Second Reading Speech
Ms O'Dwyer (Minister for Small Business and Assistant Treasurer)I move:
That this bill be now read a second time.
This bill amends the income tax laws to implement improvements to Australia's tax laws.
This bill will provide a full capital gains tax (CGT) exemption on assets held by Norfolk Island residents, to assist the Norfolk Island community in transitioning into Australia's mainstream taxation system.
On 14 May 2015, the parliament passed the Norfolk Island Legislation Amendment Act 2015 ending decades of uncertainty for the residents of Norfolk Island. The Australian government will integrate Norfolk Island with mainland social security systems, including access to Medicare and the Pharmaceutical Benefits Scheme. Immigration, customs and quarantine services will also be extended from 1 July 2016.
Norfolk Island residents will begin to fully apply the mainstream taxation system to all of their income for the first time and gain access to a broad range of Australian government programs to help improve vital infrastructure and other community assets.
Following further consultation with the community, it was found that a historical lack of formal documentation for asset sales, as well as cultural practices relating to inheritance assets, are likely to inhibit the legislated application of CGT in some instances. To address these concerns, this bill will provide a full CGT exemption on assets held by Norfolk Island residents prior to 24 October 2015, the day after the exemption was announced.
This exemption will apply to those Norfolk Island assets that were exempt from CGT before Norfolk Island was fully brought within Australia's mainstream tax system. Similar to the treatment of assets when CGT was first introduced in Australia in 1985, these assets will continue to be exempt until a CGT event happens (for example, the asset is sold).
The CGT exemption demonstrates the government's commitment to actively and regularly engage with the Norfolk Island community to ensure all residents have significant input into their future governance, including through the Norfolk Island Advisory Council.
This exemption is part of a broader reform package which addresses longstanding issues facing Norfolk Island, which were explored in a royal commission, numerous reports, 12 parliamentary inquiries and submissions over a 35-year period.
The Australian government is committed to delivering the broad reform package with a focus on economic growth and prosperity for Norfolk Island.
Unlike any other community of its size, Norfolk Island has been required to deliver its own local, state and federal services since 1979. Asking a community of around 1,800 people to deliver federal functions (such as immigration, quarantine and customs, social services and taxation), and state and local government services, is neither appropriate nor sustainable.
The reality is much infrastructure on Norfolk Island is in poor condition, the health system will be improved by better delivery of health and aged-care services and many laws will be modernised to reflect those in other Australian jurisdictions.
This is why the government is putting in place the necessary structural reforms to improve service delivery and boost economic growth, whilst preserving the island's culture and local representation through concessions such as the CGT exemption in this bill.
We look forward to continuing to work with the Norfolk Island community to progress these important reforms.
Full details of the measure are contained in the explanatory memorandum. I commend the bill to the House.