House of Representatives

Tax Laws Amendment (2011 Measures No. 7) Bill 2011

Second Reading Speech

Mr Shorten (Assistant Treasurer and Minister for Financial Services and Superannuation)

I move:

That this bill be now read a second time.

This bill amends various tax laws to implement a range of improvements to our tax laws.

Schedule 1 removes income tax barriers that impede families from making financial contributions to a special disability trust. These changes include extending the capital gains tax main residence exemption to special disability trusts. By removing these barriers, special disability trusts will become more attractive for families looking to provide for the long-term care of a family member with severe disability.

Schedule 2 reduces the lowest marginal tax rate that applies to non-resident workers employed under the government's Pacific Seasonal Worker Pilot Scheme from 29 per cent to 15 per cent. The change will apply for the 2011-12 year of income and was announced in the 2011-12 budget.

The Pacific Seasonal Worker Scheme is an important element of the government's Pacific engagement strategy, a whole-of-government strategy designed to advance our engagement in the Pacific. This measure will help support the government's strategy by improving remittance outcomes for workers and by addressing equity concerns raised by the relatively high effective tax rates currently applying to workers in the scheme.

The changes introduced in this bill will not impact Australian workers or non-residents who are not Pacific seasonal workers.

Schedule 3 amends the pay-as-you-go instalments provisions to ensure that the concept of 'instalment income' interacts appropriately with the concepts of 'gain' and 'loss' in the taxation of financial arrangements, or TOFA, stages 3 and 4 provisions.

The amendments ensure that the interaction does not impose significant administrative or compliance costs while achieving the objectives of the pay-as-you-go instalments provisions.

Schedule 4 gives the Commissioner of Taxation a limited discretion to extend the time for a taxpayer to notify the commissioner of making the transitional election to apply TOFA stages 3 and 4 provisions to its existing financial arrangements.

The TOFA transitional election gives taxpayers the choice of not having to comply with two sets of income tax rules for financial arrangements.

The proposed discretion would provide some administrative flexibility so that taxpayers who did not notify the commissioner of a transitional election on time may be able to obtain the compliance benefits of the transitional election under certain circumstances.

Schedule 5 amends the tax law and the Banking Act 1959 to make four changes to the farm management deposits, or FMDs, scheme.

First, the changes allow an FMD owner affected by an applicable natural disaster to access their farm management deposits within 12 months of making a deposit while retaining concessional tax treatment.

This schedule also allows FMD owners to hold FMDs simultaneously with more than one FMD provider.

In addition, FMD providers will be required to report certain information about FMDs to the Agriculture secretary more frequently.

The amendments will afford the owner of an FMD additional protection under the unclaimed moneys provision, which is not available to ordinary depositors.

These amendments allow FMD owners to access their own funds without foregoing concessional tax treatment, enabling them to recover and rebuild their primary production businesses more quickly or providing an income in times of severe hardship. The minor administrative amendments are intended to benefit FMD owners and allow a better understanding of the effectiveness of the scheme.

Schedule 6 extends the end date of the temporary loss relief for merging superannuation funds by three months, that is, from 30 June 2011 until 30 September 2011. This will provide additional time for mergers to take place before the loss relief expires. The requirement that affected mergers are completed in a single income year is relaxed to permit funds to benefit from the extension.

Schedule 7 preserves the integrity of the taxation laws compliance framework by ensuring that certain director penalty notices remain valid. Director penalty notices are issued by the Commissioner of Taxation to the directors of companies which have failed to remit pay-as-you-go withholding amounts to the commissioner. These notices advise directors that if they do not cause their company to take certain actions with respect to the debt, they will become personally liable for the debt.

Between December 2007 and June 2010 the commissioner issued around 17,000 director penalty notices in reliance on a precedential 2007 New South Wales Court of Appeal decision. This decision was overturned by a later decision of the same court in 2011, which in turn raised doubts about the continuing validity of the director penalty notices issued during that period.

These amendments will simply restore the precedential understanding of the law at the time these notices were issued, yet they will not impact the individual director in the latter Court of Appeal decision. These amendments are retrospective in nature; however, this is essential for ensuring these notices remain valid, and the penalties attaching to these notices remain recoverable.

Schedule 8 fulfils the government's 2010 budget commitment to provide a regulatory framework to improve the integrity of public ancillary funds, similar to that which has applied to private ancillary funds since 1 October 2009. This framework will provide the trustees of such funds with greater certainty as to their philanthropic obligations.

Following consultation, the commencement date for the measure was deferred from 1 July 2011 to 1 January 2012, which makes it vital that this bill receive royal assent by 31 December 2011.

Schedule 9 amends the tax law to make several changes to the film tax offsets. The changes specifically affect the producer offset and the location and post, digital and visual effects offsets.

These changes, which will apply from 1 July 2011, are estimated to increase expenditure on the film tax offsets by $8 million over the forward estimates period. These amendments to the film tax offsets are aimed at reforming and strengthening the Australian screen production industry at a time when it is striving to meet the challenges of a changing global environment. The amendments to the producer offset will refine delivery of government support to screen producers, reduce the financial and administrative burden on applicants, and improve operational efficiency. The amendments to the location and post, digital and visual effects offsets are aimed at enhancing those offsets to attract offshore productions to Australia.

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

Debate adjourned.