House of Representatives

Tax Laws Amendment (2010 Measures No. 5) Bill 2010

Second Reading Speech

Mr Shorten (Assistant Treasurer and Minister for Financial Services and Superannuation)

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 eligibility criteria for accessing the film tax offsets by expanding access to film tax offsets in two ways.

Firstly, the amendments reduce the minimum qualifying expenditure threshold for the post, digital and visual effects offset from $5 million to $500,000.

Secondly, the amendments remove the requirement for films with qualifying expenditure of between $15 million and $50 million to have at least 70 per cent of the film's total production expenditure as qualifying Australian production expenditure in order to qualify for the location offset.

These changes, which will apply from 1 July 2010, are estimated to increase expenditure on the film tax offsets by $6.9 million over the forward estimates period.

These changes are aimed at attracting offshore productions to Australia and expanding opportunities for Australian post, digital and visual effects providers to bid for international work.

The amendments are also expected to increase employment opportunities and to assist in building capacity and expertise in the local film industry, which will in turn provide benefits for domestic productions.

The change to the location offset in particular will also reduce compliance costs for affected taxpayers.

Schedule 2 amends division 247 of the Income Tax Assessment Act 1997 to adjust the benchmark interest rate used in the taxation of capital protected borrowings provisions to the Reserve Bank of Australia's indicator lending rate for standard variable housing loans plus 100 basis points for capital protected borrowings entered into, amended or extended after 7.30 pm (AEST) on 13 May 2008. These changes to the benchmark interest rate were first announced on 13 May 2008 and revised on 11 May 2010.

This schedule also amends division 247 of the Income Tax (Transitional Provisions) Act 1997 to provide for transitional arrangements for capital protected borrowings entered into or before 7.30 pm (AEST) 13 May 2008, to 30 June 2013. This allows capital protected borrowings entered into on or before 13 May 2008 to apply the existing benchmark interest rate until 30 June 2013 or the life of the product, whichever is earlier.

These amendments advance the government's commitment to ensuring the tax system is as fair and efficient as possible. The new benchmark interest rate provides a more appropriate basis for apportioning the expense in capital protected borrowings between interest on a borrowing without capital protection and the cost of capital protection, while taking into account industry concerns over the credit risk borne by lenders for the cost of capital protection that is paid on a deferred basis.

The amendments are expected to produce $170 million in net savings over the forward estimates period. These changes are another demonstration of the government's commitment to finding savings in the budget to help tackle inflationary pressures.

Schedule 3 extends the main residence CGT exemption to cover a CGT event that is a compulsory acquisition or other involuntary realisation of part of a main residence. The extended exemption will apply where part of a main residence, the part being some or all of the dwelling's adjacent land or structure, is compulsorily acquired without the dwelling itself also being compulsorily acquired. This will mean that taxpayers will not be worse off where part of their adjacent land or structure is compulsorily acquired than if the compulsory acquisition had not occurred.

Schedule 4 allows complying superannuation funds and retirement savings account providers to deduct the cost of providing terminal medical condition benefits to superannuation fund members and retirement savings account holders.

Currently, complying superannuation funds and retirement savings account providers are able to claim deductions for insurance policies or some of the cost of providing benefits relating to the death, permanent incapacity and temporary incapacity conditions of release, but not those relating to the terminal medical condition's condition of release. This condition of release was introduced on 16 February 2008, when this measure will commence.

This amendment will address an anomaly in the law and provide certainty to industry. It will ensure consistent tax deductibility for superannuation funds and retirement savings account providers for the cost of providing benefits to members in the event that a member or retirement savings account holder retires due to ill health or death benefits are provided.

Finally, schedule 4 also amends certain sections of the Income Tax Assessment Act 1997 to reflect the drafting convention that the term 'individual' should be used when referring to a human being.

Schedule 5 amends the 1999 GST Act to allow non-profit subentities to access the GST concessions available to their parent entity.

These changes clarify the GST law to be consistent with the approach the Commissioner of Taxation has taken in interpreting the law to allow non-profit subentities to access these concessions.

As part of this amendment non-profit subentities will be allowed to access the higher registration turnover threshold of $150,000 for non-profit bodies.

This measure will apply from the start of the first tax period after royal assent.

Schedule 6 amends the Taxation Administration Act 1953 to provide that it will not be mandatory for the Commissioner of Taxation to apply a payment, credit or running balance account surplus against a tax debt that is a business activity statement amount, unless the amount is due and payable. This amendment applies on and from 1 July 2011.

The amendment reduces compliance costs and unnecessary complexity for taxpayers.

Schedule 7 provides for an expansion of the education tax refund so that school uniforms are included as eligible expenses. Extending the education tax refund will provide valuable assistance to Australian families and help ease their cost-of-living pressures.

The refund allows eligible families to claim 50 per cent of their eligible education expenses up to the maximum claimable amounts, which are indexed each year.

The refund will be available for school uniform expenses incurred from 1 July 2011, with the first refunds paid in the 2012-13 financial year.

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

Debate (on motion by Mr Laming) adjourned.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).