House of Representatives

Tax Laws Amendment (2005 Measures No. 2) Bill 2005

Second Reading Speech

Mr Brough (Longman - Minister for Revenue and Assistant Treasurer)

I move:

That this bill be now read a second time.

This bill makes changes to various taxation laws to implement a range of improvements.

Firstly, this bill amends the simplified imputation system. The amendments will provide greater flexibility to private companies by allowing them, in certain situations, to pay franked dividends during the income year in which they first incur an income tax liability without incurring the penalty that reduces their franking deficit tax offset by 30 per cent for that year.

Secondly, this bill creates an automatic capital gains tax rollover for the transfer of assets of superannuation entities that merge to comply with new licensing requirements under the superannuation safety reforms.

The capital gains tax rollover ensures that the capital gain or capital loss that would otherwise be recognised when the transfer of assets occurs is disregarded and that the recognition of the accrued capital gain or loss is deferred until later disposal of the assets by one or more successor trustees.

The third measure will allow capital allowance deductions for expenditure incurred on indefeasible rights of use over domestic telecommunications cables and expenditure on acquiring telecommunications site access rights.

This amendment will help facilitate sharing of telecommunications infrastructure within the telecommunications industry, thereby decreasing inefficient duplication of infrastructure.

Schedule 4 to this bill will reduce compliance costs and increase certainty for taxpayers who become ineligible to pay annual pay as you go instalments as a result of registering or becoming required to register under the GST law or, in the case of a company, becoming a member of an instalment group. This will be achieved by requiring affected taxpayers to commence paying quarterly instalments from the following year rather than immediately.

The fifth measure lists several new organisations as deductible gift recipients. Deductible gift recipient status will assist the listed organisations to attract public support for their activities.

Schedule 6 amends the GST law to uphold the original policy intent that GST is payable on the value added to real property once it enters the GST system.

In particular, the amendments prevent property owners from reducing their GST liability on sales of real property by manipulating various special rules in the GST act. Other amendments provide certainty on the operation of the margin scheme and ensure entities joining a GST group have appropriate adjustments to claims for input tax credits. Most of the amendments will apply from the date this bill was introduced into parliament as they are integrity measures addressing unintended consequences in the GST law. However, the amendment requiring written agreement to use the margin scheme will apply from the date of the royal assent of the bill.

The seventh measure amends the income tax law so that superannuation annuities that have been split upon marriage breakdown under family law arrangements are taxed consistently with other superannuation benefits split on marriage breakdown.

The measure also corrects minor anomalies in the income tax law relating to superannuation benefits which are split on marriage breakdown.

Finally, this bill will remove the condition that contributions to approved worker entitlement funds must be required under an industrial instrument in order to be eligible for an exemption from fringe benefits tax.

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

I commend the bill and present the explanatory memorandum to the House.