Second Reading SpeechMr Bradbury (Assistant Treasurer and Minister Assisting for Deregulation)
That this bill be now read a second time.
This bill amends various taxation laws to implement a range of improvements.
Schedule 1 amends the Income Tax Assessment Act 1997 to implement the 2011-12 budget measure to disallow deductions against government assistance payments.
The schedule responds to the High Court decision in the Commissioner of Taxation v Anstis where it was held that expenses incurred in satisfying an activity test for taxable government assistance income are deductible.
The consequence of the High Court decision is that taxpayers with the same level of income have different tax liabilities depending on whether or not they receive taxable government assistance income that is eligible for a tax offset.
Leaving the tax law unchanged will create inequality in the tax system. Amending the tax law to overturn the High Court decision will increase equity by ensuring that taxpayers with the same level of income pay the same tax. This measure will also provide certainty as to the scope of eligible deductions.
From 1 July 2011, taxpayers who receive taxable government assistance income that is eligible for a tax offset will no longer be able to claim a deduction for expenses they incur in satisfying an activity test to qualify for assistance income. Government assistance income in scope of the amendment includes Abstudy, Austudy, Newstart allowance and youth allowance. This recognises that taxable government assistance payments are effectively tax free.
The government considers that the most targeted and timely assistance is provided through the transfer system, not the tax system.
This is why the government has introduced several key measures aimed at supporting students, including start-up scholarships for new university students, relocation scholarships for those studying away from home and reducing the age of independence for youth allowance to 22.
These measures provide more timely assistance to students when they need it most.
Schedule 2 removes the ability of complying superannuation entities to treat certain assets (primarily shares, units in a trust and land) as trading stock, which is consistent with the general industry practice of treating these assets on capital account.
These changes promote certainty in the superannuation industry by removing the present ambiguity concerning the appropriate tax treatment of gains and losses made from the sale of shares owned by a complying superannuation entity.
Schedule 3 exempts from income tax the ex-gratia payments to New Zealand Special Category Visa holders who were affected by the recent floods in New South Wales and Queensland. These ex-gratia payments are made for disasters where the Australian Government Disaster Recovery Payment has been activated, and are of an equivalent amount.
By exempting these disaster relief payments from income tax, the maximum amount of assistance is provided to affected individuals. A tax exemption for these payments is consistent with the exemption provided for equivalent payments made in response to other disasters, such as the widespread floods of the 2010-11 summer, and Cyclone Yasi.
Schedule 4 amends the Income Tax Assessment Act 1936 to implement the 2011-12 Mid-Year Economic and Fiscal Outlook measure to phase out the dependent spouse tax offset.
The dependent spouse tax offset originated around three-quarters of a century ago-a time when the single-income family was the norm and the welfare system was in its infancy. This was a time when a breadwinner was expected to 'maintain' a spouse even without children, and there were limited employment opportunities for women.
In today's modern economy, where unemployment is around five per cent, increasing employment participation and expanding the workforce is vital for the strength of our economy and the living standards of our community.
That is why the government is phasing out the tax offset for taxpayers with a dependent spouse born on or after 1 July 1952 to reduce the disincentive for dependent spouses from undertaking paid employment.
From 1 July 2012, taxpayers with a dependent spouse born on or after 1 July 1952 will no longer be eligible for the dependent spouse tax offset.
Dependent spouses with children are not affected by this measure, nor are taxpayers whose dependent spouse is a carer, an invalid or permanently unable to work. Taxpayers eligible for the zone, overseas forces or overseas civilian tax offsets are also not affected by this measure.
Schedule 4 will introduce minor amendments to ensure that taxpayers who maintain a dependent spouse are only able to claim one offset in respect of that spouse in determining their zone, overseas forces or overseas civilian tax offset entitlement. Schedule 5 includes several miscellaneous amendments to the taxation laws.
Amendments such as these are periodically made to correct minor technical or drafting defects in the taxation laws and to address unintended outcomes. Advancing these amendments gives effect to the government's longstanding commitment to uphold the integrity of the taxation system.
Full details of the measures in this bill are contained in the explanatory memorandum.