House of Representatives

Taxation Laws Amendment Bill (No. 8) 2003

Second Reading Speech

Mr Slipper (Parliamentary Secretary to the Minister for Finance and Administration)

I move:

That this bill be now read a second time.

The Taxation Laws Amendment Bill (No. 8) 2003 makes amendments to the income tax law and other laws to give effect to several taxation measures.

Schedule 1 to this bill amends the imputation rules in the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997 to ensure non-share dividends can be franked in the manner intended by parliament. The amendments will ensure that entities can take into account expected profits when calculating if sufficient profits are available to frank a non-share dividend.

The amendments in schedule 2 provide a number of enhancements to the consolidation regime which will further clarify the cost setting rules and ensure that the income tax law that applies to head companies of consolidated groups also applies to the head companies of multiple entry consolidated groups. In addition, this bill introduces rules to permit the transfer of any unapplied excess franking deficits tax offset from joining entities to the head company.

These amendments have retrospective effect to 1 July 2002, which is the date of commencement of the consolidation regime. The amendments are beneficial to taxpayers or correct unintended outcomes. The amendments to address unintended outcomes are consistent with the original policy intent for the consolidation regime and therefore have the same commencement date as the consolidation regime.

Schedule 3 will provide an income tax deduction for taxpayers entering into certain types of conservation covenants with government entities. This is in addition to the existing deduction for taxpayers entering into eligible conservation covenants with deductible gift recipients and prescribed private funds.

The amendment will provide land-holders with greater incentives to protect and manage their land for conservation purposes.

Schedule 4 to this bill amends the Fringe Benefits Tax Assessment Act 1986 to maintain alignment between the deemed depreciation rate used under the operating cost method for valuing a car fringe benefit and the rate used for depreciation purposes under the income tax provisions.

The amendments in schedule 5 amend the gift provisions of the Income Tax Assessment Act 1997 to remove the requirement to have a winding up clause as part of the endorsement provisions for statutory bodies that are established by the Commonwealth parliament in perpetuity.

Schedule 6 to this bill will make it easier for primary producers to determine if an entity is eligible to issue farm management deposits. The amendments also protect the tax status of certain pre 1 July 2003 deposits and transfers that were made in good faith with non-complying entities offering products described as farm management deposits.

Schedule 7 will amend the imputation rules in the Income Tax Assessment Act 1997 to allow companies to offset a franking deficit tax liability against any future income tax liabilities. There are rules for both ordinary companies and life companies. These amendments are a further component of the simplified imputation system that commenced on 1 July 2002.

The rules will generally operate in a similar manner to the former franking deficit tax offsetting rules in the Income Tax Assessment Act 1936. However, a change as previously announced by the government is the replacement of the franking additional tax with a simplified penalty for over-franking. This penalty will apply to reduce a company's franking deficit tax offset entitlement against future income tax liabilities by 30 per cent where there is over-franking.

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

I commend this bill to the House and present the explanatory memorandum.

Debate (on motion by Ms Macklin) adjourned.

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