Second Reading SpeechMr Bowen (Minister for Competition Policy and Consumer Affairs, and Assistant Treasurer)
That this bill be now read a second time.
This bill amends various taxation laws to implement a range of improvements to Australia's tax laws.
Schedule 1 provides relief from capital gains tax for private health insurance policyholders when their insurer demutualises to a for-profit insurer. These amendments facilitate the demutualisation of private health insurers.
These amendments ensure that policyholders who receive shares in the demutualised insurer will not be subject to capital gains tax when they receive the shares. In addition, these shares will broadly receive a market value cost base.
Policyholders who receive a cash payment under their insurer's demutualisation, rather than shares, will not be subject to capital gains tax at the time they receive this payment.
Although schedule 2H of the Income Tax Assessment Act 1936 provides members of mutual entities that demutualise with certain capital gains tax relief, many policyholders of health insurers are not covered by the existing demutualisation provisions because they are not members in the sense required under schedule 2H and consequently would be subject to the general income and capital gains tax provisions of the law on demutualisation.
The changes will provide certainty to policyholders of health insurers that have demutualised this year to receive the new tax treatment.
To illustrate the effect of this measure, NIB demutualised in October last year; MBF is preparing to demutualise. In the interests of full disclosure, I declare that I am an MBF policyholder.
Schedule 2 reverses the family trust changes announced by the previous government in the Tax Laws Amendment (2007 Measures No. 4) Act 2007.
These amendments were foreshadowed by Labor prior to the federal election, and were announced in the 2008-09 budget.
The amendments change the definition of 'family' in the family trust election rules to limit lineal descendants to children or grandchildren of the test individual or of the test individual's spouse-that is, the previous definition of family will be restored.
The amendments also prevent family trusts from making a variation to the test individual specified in a family trust election, other than specifically in relation to the 2007-08 income year or in the case of a marriage breakdown.
Both of these changes reduce the scope for family trusts to be used to lower income tax by utilising losses, delivering on the government's commitment to disciplined budget management providing savings of almost $20 million over the forward estimates.
Finally, schedule 3 implements various minor amendments to the law and also some general improvements of a minor nature to deal with such issues as incorrect terminology, grammatical or punctuation errors, missing asterisks from defined terms, inoperative material, ambiguities in the law and adding non-operative notes to help readers navigate their way through law. These amendments reflect the government's commitment to the care and maintenance of the tax system.
Full details of the measures in this bill are contained in the explanatory memorandum. I commend the bill to the House.
Debate (on motion by Mrs Bronwyn Bishop) adjourned.