ensure that copyright collecting societies will be exempt from income tax on copyright income collected and held on behalf of members, before it is distributed. At the same time, the law will further be amended to ensure that the income which is exempt at the society level is included in the assessable income of the members once it is received.

The third measure ensures continues the implementation of the simplified imputation system. It covers anti-avoidance rules in relation to exempt entities that are eligible for a refund of imputation credits; and consequential amendments to replace references to the previous imputation system with references to the new system and to update the terminology for the new system.

Schedule 4 to this bill adds several institutions and funds to the list of specifically-listed deductible gift recipients in the income tax law, including certain fire and emergency services bodies. It also creates a new general category of deductible gift recipient for government schools that provide special education for students with a permanent disability.

The fifth measure will extend the existing transitional rules in the debt/equity rules for at-call loans to 30 June 2005. This will mean that an at-call loan made to a company by a related party before 30 June 2005 (typically a loan by a small business owner to the business) will be treated as being on revenue account. The measure will give businesses more time to assess existing loans and adjust their arrangements if need be.

Schedule 6 extends the water facilities and landcare tax concessions, currently available to primary producers and some rural businesses, to irrigators and rural water providers. As a result of these amendments, irrigators will be able to claim deductions for capital expenditure on water facilities over three years, and rural water providers will be eligible for immediate deductions on landcare operations. The measure will assist irrigators to renew water supply infrastructure and enhance the efficiency of water delivery to primary producers and other users.

The next measure broadens the fringe benefits tax exemption for the costs associated with the purchase of a dwelling by an employee as a result of relocation for work purposes. Currently, the exemption is only available if, within the two year time limit, and after the employee sells his or her old dwelling, the employee buys a new dwelling and the employer pays the incidental purchase costs. The exemption will be extended to cases where the new house is bought before the old one is sold.

Schedule 8 to this bill amends the capital gains tax law so that an administrator of a company, as well as a liquidator, can declare shares and other equity interests in a company to be worthless for capital gains tax purposes. The declaration permits taxpayers who hold those shares or other equity interests to claim a capital loss.

The next measure amends the goods and services tax law, to remove an anomaly that allows supplies of certain services relating to residential property in Australia to be GST-free if the owner is not in Australia at the time of the supply, when the same supply would be taxable if the owner was in Australia. The measure gives the same GST treatment to both residents and non-residents for these property-related services.

Schedule 10 amends the the first child tax offset, or Baby Bonus, in relation to adoptive parents, to ensure that, in line with the Government's original intention, adoptive parents are not disadvantaged with respect to the Baby Bonus. The amendments will allow adoptive parents, once they become legally responsible for a child, to lodge a retrospective claim for the Baby Bonus to cover the period between commencing care of the child and being given legal responsibility for that child.

This bill will also amend the income tax law to alleviate the unintended tax consequences that arise when a life insurance company transfers some or all of its life insurance business to another life insurance company. The amendments respond to concerns raised by the life insurance industry and will ensure that taxation issues are not a barrier to transfers of life insurance business between life insurance companies.

In addition, there will be technical correction in the commencement provision applying to the franking deficit tax offset provisions for life insurance companies.

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

I commend this bill.

Debate (on motion by Senator Hill) adjourned.

Ordered that the resumption of the debate on these bills be made an order of the day for a later hour.

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