House of Representatives

Tax and Superannuation Laws Amendment (2014 Measures No. 7) Bill 2014

Second Reading Speech

Mr Ciobo (Parliamentary Secretary to the Treasurer)

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 system. The amendments are part of the government's Economic Action Strategy, which is providing the right conditions to drive growth and create jobs by creating the right incentives for a more dynamic and competitive Australian economy.

We are restoring fiscal sustainability and confidence in our public finances.

We are promoting business confidence by creating the right environment to innovate, invest and thrive.

We are making sure that the frameworks and structures that underpin the Australian economy-the fundamentals-are right.

By doing this we will unleash our economic potential and build a strong and prosperous Australia.

These amendments encourage business to get on with business.

They improve the efficiency of government.

And they reduce uncertainty for both business and individuals in taxation and regulation.

Schedule 1 of this bill makes the superannuation tax laws fairer. Currently, individuals are taxed on any superannuation contributions in excess of their cap at the top marginal tax rate. This is punitive, especially as excess non-concessional contributions are made out of aftertax income, generally inadvertently and incurred by most individuals below the top marginal tax rate.

This bill will allow individuals the option of being taxed on the deemed earnings associated with their excess superannuation non-concessional contribution at their marginal tax rate.

This will ensure the treatment of excess concessional and non-concessional contributions is broadly consistent.

Prior to the last election, the government made a commitment to develop appropriate mechanisms to address all inadvertent breaches of the superannuation contribution caps where the error would result in a disproportionate penalty.

This measure delivers on that commitment.

It also addresses the recommendations of the Inspector-General of Taxation in his report of March 2014, Review into the Australian Taxation Office's compliance approach to individual taxpayers-superannuation excess contributions tax.

Schedule 2 of the bill transfers the Commonwealth Ombudsman's investigative and complaints handling functions relating to tax law matters to the Inspector-General of Taxation.

The Inspector-General of Taxation is an independent statutory office that reviews systemic tax administration issues and reports to government with recommendations for improving tax administration for the benefit of all taxpayers.

The changes were announced in the 2014-15 budget and will provide taxpayers with a single, specialised, scrutiny agency for handling both individual tax complaints and systemic tax reviews. The transfer will enable more efficient use of tax expertise and provide for an improved customer focus.

The amendments have also provided the opportunity to bring the inspector-general's systemic review powers into line with those of the Ombudsman. The inspector-general's powers will now mirror those of the Ombudsman.

Schedule 3 of the bill makes minor amendments to the taxation laws to ensure the proper functioning of the capital gains tax provisions in relation to life insurance policies.

The government is addressing the backlog of 92 tax and superannuation measures that had not been legislated by previous governments to reduce uncertainty for businesses and consumers.

By introducing this bill, the government is crossing another measure off that list.

The intention of this amendment is for compensation or damages received by a trustee and beneficiary, for example for a workplace injury, not to be subject to capital gains tax.

Further, trustees who hold life insurance policies, and superannuation fund trustees who hold life, injury and illness insurance policies for members and receive compensation or damages, from such policies, should not be subject to capital gains tax.

These changes will create a capital gains tax exemption for compensation or damages received by certain trustees for a wrong, injury or illness suffered by a beneficiary who subsequently receives a distribution attributable to that compensation or damages.

These amendments codify the ATO's existing administrative practice, giving taxpayers, business and superannuation funds certainty in how the law applies to these situations.

Schedule 4 provides greater certainty for superannuation fund mergers by clarifying that a tax integrity rule will not be triggered when superannuation benefits are rolled over from one superannuation fund to another as a result of a merger between those funds.

The measure will benefit superannuation funds intending to merge to achieve efficiencies and comply with regulatory requirements, and their individual members whose retirement savings will benefit as a result.

This measure will apply from 1 July 2015.

Schedule 5 of the bill amends the Taxation Administration Act 1953 to remove doubt about protected information sharing by the ATO with law enforcement agencies.

These amendments clarify the ATO's ability to share information with Commonwealth, state and territory law enforcement agencies seeking proceeds of crime orders.

The amendments also extend disclosure of protected information to include disclosure that assists in supporting or enforcing proceeds of crime orders.

Schedule 6 of this bill amends the taxation laws to provide for an Exploration Development Incentive.

This delivers on the government's 2013 election commitment.

The incentive encourages investment in small exploration companies undertaking greenfields exploration in Australia.

The resources sector remains an important source of growth in the Australian economy. In 2013-14 about 10 per cent of growth in GDP was driven by the mining industry. Similarly, employment in the mining industry has grown by 10 per cent on average over the past 10 years.

Not only is the sector important for Australia's economy overall, but a vibrant resources sector creates jobs and supports local businesses in regional communities across Australia.

The resources sector is dependent on the continuing discovery of quality resources, and it is small mineral exploration companies that undertake most of the exploration in greenfields areas.

However, Australia's junior explorers have been finding it increasingly difficult in recent years to raise the capital they need to continue to explore.

This was not helped by the actions of the previous Labor government, which burdened the resources sector with new taxes and extra regulation. As a result, exploration for new mineral discoveries has reached a 10 year low.

The Exploration Development Incentive helps restore confidence in the junior exploration sector and allows junior exploration companies to get on with the job of finding tomorrow's mines.

The incentive provides Australian resident shareholders of junior explorers with a refundable tax offset for the exploration undertaken by these companies where the company gives up a portion of its losses.

This will assist junior explorers in raising capital from private sector investors.

The government conducted public consultation on the policy design of the Exploration Development Incentive from March to April and public consultation on draft legislation and explanatory materials in October.

The cost of the incentive is capped at $100 million over three years.

Schedule 7 of this bill makes a number of amendments across the tax law to provide certainty for taxpayers. These amendments make sure the law operates as intended, by correcting technical or drafting defects, removing anomalies, and addressing unintended outcomes.

The amendments demonstrate the government's commitment to the care and maintenance of the tax law. By clarifying the law, addressing unintended outcomes and repealing unnecessary provisions, these amendments further the government's deregulation agenda.

A number of the amendments relate to issues lodged on the Tax Issues Entry System, a platform for members of the community to raise matters regarding the care and maintenance of the Australian government's tax and superannuation systems.

Among other things, these amendments will achieve the intended policy outcome for the self-actuating system for indirect taxes.

They remove redundant provisions concerning the calculation of taxpayers' net amounts of GST for a period.

They clarify that an entitlement to an input tax credit ceases when the Commissioner of Taxation is no longer able to amend relevant GST assessments.

And they harmonise the time limits for objections for private indirect tax rulings and those for objecting to other kinds of tax rulings.

The schedule also makes amendments to allow corporate limited partnerships to effectively return capital to partners, without anomalous tax outcomes.

This bill makes sure the amendments do not operate to determine whether a payment made by a corporate limited partnership is taken to be a dividend by the income tax law.

Further amendments will assure taxpayers they will not be inappropriately denied automatic rollover relief in balancing adjustments for certain depreciating assets.

The schedule also updates section references and cross-references in the tax law, and repeals redundant provisions.

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

I commend the bill to the House.

Debate adjourned.

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