House of Representatives

Tax Laws Amendment (2012 Measures No. 4) Bill 2012

Second Reading Speech

Mr Bradbury (Assistant Treasurer and Minister Assisting for Deregulation)

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 tax laws to better target the tax concession for living-away-from-home allowances and benefits.

These reforms will better target the tax concession at people who are legitimately maintaining a home away from their actual home in Australia for an initial period.

The amendments implement the reforms that were announced as part of last year's Mid-Year Economic and Fiscal Outlook, and also the reforms in this year's budget.

Use of the tax concession for living-away-from-home allowances has dramatically increased over the past decade.

One of the issues raised at last year's successful Tax Forum was the increasing exploitation and misuse of this tax concession.

The current tax rules have a number of deficiencies.

Firstly, people are able to access the tax concession even if they are not maintaining another home in Australia. This means that people who have sold their old home, or are renting it out, can still access the tax concession.

Secondly, people are able to receive the tax concession in relation to cash payments in excess of the actual amount they spend on accommodation and food.

And thirdly, people are able to access what was meant to be a temporary tax concession for long periods-often three or four years or more.

In November last year, the government announced two reforms to the tax concession as part of the Mid-Year Economic and Fiscal Outlook.

Temporary residents will need to be maintaining a home for their own use in Australia that they are living away from for work to be able to access the tax concession.

And all individuals will need to substantiate their actual expenditure on accommodation and food.

We announced that these reforms would apply from 1 July this year.

We announced two new reforms to the tax concession in this year's budget.

Permanent residents will need to be maintaining a home for their own use in Australia that they are living away from for work to be able to access the tax concession.

And there will be a 12-month time limit on how long all people (other than fly-in fly-out workers) can access the tax concession.

We announced that the reforms in the budget would apply from 1 July this year for arrangements entered into after budget night, and from 1 July 2014 for arrangements entered into prior to that time.

The government held two extensive consultation processes in relation to these reforms.

In response to the submissions received, the government has taken the decision to defer the start date of the reforms from 1 July 2012 to 1 October 2012.

This deferral will give employers and employees more time to prepare for the new arrangements.

Some technical changes have also been made to the amendments in response to feedback on the exposure draft legislation.

The schedule moves the majority of a living-away-from-home allowance to the income tax system, so it is included in the assessable income of the employee.

Employees who satisfy the new requirements will be able to claim an income tax deduction for their accommodation and food expenses, so they pay no tax on the allowance.

The component of a living-away-from-home allowance that represents the 'ordinary weekly food and drink expenses' of an employee will remain in the fringe benefits tax system, in a similar way to the current treatment.

Employers who provide direct living-away-from-home benefits to their employees will be able to apply the otherwise deductible rule to reduce the taxable value of the benefits.

This will ensure the fringe benefits tax treatment mirrors the income tax treatment.

The reforms we are making to this taxpayer funded tax break will provide savings of $1.9 billion over the forward estimates.

These reforms will not affect the tax concession for fly-in fly-out arrangements, as these employees will not be subject to the 12-month time limit.

The reforms will not affect the tax concessions provided for 'remote area fringe benefits'.

And they will not affect the tax treatment of travel and meal allowances.

Schedule 2 amends the GST law to ensure that, in circumstances where a representative of an incapacitated entity is a creditor of that entity, the correct provision of the GST act applies.

This will ensure certainty for entities involved in the mortgage lending sector, as well as reduced compliance costs for these entities.

The amendments restore the intended operation of the GST law following previous amendments to the GST act. As a result of the previous amendments, there are circumstances where two conflicting provisions of the GST act can apply to a mortgagee or other holder of a security interest in possession or control of a corporation's property.

These amendments will apply from the first quarterly tax period after royal assent. Schedule 3 amends schedule 3 to the Tax Laws Amendment (2012 Measures No. 2) Act 2012 so that no interest or penalties are payable if an overpayment of income tax arises, or if additional tax becomes payable, under the recent amendments to the consolidation regime for consolidation events before 30 March 2011.

This will ensure that taxpayers who get deductions as a result of those changes to the consolidation regime do not receive interest in respect of tax they had previously overpaid. However, where interest has already been received by a taxpayer, the taxpayer will not need to pay back the amount received in most cases.

In addition, taxpayers will not have to pay interest and penalties if additional tax becomes payable because a deduction is disallowed as a result of the recent amendments.

These changes were announced as an important part of the recent amendments to the consolidation regime.

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

Debate adjourned.