TAXATION LAWS AMENDMENT BILL (NO. 8) 2002: Second Reading
Mr CADMAN (Mitchell) (9.21 a.m.) —The Taxation Laws Amendment Bill (No. 8) 2003 is a composite bill. It makes income tax deductions available for gifts to a range of organisations. Some of the organisations are new, some have had their names changed and some have extensions to existing deductibility.
Amongst those extensions I notice an extension to tax deductibility for the restoration and rebuilding fund for St Patrick's Cathedral, Parramatta. I am just delighted that this is now in legislation. The diocese of Parramatta and the fundraising committee at St Patrick's have been aware that this was going to be transmuted into legislation and here it is today.
Mr Speaker, you will remember that there was a horrific fire in Parramatta. It destroyed a historical building that was an icon for the whole region and for the Catholic Church. But it goes beyond a simple denominational allegiance to that building. The building is an icon and a symbol of the Christian faith in Western Sydney. I know that everybody in the Parramatta district will be delighted that deductibility for this fund has been extended until 24 February 2004. Construction work on the restoration of the building is almost complete and donors have been very generous. I met with the Bishop of Parramatta, Kevin Manning, recently. We discussed briefly the restoration program and I know that he is delighted with the way it has gone. I think that everybody is looking forward to the opening of the building. I think it was a great decision by the government to extend deductibility for that program, and a very sensible one.
Part of this legislation concerns employee share schemes and contains changes that will ensure that capital gains tax or capital losses that arise while the shares or share rights are held in trust are recognised. This brings into line an important factor and ensures that, if there is a capital gains tax due to the sale of shares or a change in share value, employees are taxed in a more reasonable way. This came into effect on 27 February 2001, but taxpayers can choose for the amendments to apply to shares or rights acquired before and disposed of after that date.
Encouraging people to take up shares in their own places of employment is something that I strongly endorse and it is strongly endorsed by the government. It will allow taxpayers to choose an earlier application date for the primary amendments. It will reduce the cost of compliance, but it will not be a large cost to revenue. The financial cost is unquantifiable because there are not a lot of employee share schemes around. The capital gains tax application to those employee share schemes would not be large, in any case.
The franking of distributions by cooperatives is a third feature of this legislation. Mr Speaker, I know that you and your family would be well aware of the significance of cooperatives and the importance they have had, mainly to primary and rural industries of Australia. Farmers and producers of all types can band together, build packing houses, factories and processing units in a way that allows them to work together, not as a commercial operation in the sense of an incorporated body but as a cooperative, the rules of which are a little different to those of an incorporated body or a company limited. This franking of distributions by cooperatives will allow the cooperatives to have the option of franking the distribution to shareholders or, alternatively, claiming the existing deduction for distributions of assessable income to shareholders. The cost to revenue is not large—it is about $5 million—and I think it is a very worthy and sensible proposal.
Cooperatives are an important part of the culture and success of our rural industries. Some of the great names of Australian industry started as cooperatives or are still operating as cooperatives. I know that, whether it is in fruit growing areas, the dairy industries or wider industries, the service that cooperative organisations have given to primary producers is most significant. This will bring those shareholders and owners of cooperatives the better opportunity of franking distributions or claiming the immediate deductions.
The fourth measure in the legislation deals with the reasonable benefit limits. This just rectifies an anomaly. I know that the accounting industry has long been waiting for these amendments and for the government's view on how this would happen. An anomaly in the RBL provisions is rectified so that a revisionary pension benefit paid on the death of the original recipient will receive the same proportion of concessional taxation rebate that applied to the original pension. This is commonsense—it was obviously an oversight in the original legislation. It is hard to quantify the results, but there will be negligible compliance costs. This is just a rectification of a problem.
The petroleum resource rent tax is a matter that attracted the attention of the previous speaker from the Australian Labor Party. This provision allows expenses associated with the closing down of a facility which has ceased to be used as a PRRT petroleum project but which continues to be used under an infrastructure licence to be deductible under the project's receipts. This provision will give additional opportunity for investment in the development of petroleum. The proposal is a sensible one and seeks to husband and extend the availability of Australian petroleum and oil industry resources. [start page 19083]
The petroleum resource rent tax was introduced by the previous government. This change will allow the explorers and exploiters to extend and to be more effective in the use of our scarce petroleum product. In relation to this, I note in passing some of the commitments of this government to the development of ethanol as an alternative fuel source. Something that was announced in 1998 as part of response to the Kyoto meeting was the development of a broader application to alternative fuels and the process that would allow the use of products—mainly natural products—in the production of ethanol. CSR uses molasses, Manildra uses starch and Rocky Point and Bundaberg use molasses. So there is a number of various sources.
In terms of the relationship with excise and the petroleum tax, the composite approach that we are seeking to establish here is a very sensible and well-balanced approach. I question some of the economics, but the measure for petroleum in the bill today is another addition of a whole range of weapons and strategies being used by the current government to extend the capacity for fuels to be used by vehicles using petrol or diesel. I want to speak about the changes to the taxes in the legislation. I read from the explanatory memorandum, which says:
Currently there are no specific petroleum projects that would be affected by these amendments and it is difficult to predict when any such changes will occur.
However, the likely revenue impact if such changes were to occur is a reduction in revenue of between $0.28 million to $56 million per field. The cost to revenue depends on the size of the field.
There is also a partial use proposal. The concessions in tax will allow projects and activities to change without a penalty in taxation or without being sidelined from the main driving force of petroleum development or enhancement. Therefore, the ethanol strategy complements these resources as something which seeks to extend Australia's self-reliance but which at the same time draws on our commitment to a greener environment and to dealing with emission gases. I think overall it is a very sensible approach.
The final part of this legislation deals, in summary, with the regulation impact statement—that is a minor change—together with some further technical corrections. Always look at technical corrections because they can hide a multitude of really dangerous provisions. I am very careful to look at what are termed `technical corrections' by the Treasury or the tax office or by accountants, for that matter. I think it would pay every member of parliament at times to give more attention to technical corrections than to the main body of changes to legislation, because many have found—as I know you, Mr Deputy Speaker Jenkins, have—that technical corrections in any legislation can send tremors from one end of the country to the other. With those remarks, I commend the bill to the House.
Author: Alan Cadman MP
Source: House Hansard - 10th September 2003
Release Date: 10 Sep 2003