Tax and Superannuation Laws Amendment (2014 Measures No. 6) Bill 2014

Second Reading Speech


Today I introduce a bill that implements a range of improvements to Australia's tax laws. Importantly, this bill will also help clear more of the backlog of the 92 unenacted tax and superannuation measures this government inherited when we came to government. This, in turn, will provide investment certainty and allow Australian business to actually get on with doing business. And where there is business, there is opportunity.

This bill includes two measures that were left unlegislated by the former government: one concerns business restructures, the other concerns investments in managed investment trusts. By taking action on these measures, the government is delivering much-needed certainty to businesses and investors. Under the Abbott government, Australia is open for business.

This bill also supports the reintroduction of fuel duty indexation by ensuring that businesses which claim fuel tax credits or receive grants under the Cleaner Fuels Grants Scheme continue to receive the appropriate level of credits or grants.

Fuel duty indexation will provide a predictable and growing source of revenue that the Commonwealth will use to help deliver the government's new road infrastructure projects. In the long run, this will assist all businesses by reducing the costs of transporting goods around this great country.

This bill will make it easier for firms to restructure by extending the business restructure rollover provisions. In the usual course of growing a business, a firm may reach a point where it needs to restructure. However, in some cases, this could result in an income tax liability for the owners of the firm, even though no real change in ownership will take place.

This is where the rollovers are important, because they make it possible for businesses to defer the income tax consequences from a restructure.

These amendments will extend some of the existing rollover provisions to revenue assets and trading stock, and will also improve how the law operates. By removing income tax barriers to restructuring, the government is supporting Australian businesses-large and small-to grow and to succeed.

This bill will also make amendments to the managed investment trust withholding tax regime, which will increase certainty and reduce red tape for investors.

This bill amends the Income Tax Assessment Act 1997 so that foreign pension funds can access the managed investment trust withholding tax regime, as well as the associated lower rate of withholding tax on income from certain Australian investments.

Under the current law, the managed investment trust withholding tax regime does not apply to payments made to a trust without 'presently entitled' beneficiaries.

This means that a payment from an Australian managed investment trust to a foreign pension fund may not fall within the managed investment trust withholding tax regime. As a result, a payment from an Australian managed investment trust to a foreign pension fund may be taxed at the highest marginal tax rate.

The amendments in this bill mean that foreign pension funds will be treated as the final beneficiary of a fund payment and will have access to the concessional managed investment trust withholding tax.

Allowing foreign pension funds to access the managed investment trust withholding tax regime is both consistent with the original purpose of the regime and with industry practice.

By applying this measure from July 2008 (the date the regime commenced), industry will have certainty about the treatment of foreign superannuation funds that invest in Australian managed investment trusts.

It is all about certainty.

This bill will also amend the law to give effect to certain taxation arrangements for the United States force posture initiatives, first announced in 2011 by the then-Prime Minister and the President of the United States.

The United States force posture initiatives in Australia currently involve annual rotational United States Marine Corps deployments, and better aircraft cooperation activities in northern Australia. This represents a significant development in Australia's alliance and defence cooperation with the United States.

The Force Posture Agreement, which was signed on 12 August 2014, provides a legal, policy and financial framework to govern United States force posture initiatives in Australia. It contains important protections and assurances for both countries.

For example, it provides an exemption from Australian tax for Australian source income derived by United States contractors in connection with the initiatives in Australia. A legislative amendment to the tax law is required to give effect to this aspect of the agreement.

The legislative amendment introduced by this bill will apply only to United States contractors performing duties directly connected with the force posture initiatives in Australia, and not to United States contractors in Australia performing other unrelated duties for the United States government. The exemption from Australian tax will only apply if the relevant income is taxable in the United States.

The government remains strongly committed to ensuring that Australian workers and service providers are able to maximise the potential benefits of the United States force posture initiatives in Australia.

This commitment is embodied in the Force Posture Agreement, which obligates United States forces in Australia in connection with the force posture initiatives to strive to use Australian suppliers of goods, products, and services, including Australian workers and Australian commercial enterprises, to the greatest extent practicable, in accordance with United States laws and regulations.

As a result of these United States force posture initiatives, small businesses are likely to benefit from the increased demand for goods and services from the presence of United States personnel on rotational deployment in northern Australia.

The government is also getting on with calmly and methodically implementing the budget.

The government has decided to give practical effect to the fuel excise indexation budget measure by way of tariff proposals to be validated by parliament within 12 months.

The government announced as part of the 2014-15 budget that it would reintroduce the indexation of fuel duty excise.

Funding constraints at all levels of government have become a significant impediment to the provision of the infrastructure that Australia needs to bolster the productive capacity of the economy and prosperity for the 21st century.

To provide a secure funding source for road infrastructure, the government is committed to reintroducing the biannual indexation of fuel excise to the consumer price index.

To give effect to this commitment, earlier today the government tabled fuel excise and customs tariff proposals.

In difficult budget circumstances, this is the responsible way to immediately start building the productivity-boosting roads Australia needs.

This bill will make important amendments so that when a tariff proposal increases the rate of fuel duty being collected, businesses who claim fuel tax credits or grants under the Cleaner Fuels Grants Scheme continue to receive the appropriate credit or grant.

These amendments will apply to the tariff proposals tabled earlier today and any future fuel duty tariff proposal.

The amendments to fuel tax credits will continue to ensure that fuel duty is a tax on final consumption of fuel rather than a tax on business inputs.

For those businesses using fuel in off-road operations or operating a vehicle with a gross vehicle mass in excess of 4.5 tonnes, indexation of fuel duty will not increase their business costs. This is because these businesses are able to receive fuel tax credits to offset the fuel duty paid.

This removes the incidence of fuel duty for these business activities and avoids imposing additional costs on business.

If passed quickly, these amendments will ensure businesses will be able to receive fuel tax credits equal to the rate of fuel tax duty specified in the tariff proposal straight away. This will save businesses from having to claim extra fuel tax credits at a later date and avoid any negative cash flow consequences that result from the use of tariff proposals.

The bill will also make similar amendments to the operation of the Cleaner Fuels Grant Scheme.

Full details of each of these measures are contained in the explanatory memorandum.

The measures in this bill are part of the government's plan to secure Australia's future. The government is committed to building a future that is just and prosperous, which means creating the right environment in which Australian businesses can grow and flourish.

The measures in this bill are part of the government's commitment to help investors, small business and corporate Australia get on with their jobs and create opportunities so that all Australians can benefit.

Debate adjourned.