Second Reading Speech
This Bill amends various taxation laws to implement a range of improvements to Australia's tax system.
Schedule 1 amends the tax laws to require large entities in the Pay As You Go instalment system to make their instalments monthly, instead of quarterly. This change does not increase the tax liabilities of an entity, merely the frequency with which instalment amounts must be remitted to the Australian Taxation Office.
These reforms will make Australia's tax system more responsive, efficient and consistent by better matching tax collections with the economic conditions faced by traders.
It is the next step in the process to reform the timing of businesses' tax payments that began in the 1980s.
Tax entities will migrate to the new system in four stages. Corporate tax entities with a turnover threshold of more than $1 billion will move to monthly instalments from 1 January 2014 and corporate tax entities with a turnover of more than $100 million will make the transition from 1 January 2015.
Corporate tax entities with a turnover of $20 million, and all other tax entities with a turnover of $1 billion, will move from 1 January 2016.
In the final stage, all other entities in the Pay As You Go regime with a turnover of more than $20 million will move to monthly instalments from 1 January 2017.
The turnover test will apply to the current measure of income for Pay As You Go instalments: base assessment instalment income.
To ensure that comparable entities receive the same treatment, entities in the taxation of financial arrangements regime will use an adjusted base assessment instalment income calculation. It will be based on their gross TOFA income, rather than their net TOFA income.
Entities that do not report GST monthly will not be required to migrate to the monthly Pay As You Go system, unless they have turnover above $100 million or are the head company of a consolidated group.
This reflects our aim of aligning large entities' Pay As You Go instalments with their GST reporting cycle.
To further reduce compliance costs, the Commissioner of Taxation will have the power to develop alternative methods of calculating instalment income. The Government will continue to work with the business community to identify options to simplify the Pay As You Go instalment regime and reduce compliance costs.
Schedule 2 amends various taxation laws and the Infrastructure Australia Act 2008 to introduce a tax loss incentive for designated infrastructure projects. This measure will encourage private sector investment in nationally significant infrastructure such as roads, rail and ports.
It will do this by preserving the value of infrastructure project losses over time and exempting these losses from utilisation tests that normally apply.
Infrastructure Australia will play a critical role in designating infrastructure projects that will benefit from this new measure.
Examples of projects that could benefit include the transformational Brisbane Cross River Rail, Sydney Motorways and Melbourne Metro projects.
I note that the Government announced significant contributions to both of these projects in this year's Budget, and this measure will help attract private sector support.
This is another Labor Government initiative which builds on our impressive infrastructure record.
Already, we've allocated more than $60 billion for nation building infrastructure, and delivered major reforms to the way the nation plans, finances and builds infrastructure.
Schedules 3 and 4 amend the Tax Agent Services Act 2009 to bring entities that provide tax agent services in the course of providing advice of a kind that is usually provided by a financial services licensee or a representative of a financial services licensee within the regulatory regime of the Tax Practitioners Board.
This ensures the appropriate regulation of all forms of tax advice, whether it is provided by a tax agent, a BAS agent or an entity in the financial services industry. I note that the Tax Practitioners Board has been working closely and consulting with relevant entities, including the Australian Securities and Investments Commission, about how it would administer this new regulatory regime to minimise compliance costs for those in the financial services industry.
Schedules 3 and 4 also amend the Tax Agent Services Act 2009 to correct a range of anomalies identified in the Act.
Schedule 5 amends the Taxation Administration Act 1953 to increase the transparency of Australia's business tax system.
There is growing concern - in Australia and globally - that many of the key rules of international taxation may not have kept pace with the evolution of the global economy.
The apparent ease with which some large corporate entities can shift taxable profits and erode a country's tax base is a shared concern for this Government, the G20 and most OECD countries.
Policy makers and the Australian public should have more transparency around the levels of tax being paid by large and multinational businesses in Australia to allow for an informed debate about the efficiency and equity of our tax system.
This is particularly the case when there are increasing demands for the Government to provide evidence about the challenges that base erosion and profit shifting present to the sustainability of our corporate tax system.
By increasing the transparency of our business tax system, the Government will ensure that the public is well informed about the contributions made by large corporations. This is also intended to discourage aggressive tax minimisation practices by large and multinational businesses.
The amendments in this schedule impose a duty on the Commissioner of Taxation to publish certain information obtained from the tax returns of corporate tax entities that have an annual total income of $100 million or more.
The Commissioner will have a separate duty to publish the amount of an entity's Minerals Resource Rent Tax or Petroleum Resource Rent Tax (PRRT) payable as reported by the entity, regardless of its total income.
Schedule 5 also allows for the publication of periodic aggregate tax collection information irrespective of whether the number of corporate entities paying a particular tax may be small.
In addition, Schedule 5 enhances information sharing between Government agencies in relation to decisions under the Foreign Acquisitions and Takeovers Act 1975 and Australia's Foreign Investment Policy.
Schedule 6 amends the Petroleum Resource Rent Tax Assessment Act 1987 to provide certainty to industry following the Full Federal Court's decision in Esso Australia Resources Pty Ltd v Commissioner of Taxation.
The amendments ensure that PRRT taxpayers are able to deduct legitimate expenditures, consistent with the policy intent of the PRRT regime. These amendments will:
ensure the capacity for taxpayers to apportion expenditure consistent with the PRRT's policy intent;
allow PRRT taxpayers to deduct expenditure incurred under contracts for project services or operations where the taxpayer is unrelated to the contractor, consistent with past administration; but preserve the requirement to look through contract arrangements where the contractor is a commercially or operationally related entity.
These amendments ensure that the PRRT continues to operate as a profits-based tax.
Schedule 7 exempts from income tax payments made to individuals under the Defence Abuse Reparation Scheme.
The Government's intent is to recognise, by way of a reparation payment, persons who have made plausible allegations of being subjected to sexual or other forms of abuse in Defence. This recognises the fact that abuse in Defence is unacceptable and wrong.
Exempting these payments from tax will ensure that recipients will receive the full benefit of the payments. The income tax exemption will also ensure that the reparation payment does not reduce peoples' social security payments, such as parental leave, family assistance and child support payments.
Exempting these payments also ensures consistency with the approach taken by the Government in relation to the Deseal/Reseal Payment Scheme in 2006.
Schedule 8 amends the Income Tax Assessment Act 1997 to remove eligibility for the 50 per cent discount oncapital gains accrued after 8 May 2012 by foreign and temporary resident individuals on taxable Australian property, such as real estate and mining assets.
The discount is not necessary to attract investment from foreign and temporary resident individuals into these assets, which are immobile. Removal of the discount is consistent with the findings of Australia's Future Tax Sytem review on the taxation of immobile capital.
Foreign resident individuals will still be entitled to a 50 per cent discount on discount capital gains accrued prior to 8 May 2012 (after offsetting any capital losses), provided they choose to value the asset as at that time.
Schedule 9 amends the GST law to establish the framework for making certain services and other things supplied to a participant as part of the National Disability Insurance Scheme under the National Disability Insurance Scheme Act 2013 GST-free.
The amendment will provide certainty for providers of services to National Disability Insurance Scheme participants by allowing the Disability Services Minister to make a determination specifying certain supplies to be GST-free when they are included in the participant's National Disability Insurance Scheme plan, allowing for flexibility as circumstances change.
These amendments will apply in relation to supplies made on or after the commencement of section 37 of the National Disability Insurance Scheme Act 2013, subject to State and Territory agreement to the making of the necessary determination.
Schedule 10 amends the list of deductible gift recipients identified by name in Division 30 of the Income Tax Assessment Act 1997. Donations made to organisations with deductible gift recipient status are income tax deductible to the donor and therefore deductible gift recipient status will assist the listed organisations in attracting public support for their activities.
This schedule adds five new organisations to the Act, namely, Aurora Education Foundation Limited, United Way Australia, Australian Neighbourhood Houses & Centres Association (ANHCA) Inc., The Australia Foundation in support of Human Rights Watch Limited and Layne Beachley - Aim for the Stars Foundation Limited, and extends the time period for listing of The Charlie Perkins Scholarship Trust and the Roberta Sykes Indigenous Education Foundation.
Finally, Schedule 11 to this Bill makes a number of miscellaneous amendments to the taxation and superannuation laws. The Government often progresses miscellaneous amendments schedules, such as this, to give effect to its long-standing commitment to the care and maintenance of the taxation and superannuation systems.
Full details of the measures in this Bill are contained in the explanatory memorandum.