Tuesday, 28 May 2013

Speech in Parliament - Tax and Superannuation Laws Amendment (2013 Measures No. 2) Bill 2013 - 28 May 2013

Mr TONY SMITH (Casey) (15:35): I rise to speak, on behalf of the shadow Treasurer, on the Tax and Superannuation Laws Amendment (2013 Measures No. 2) Bill 2013. This tax law amendment bill has eight schedules. Some of those schedules the coalition supports. Some of those schedules we will not be opposing. As a consequence, I say at the outset that the coalition will not be opposing the passage of this tax law amendment bill. On behalf of the shadow Treasurer, I will run through the relevant schedules, six of which relate to tax and two of which relate to superannuation.

Schedule 1 deals with the definition of 'documentary' for film tax offset purposes. The schedule amends the Income Tax Assessment Act 1997 to define 'documentary' in accordance with the Australian Communications and Media Authority guidelines and to restore its intended meaning. 'Documentary' in tax law, for film tax offset purposes, becomes 'a creative treatment of actuality that is not an infotainment or lifestyle program or a magazine program'. As the explanatory memorandum and the detail of the bill make clear, the schedule also clarifies that the exclusion of light entertainment programs from film tax offset eligibility does extend to game shows. This is done by adding game shows to the list of light entertainment programs explicitly excluded from film tax offset eligibility.

The offset is designed to encourage Australian investment in film production. These amendments are a response to litigation—the decision in the Lush House case—where the taxpayer successfully argued that their infotainment-like production Lush House, a six-part television series, qualified as a documentary for film tax offset eligibility purposes. As this judicial interpretation was wider than the intention of the original policy, amendments were proposed to make the legislative boundaries clearer around documentary and game shows and restore the original intent and the integrity of the offset. This proposal was announced in the budget of 8 May 2012. The amended definition applies from 1 July last year. The coalition considers these amendments—primarily a response to the decision in that case that I mentioned—to be sensible integrity measures that better target eligibility for, and access to, the key film industry tax concession.

Schedule 2 of the bill deals with ex gratia payments for natural disasters and amends the Income Tax Assessment Act 1997 to exempt from income tax any ex gratia disaster income recovery subsidy that was received by individuals who lost income, whether as an employee, small business person or farmer, as a direct result of the floods that occurred in Queensland from 21 January this year. It also exempts from income tax the ex gratia payment for the eligible New Zealand special category visa holders, equivalent to the Australian Government Disaster Recovery Payment, made in relation to the natural disasters occurring across Australia in the financial years of 2011-12 and 2012-13. These exemptions apply to payments relating to disasters occurring in those financial years, and the coalition supports these amendments in schedule 2.

Schedule 3 deals with the GST instalment system and amends the goods and services tax law to enable entities that are paying their GST by instalments and subsequently moving to a net refund position to continue to pay their GST by instalments, albeit a zero-instalment amount if they choose to. The purpose of this is to address an issue in the current law which leads to otherwise eligible entities being excluded from the GST instalment system, when they move to a net refund position, and therefore lose the compliance-cost advantages of submitting their BAS, their business activity statement, annually. It otherwise has to be submitted quarterly. This amendment will allow entities that use the instalment option and move into a net refund position to choose to continue to pay their GST instalments and therefore retain the compliance-cost advantages they see in annual reporting.

Somewhat ironically, the choice to remain in the GST instalment system provides the entity with compliance-cost advantages with not having to complete a quarterly BAS. The amendments result in those entities that decide to remain in that system receiving their refund after they have submitted their annual return. The option for GST instalment payers to elect, where it suits them, for a lower BAS compliance cost is available from 1 July, after royal assent. It gives those businesses the choice in that system.

It will benefit only a small proportion of businesses and not-for-profit organisations. It will reduce compliance costs for electing entities, in an ongoing sense. There will be some transitional costs by those that elect but presumably they will choose the overall benefits to outweigh those costs. The coalition supports these amendments, albeit quite technically and narrowly applicable ones, but they have our support. We do note that this was announced two budgets ago, on 10 May 2011, and we do wonder why it has taken the government two years to deal with this.

Schedule 4 is a regular schedule that appears in these tax law amendment bills. It amends the Income Tax Act of 1997 to again update the list of deductible gift recipients by adding six entities: the Conversation Trust, the National Congress of Australia's First Peoples Limited, the National Boer War Memorial Association Incorporated, the Anzac Centenary Public Fund, the Australian Peacekeeping Memorial Project Incorporated and Philanthropy Australia. We are told from the explanatory memorandum that the financial impact of these listings will be just under $10 million over the forward estimates—in fact, $8.6 million I think is the figure.

Schedule 5 is one of the schedules I highlighted at the start that deals with superannuation and it amends the Superannuation Industry (Supervision) Act 1993, known colloquially as the SIS Act, to expand the duties of trustees of particular superannuation funds to establish and implement procedures to consolidate accounts where a member of a fund has multiple accounts within a fund and consolidation is in the member's best interests. This measure will facilitate a reduction in the number of unnecessary accounts, boost superannuation balances by ensuring members avoid paying unnecessary fees and insurance premiums on multiple accounts and, at the same time, reduce the number of lost accounts.

This proposal was announced in September 2011 by the minister. It is a measure that has the coalition's support. It will lead to greater efficiencies and less red tape, in an ongoing sense. I should point out that the industry raised several concerns in the hearing of the Joint Committee on Corporations and Financial Services, inquiring into unclaimed money late last year and its likely interaction with the consolidation process. In particular, there were comments that the requirements of the unclaimed money bill were likely to lead to increased double-handling and complexity in this accounts autoconsolidation process; that the unclaimed money time lines could have been better chosen—in other words, delayed to better dovetail with this consolidation process, instead of the haphazardness and haste of the bill, just to help the government meet an unlikely cash surplus target for 2012-13 which it abandoned only two months later; and that all parts of the consolidation process should be stipulated before systems are designed and automated, otherwise the costs and risks of getting things wrong will mount. Those are some of the concerns that were raised. With better coordination, consultation and policy processes, systems to automatically consolidate accounts can be designed once and holistically, with double-handling costs and risks kept to a minimum.

I turn to the last three schedules. Schedule 6 is the other schedule dealing with superannuation, and with it the Gillard government is again seeking to quietly reduce the Howard government superannuation co-contribution scheme for low-income workers. It will halve the government's maximum co-contribution under the scheme from the current $1,000 down to $500. Under the Howard government, the government super co-contribution for low-income earners was up to $1,500. It also, again, reduces the government's co-contribution matching rate by half, from the current dollar-for-dollar rate down to 50c for every dollar put in by the low-income earner. It was originally $1.50 for every dollar. It also halves the income band across which the co-contribution phases out or tapers. Instead of the higher-income threshold being set at $30,000 above the lower-income threshold, as it is currently, it will be reduced to $15,000. Lastly, indexation of the lower-income threshold, which has been frozen for two years, since the 2010-11 budget, will be frozen for another income year, 2012-13.

These amendments will commence from the date of royal assent and apply from the 2012-13 year. The financial impact of these amendments is around $330 million a year on assessment, once matured. The government asserts that the compliance cost impact of these amendments will be minimal. Once again, it is necessary to point out the hypocrisy of the government on superannuation. This is yet another example of the government not living up to their word to not change superannuation, 'not one jot, not one tittle', and it is another illustration of the tendency of those opposite to run a class war in the lead-up to elections and then cut benefits for low- and middle-income earners when they need to plug their budget black holes. After this sixth change to the government's super co-contribution benefits for low-income earners, the current government, by the time they are finished, will have cut those benefits by more than $3.3 billion.

Schedule 7 rationalises and consolidates the dependency tax offsets. It amends the Income Tax Assessment Act 1936 to create new consolidated dependency tax offsets for taxpayers maintaining certain classes of dependants who are genuinely unable to work; it amends the Income Tax Assessment Act 1997 to preserve the existing dependency offsets for taxpayers eligible for the zone, overseas forces and overseas civilian tax offsets; and it amends the 1936 act to reflect the impact of the consolidation of the dependency tax offsets on the net medical expenses tax offset.

To provide a bit of history and context, the rationalisation of numerous dependency tax offsets did have some merit, but I cannot help thinking this government is only doing so to feed its massive spending addiction. As described in the Henry review of 2010, the dependent spouse tax offset in its original form had become somewhat outdated. It was often holding back participation in the workforce. The Gillard government's announcement in 2011-12 restricted that, of course. All in all, given the state of the budget, the coalition will not be opposing this measure—as I said, because of the state of the budget.

The last schedule deals with the taxation of financial arrangements, known as the TOFA regime, and, again, this is another regular entrant in the tax law amendment bills that come before this chamber. Like a few before it, it seeks to clarify and refine the operation of certain aspects of the regime. They are largely of a technical and housekeeping nature. They flow from ongoing monitoring of the implementation of the TOFA reforms and they have been developed in consultation with the industry. The government argues these amendments refine and clarify the operation and provide lower compliance costs and additional certainty for affected taxpayers. These proposals were announced some time back, in June 2010, and apply from the commencement of that regime.

The coalition supports these amendments to the schedule which appear generally beneficial to taxpayers with compliance costs unlikely to be significant at all. So the coalition will not be opposing the passage of this legislation. As I have noted, the government's change to the super co-contributions will be the sixth change and that will mean the cuts to benefits of those low-income earners will be more than $3.3 billion. As I noted with the other schedule, given the parlous state of the budget handed down a fortnight ago, where a $1 billion surplus forecast only six months ago for this financial year is now a $19 billion deficit, the coalition will in this instance elect not to oppose the passage of this bill through the House of Representatives.

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