House of Representatives

Tax Laws Amendment (2009 Measures No. 6) Bill 2009

Second Reading Speech

Dr Emerson (Minister for Small Business, Independent Contractors and the Service Economy, Minister Assisting the Finance Minister on Deregulation and Minister for Competition Policy and Consumer Affairs)

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.

The bill typifies the busy work ethic of the Rudd Labor government, in this case through another instalment in finalising a raft of outstanding taxation issues in the period before the government considers the recommendations of Australia's Future Tax System. Some of these issues were inherited from the previous government.

Schedule 1 abolishes the exception to capital gains tax events E1 and E2, widely known as the 'trust cloning' exception. This is consistent with the policy principle of taxing capital gains that arise where there is a change in ownership of an asset.

Schedule 1 also provides a limited capital gains tax rollover for the transfer of assets between fixed trusts with the same beneficiaries, each of which has the same interests in each trust.

This will ensure that capital gains tax considerations are not an undue impediment to the restructure of those trusts, whilst ensuring that subsequent changes to the manner and extent to which beneficiaries can benefit from the trusts are subject to appropriate tax consequences.

Schedule 2 removes significant income tax impediments to mergers between complying superannuation funds. These amendments will permit eligible entities to roll over capital losses and revenue losses under the merger and to transfer previously realised capital losses and revenue losses.

The loss relief will be available for complying superannuation funds that merge with another complying superannuation fund with five or more members. The loss relief will preserve the offsetting value of the losses, thereby removing a potential barrier to superannuation fund consolidation.

This measure will assist in maintaining a robust and efficient superannuation sector. The measure has a limited period of application from 24 December 2008 until 30 June 2011.

Schedule 3 amends the Income Tax Assessment Act 1997 to clarify the circumstances in which income derived by life insurance companies in respect of immediate annuity business qualifies as non-assessable non-exempt income.

The annuity conditions that must be satisfied for an annuity policy to qualify for exemption have been rewritten to make the law clearer and to clarify the circumstances in which they apply. These changes have been sought by business groups and apply from 1 July 2000.

The amendments also ensure that the annuity conditions do not apply to immediate annuity policies that provide for superannuation income streams.

This ensures that life insurance companies are taxed on superannuation income stream business in the same way as all other superannuation income stream providers. These changes apply from the 2007-08 income year.

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 two new organisations to the act, namely the Green Institute and the United States Studies Centre. It also changes the name of one organisation currently listed in the act from the 'Dymocks Literacy Foundation Limited' to 'Dymocks Children's Charities Limited'.

Schedule 5 exempts from income tax the income recovery subsidy payment for the north-west Queensland floods of January and February 2009.

This payment was available to Australian resident employees, small business owners and farmers over 16 years of age who could demonstrate that they experienced a loss of income as a direct result of the north-west Queensland floods in January and February 2009.

Eligible recipients must also have demonstrated that they derived an income or resided in the affected area within a designated time period. The payment was a Newstart-like payment designed to provide immediate financial assistance to disaster victims.

Schedule 6 clarifies the excise law to ensure that imported high-strength spirits blended with domestically produced high-strength spirits are free of duty under the concessional spirits scheme, with effect from the date of royal assent.

These spirits are generally not intended for consumption as an alcoholic beverage and the proposed changes will allow current practice to continue.

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

Debate (on motion by Mrs Mirabella ) adjourned.