House of Representatives

Tax Laws Amendment (2009 Measures No. 5) Bill 2009

Second Reading Speech

Mr Shorten (Parliamentary Secretary for Disabilities and Children's Services and Parliamentary Secretary for Victorian Bushfire Reconstruction)

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.

First, schedule 1 amends the A New Tax System (Goods and Services Tax) Act 1999 to ensure that a representative of an incapacitated entity is responsible for the GST consequences that arise during its appointment. The amendments will protect GST revenue in light of the adverse Federal Court of Australia decision of Deputy Commissioner of Taxation v PM Developments handed down on 12 December 2008.

The PM Developments decision found that a liquidator is not liable for the GST arising from a transaction occurring during the period of the liquidator's appointment. Instead, the court found that the GST liability is a liability of the company in liquidation.

The decision is contrary to the stated intention that the representative of an incapacitated entity is liable for GST on transactions within the scope of its appointment. It is also contrary to the commissioner's administration of the law since the introduction of the GST.

This schedule amends the GST law with effect from 1 July 2000 to ensure the law achieves the stated policy objective. Retrospective amendment will protect the revenue by preventing claims for refunds of amounts of GST paid by representatives. Transitional provisions will apply to ensure that the amendments do not adversely impact taxpayers who have in fact complied with the commissioner's interpretation of the law or who have acted in good faith.

The amendments also ensure that the GST consequences for a representative are the same as those that would have arisen had the action been performed by the incapacitated entity.

Schedule 2 amends the pay as you go instalment provisions to address unintended consequences arising out of amendments to those provisions contained in the Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009.

For compliance reasons, a special provision was inserted into the income tax law by the TOFA act to calculate TOFA gains and losses on a net rather than gross basis for pay as you go instalment income purposes. However, the provision could unintentionally lead to a reduction in pay as you go instalments paid because the net basis of a calculation can produce a reduction in pay as you go instalment income. The amendments reverse the changes the TOFA act made to the pay as you go instalments system, thus preventing this potential outcome.

In addition, the amendments ensure that where an entity has become liable to pay a decreased amount of pay as you go instalments prior to the commencement of this bill, there will be a catch-up payment of the decreased amount in the quarter that ends after the commencement of this bill. This catch-up payment will only be of relevance to those taxpayers who have elected to apply the TOFA act from the 2009-10 income year.

The government intends to undertake consultation on a more appropriate method for dealing with the interactions between the pay as you go instalments system and the TOFA act. This method will have regard to taxpayer compliance costs.

Schedule 3 exempts from income tax the outer regional and remote payment made under the Helping Children with Autism package. This payment is made to assist families with children who have been diagnosed with autism spectrum disorder and living in outer regional and remote areas, to be able access otherwise scarce early intervention and education services. The amount is $2,000. Exempting this payment from income tax reflects the added difficulties that can be faced by families living in a regional or rural area in gaining access to these scarce services.

Schedule 4 exempts from income tax those payments made under the Continence Aids Payment Scheme. This scheme replaces the existing Continence Aids Assistance Scheme which provides subsidised continence products to eligible recipients. The replacement of the direct provision of products with a payment allows eligible recipients greater freedom of choice of products and suppliers. Providing an income tax exemption for the receipt of this payment will ensure that no recipients are disadvantaged under the new scheme.

Schedule 5 amends the Income Tax Assessment Act 1936 so that Commonwealth issued debt will be exempt from interest withholding tax. This important measure will mean that Commonwealth debt, state government debt and private sector debt will be afforded the same treatment for interest withholding tax purposes. This will help improve the neutrality of the tax system, and bring Australia's tax treatment of Commonwealth government securities into line with most other countries, including the United States and the United Kingdom. This measure will also improve the efficiency of financial markets, and increase the attractiveness of Commonwealth government securities to overseas investors. The exemption will apply to interest paid after the day the bill receives royal assent. To be eligible for this exemption from interest withholding tax, the debenture or debt interest must pass the public offer test. The public offer test can be satisfied if a significant number of investors are likely to be interested in acquiring the debentures or debt interests.

Finally and importantly, schedule 6 provides greater scope to the Victorian Bushfire Appeal Fund independent advisory panel to support communities affected by the 2009 Victorian bushfires.

A joint Australian Red Cross Society and Victorian government appeal, the 2009 Bushfire Appeal Fund, has remarkably received donations in excess of $375 million and has been ably chaired until recent days by former Governor John Landy and is now chaired by Patrick McNamara.

Recognising the extraordinary circumstances surrounding the Victorian bushfires, these amendments will permit the panel, at their discretion, to use these remarkable donations for a broader range of purposes than the tax law considers charitable, without jeopardising the charitable status of the Red Cross. The amendments also apply so that the panel can provide support and assistance in respect of all of the tragic fires that blighted Victorian communities in the 2009 fire season.

Importantly the panel's primary consideration remains the provision of assistance to individuals and communities in towns and suburbs affected by the 2009 fires to ensure that they are re-established to be thriving and socially inclusive.

The allowable purposes for which the funds may be expended are consistent with the charitable expectations of the donors, who made their donations in good faith.

The key amendments permit the panel, at their discretion, to assist with:

payments to orphans under the age of 18 without the need for annual assessments;
reimbursements to individuals or organisations where the panel had later provided funds to others in the same circumstances;
grants up to $15,000 for those in transitional housing where a grant has been provided previously to assist with rebuilding the family home;
grants up to $10,000 to affected farmers to use for repair and restoration of farm activities, including re-fencing; and
payments to those people, especially farmers, who own the family home through a company or trust structure.

In addition the panel may also support community projects to fund the replacement or enhancement of pre-existing community facilities, or to establish new community facilities. If the panel chooses to do so these projects must be consistent with the purposes of an income tax exempt entity, have a broad public benefit with wide public accessibility, and have no more than an incidental and ancillary commercial or private benefit.

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

Debate (on motion by Mr Billson) adjourned.