House of Representatives

Tax Laws Amendment (2010 Measures No. 2) Bill 2010

Second Reading Speech

Mr Griffin (Minister for Veterans' 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.

Schedule 1 amends the non-commercial loan rules in division 7A of the Income Tax Assessment Act 1936 to prevent a shareholder of a private company (or an associate of the shareholder) accessing tax-free dividends through the use of company assets, for less than their market value.

This schedule also makes a range of other technical amendments to strengthen the non-commercial loan rules by ensuring that they cannot be circumvented by the use of corporate limited partnerships or by interposing entities between a private company and its shareholders.

The government announced that it would tighten the non-commercial loan rules in division 7A as part of the 2009-10 budget. After listening to the community, particularly the farming and small business communities, the government has introduced a number of exceptions into this measure to cover the minor use of company assets, the use of assets for income-producing purposes where that use would otherwise be deductible and the use of certain dwellings for private purposes.

These amendments will strengthen the operation of division 7A as an integrity measure, providing greater equity and fairness to taxpayers.

Schedule 2 amends the taxation laws to extend tax file number withholding arrangements to closely held trusts, including family trusts.

Generally, the new tax file number withholding arrangements will apply to the trustees of closely held trusts and family trusts where the trustee makes a payment of income to the beneficiary or the beneficiary is presently entitled to be paid a share of the income of the trust and the beneficiary of the trust has not provided their tax file number to the trustee.

To allow the Australian Tax Office data matching and ensure the effective operation of the system, the new tax file number withholding framework includes various reporting and remittance obligations.

This measure will improve the fairness and integrity of the taxation system by equipping the tax office with the information necessary to match amounts assessable to beneficiaries of these trusts, with amounts reported in the beneficiary's income tax return and thus help ensure that beneficiaries of these trusts pay their fair share of tax.

Schedule 3 exempts from income tax the value of the HECS-HELP benefit received by an eligible applicant.

The HECS-HELP benefit, or Higher Education Contribution Scheme-Higher Education Loan Program benefit, was an initiative first introduced in the 2008-09 budget. The benefit gives eligible recipients a reduction in their HECS debt repayment and/or their HELP debt repayment or, in some cases where a repayment is not required due to low income, a direct reduction in their HELP debt.

The benefit was initially introduced for mathematics and science graduates and early childhood education teachers. In the 2009-10 budget it was announced that the benefit had been extended to nurses and teachers generally.

The amendments ensure that no income tax is payable on the value of the benefit received by eligible recipients.

Schedule 4 amends the list of deductible gift recipients, or DGRs, in the Income Tax Assessment Act 1997. Taxpayers can claim income tax deductions for certain gifts to organisations with DGR status. DGR status assists the listed organisations to attract public support for their activities.

This schedule adds two new organisations to the 1997 act, namely the Sichuan Earthquake Surviving Children's Education Fund and the Bali Peace Park Association Inc.

This schedule also extends the period that the Yachad Accelerated Learning Project Ltd can collect deductible gifts for another three years.

Schedule 5 amends the Income Tax Assessment Act 1997 to make the Global Carbon Capture and Storage Institute Limited income tax exempt for a four-year period.

The institute is a not-for-profit-organisation that aims to accelerate the development and global adoption of safe, commercially and environmentally sustainable carbon capture and storage technology.

Carbon capture and storage technology aims to reduce greenhouse gas emissions from fossil fuels burnt during industrial processes, such as coal powered electricity generation. It involves the capture, compression, transport, long-term storage and monitoring of carbon emissions that would otherwise be released into the atmosphere.

The institute's purpose is to drive the commercial uptake and deployment of carbon capture and storage technologies, which would have significant positive consequences for the global environment.

There may also be an economic benefit to Australia of investing in environmentally sustainable industries through carbon capture and storage technologies. Australia has the fourth largest coal reserves in the world, and is the world's largest exporter of coal.

The information and expertise developed by the institute is to be disseminated broadly and globally to the benefit of both the Australian and the global carbon capture and storage communities.

Supporting the institute by making it income tax exempt is a part of the government's strategy to mitigate the risks of climate change.

Schedule 6 repeals over 100 provisions in the tax laws that provide the Commissioner of Taxation with an unlimited period to amend taxpayers' assessments.

Generally, under the current law, amendments to the taxpayers' assessments may be made within specific time periods, including in certain circumstances time periods that are unlimited.

The repeal of the unlimited amendment period provisions within this schedule include provisions where the standard two- to four-year amendment period would provide sufficient time for the commissioner to examine and make any necessary amendments to the relevant assessment. For these provisions, the standard amendment period will also retain an unlimited amendment period in cases of fraud and evasion.

This will have the effect of reducing the volume of unnecessary and redundant provisions in the taxation laws, as well as assisting in providing more certainty to taxpayers in their taxation affairs.

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

Debate (on motion by Mrs Gash) adjourned.