TAX LAWS AMENDMENT (2004 MEASURES NO. 2) BILL 2004Cognate bill:TAX LAWS AMENDMENT (2004 MEASURES NO. 3) BILL 2004: Second Reading
Mr CADMAN (Mitchell) (12.47 p.m.) —The Tax Laws Amendment (2004 Measures No. 2) Bill 2004 and the Tax Laws Amendment (2004 Measures No. 3) Bill 2004 contain a series of amendments to the tax act.
It is no wonder, as one can see when one looks through the amendments, that the country is in such a good state. The budget revealed that the fiscal outlook for Australia remains really positive, with a forecast of an underlying cash surplus of $2.4 billion. Across the forward estimates the government will maintain the budget in surplus, after providing $36.7 billion in new assistance to families, tax cuts and increased incentives to boost retirement savings. All of this is due to good management, and that is what this legislation is about—care in the tax act to collect what is due and not to go beyond that. There are a range of measures in the legislation. Some of them draw in tax where holes have been established and some of them give concessions where concessions are due.
I noted the comments of the previous Labor speakers. I have looked back over the years to assess where the Australian Labor Party and the current government, my side of politics, lie in regard to taxes. I found that the Australian Labor Party has introduced 27 new taxes and the coalition has introduced six; the ALP has increased taxes 19 times and coalition governments have done so twice only over a period of 50 years; the Australian Labor Party has made no major changes abolishing taxes and coalition governments have made 12; the ALP has made major tax reductions twice and coalition governments have done so 25 times; and Labor governments have made no financial relations changes to the states—not one consideration of the states of Australia—and the coalition has made three. I could run through my findings in detail, but they touch on the introduction of things like capital gains tax, the resource rent tax, the fringe benefits tax and HECS. All of these have been introduced by the ALP, whereas on this side of the House we have sought to reduce taxation and make it more reasonable for the people of Australia.
The legislation before the House today relates to the consolidation of insurance companies, allowing the taxing of a group of companies as an entity instead of having a lot of separate arrangements; venture capital partnerships, the investment in innovative and productive future prospects for the nation; sensible changes in fringe benefits tax on housing benefits; capital gains tax event K6 and demergers; deductions for United Medical Protection Ltd support payments; goods and services tax amendments relating to compulsory third party schemes; public ambulance services; taxation of overseas super payments; a simplified imputation system; sensible technical corrections, which are always there, for foreign tax provisions, and which are not as nebulous as they sound; and amendments to the non-alienation of personal services income provisions.
I think the life insurance company provisions would attract the attention and support of all Australians. The current law as it applies to insurance companies means that tax losses of the complying superannuation class can only be applied to reduce future complying superannuation class income. Tax losses for the ordinary class must be applied to reduce both future ordinary class income and future complying superannuation class income. The new laws mean that tax losses for the complying superannuation class can be applied only to reduce future complying superannuation class income and tax losses of the ordinary class can be applied only to reduce future ordinary income. [start page 29661]
There is also a provision here which I know that you would agree with, Mr Deputy Speaker Barresi—that is, the capacity for reinsurance to be done onshore or offshore. That means that for some measures such as accident insurance and small measures, insurance companies can reinsure offshore—that is, take it out of the country for reinsurance—but our life funds are preserved onshore. I think that is a very welcome change to the legislation. I think that gives assurance to those holders of life policies that the process remains in the country. I think it is a very sensible proposal. It should remain in the country so that any provisions to change the way in which insurance is held cannot be affected by international events; it is totally reliant on Australian circumstances. So that is a sensible provision in the new legislation.
Our proposals today are laid out very clearly in the amendments and in the explanatory memorandum for each bill. The explanatory memorandum is a useful document for people seeking to understand precisely what is going on in the tax act. It makes easier reading than the legislation itself, although it is still full of diagrams and changes.
Another provision of particular interest to me—and an issue that has caused concern, I know, to the accounting profession and to large companies—deals with the consolidation process. Companies have been looking for the greater flexibility that is brought about by this legislation for some time. The confusion of the original presentation was put to one side. It was not so much confusion as misunderstanding, but now, with greater clarity and flexibility, I know that companies and their advisers will be better able to deal with consolidation and particularly the capital gains tax aspect of consolidation.
The venture capital partnerships provision is something that we have sought for some time, because Australia needs to be able to raise venture capital and invest in innovative items that are going to provide impetus to change in Australia. Unless we are on the cutting edge of technology, we are not going to be able to stay competitive. So the partnership arrangements for income tax purposes are dealt with in this legislation. The new law will be that a limited partnership that is incorporated as a separate legal entity and formed solely for the purpose of becoming a venture capital limited partnership, an Australian venture capital fund or funds, or a future capital management partnership, and to carry on activities carried out by such bodies, is a partnership under the income tax law. That just gives concessions the capacity to be considered appropriately, in full legal format. It is the sort of thing that we need to encourage, because often these partnerships are between a funds provider and the person or persons who have innovative ideas but lack resources. For all of these people, the partnership is a very useful arrangement.
Fringe benefits tax on housing for remote areas is dealt with in this legislation. This is something that has been of concern to many members on this side of the House representing regional and rural seats. Deductions for United Medical Protection Ltd are a flow-on from the failure of UMP. The legislation allows a deduction for those former members of UMP who may now no longer be practising medicine and who form part of the so-called `tail of payments', where a practitioner may be eligible for a claim up to 25 years after the operation or procedure was finished. In these instances, they need to be able to claim protection from their insurer, and United Medical Protection Ltd is the preferred insurer—for New South Wales, anyway. So doctors can continue to make their contribution to this insurance to claim the protection, and it is tax-deductible.
That, in brief, is a summary of the legislation, and I am pleased that the House is dealing with it today. In all of these issues, we have to be positive, as far as the tax office is concerned, and pay the tax that is due, but not pay too much. I leave the debate on this legislation by reminding the House that it is the promise of the Australian Labor Party that they will spend more, that they will give bigger tax cuts, that they will have larger surpluses, that they will reduce the net debt and that they will lower taxation and spending as a share of GDP—an impossible target, taken together. I remind the House that, when one looks back over the history of taxation, the imposers of new taxation are the Australian Labor Party. Those who will remove taxation are the parties from this side of the House. Those who to seek to give relief and decent tax cuts come from the coalition parties. Those who seek to impose new taxes, to invent new taxes and to tax areas promised not to be taxed are the Australian Labor Party. With those remarks, I conclude my comments and commend the legislation to the House.
Author: Hon Alan Cadman MP
Source: House Hansard - 3rd June 2004
Release Date: 22 Jun 2004