Second Reading SpeechMr Pearce (Parliamentary Secretary to the Treasurer)
That this bill be now read a second time.
This bill amends various taxation laws to implement a range of changes and improvements to Australia's taxation system.
Schedule 1 to this bill extends the existing capital gains tax (CGT) rollover relief on marriage breakdown to assets transferred under a binding financial agreement or an arbitral award entered into under the Family Law Act 1975. This measure will also extend to similar arrangements under state, territory or foreign legislation. Finally, the measure will ensure that the CGT rollover interacts appropriately with the main residence exemption and that marriage breakdown settlements do not give rise to CGT liabilities.
Schedule 2 improves the interaction between the consolidation rules and the demerger rules. Currently a consolidation integrity measure causes certain CGT rollovers to be ignored for consolidation tax cost-setting purposes. This integrity measure will not apply to a consolidated group or multiple entry consolidated group that forms after a demerger. The amendments will apply from 1 July 2002-that is, from the commencement date of the consolidation regime.
Schedule 3 amends the simplified imputation system to ensure that Australian companies receive franking credits attached to non-assessable non-exempt distributions from New Zealand companies. This change will apply from 1 April 2003-that is, from the commencement of the trans-Tasman imputation measures.
Finally schedule 4 to this bill will implement the government's decision to reform the CGT treatment of foreign residents.
These reforms will further enhance Australia's status as an attractive place for business and investment by addressing the deterrent effect for foreign investors of Australia's current broad foreign resident CGT tax base.
The amendments in this bill better target and strengthen the application of CGT to foreign residents. This is achieved, firstly, by narrowing the range of assets on which a foreign resident is subject to Australian CGT to Australian real property and the business assets of Australian branches of a foreign resident.
Secondly, the integrity of this narrower CGT tax base for foreign residents is strengthened. CGT will apply to non-portfolio interests (10 per cent or more) in Australian and foreign interposed entities, where more than half of the value of the interposed entities' assets is attributable to Australian real property. Those assets may be held directly or held indirectly through one or more other interposed entities.
The amendments align Australia's domestic law with the approach adopted in Australia's tax treaties. They complement taxation changes already introduced by the government affecting investments made from Australia.
Full details of the measures in the bill are contained in the explanatory memorandum. I commend the bill to the House.
Debate (on motion by Mr Edwards) adjourned.