House of Representatives

Tax Laws Amendment (2009 Measures No. 3) Bill 2009

Second Reading Speech

Mr Bowen (Minister for Competition Policy and Consumer Affairs, and Assistant Treasurer)

I move:

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 amends the Taxation Administration Act 1953 to set the GDP adjustment for the 2009-10 income year at two per cent for taxpayers who pay quarterly pay-as-you-go (PAYG) instalments on the basis of the GDP-adjusted notional tax method. Without this amendment, the GDP adjustment using the formula in the PAYG instalment provisions of the Tax Administration Act 1953 would be around nine per cent for the 2009-10 income year. Consequently, many taxpayers may have been required to pay tax instalments that would exceed their actual tax liability, with the overpaid tax being credited to them after the end of the income year when their final tax liability is assessed. While taxpayers can vary their PAYG instalments, they may be reluctant to do so as penalties may apply for significant underestimation. The amendment will provide cash flow benefits to small businesses, self-funded retirees and other eligible taxpayers by ensuring that their PAYG instalment amounts more closely approximate their actual income tax liability for the 2009-10 income year. This is an important part of the government's efforts to assist business through the global recession. Schedule 2 amends the Taxation Administration Act 1953 to allow taxpayers who are voluntarily registered for goods and services tax (GST) and who choose to remit GST annually to also choose to make their PAYG instalments annually, if they satisfy the other eligibility tests for annual PAYG instalments. The introduction of annual GST payments in 2004 without changing the annual PAYG instalment conditions at that time has created a misalignment between the PAYG and GST instalment systems. In some cases this prevents annual GST payers from making annual PAYG instalments solely because of their voluntary GST registration. This imposes unnecessary compliance costs on these taxpayers. The amendments introduced by this bill will reduce compliance costs for eligible taxpayers. Schedule 3 of the bill amends the Petroleum Resources Rent Tax Assessment Act 1987 to implement four minor measures. The first measure involves introducing a functional currency rule into the petroleum resources rent tax (or PRRT), similar to the functional currency rule in income tax although adapted to the different features of the PRRT. This will allow PRRT taxpayers the option of electing to work out their PRRT position in a functional currency (or foreign currency) which in turn is converted to Australian dollars. The functional currency measure is expected to reduce compliance costs for those PRRT taxpayers who keep their financial accounts in a foreign currency. The second PRRT measure deals with exploration expenditure related to a production licence derived from an exploration permit or a retention lease. This measure ensures that all exploration expenditure in an exploration permit area, or retention lease area, is deductible for PRRT purposes against the appropriate area's production licence. The third PRRT measure introduces internal petroleum provisions into the PRRT to deal with the case where one participant in a petroleum project processes another participant's petroleum prior to the PRRT taxing point. A project is currently under construction where this scenario may apply. The measure will provide consistency with the external petroleum provisions, which deal with the circumstance where a petroleum project sources petroleum for processing from outside its production area. The fourth PRRT measure extends the offshore exploration designated frontier area incentive by one year. The incentive allows a 150 per cent uplift on PRRT deductions for exploration expenditure incurred in designated offshore frontier areas. This will enable this incentive to apply to the 2009 annual offshore acreage release. Any assistance provided beyond 2009 will be considered in light of the final report of the Australia's Future Tax System review and the energy white paper, which are both scheduled to be completed by the end of 2009. Finally, schedule 4 amends the list of deductible gift recipients (DGRs) in the Income Tax Assessment Act 1997. Taxpayers can claim income tax deductions for certain gifts to organisations with DGR status. DGR status will assist the listed organisations to attract public support for their activities. This schedule adds three new organisations to the act, namely the Diplomacy Training Program Limited, the Royal Institution of Australia Incorporated and the Leeuwin Ocean Adventure Foundation Limited. The Royal Institute based in Adelaide promotes science and scientific applications in the community and is the first international affiliate of the Royal Institute of Great Britain. The Diplomacy Training initiative affiliated with the University of New South Wales provides training for representatives of non-government organisations in the Asia-Pacific region focusing on human rights and good governance. I acknowledge the work and support of the member for Page for this organisation and her very active efforts to ensure that DGR status was forthcoming. The Leeuwin Ocean Adventure Foundation based in Fremantle provides educational and self-development training for young people to stimulate personal development, self-reliance, teamwork, confidence, responsibility and community spirit. I acknowledge the very active efforts of the member for Fremantle in support of this organisation. I wish these organisations well. Full details of the measures in this bill are contained in the explanatory memorandum. Debate (on motion by Mr Coulton) adjourned.