Second Reading
Mr MILES (Braddon--Parliamentary Secretary (Cabinet) to the Prime Minister) (4.59 p.m.)--I move:That the bill be now read a second time.
This bill will amend the taxation laws relating to provisional tax, share buybacks and gifts. The share buyback and gift measures were introduced into the Parliament late last year but were not debated.
The bill will give effect to the coalition's election commitment to reduce the provisional tax uplift factor for the 1996-97 income year to six per cent. Under Labor the uplift factor was set at eight per cent for the previous three years income. This rate exceeded growth in income subject to provisional tax in these years--more than double the rate of actual income growth in one of these years. It was merely a tax grab and a way to bring forward revenue collections. It placed a heavy cashflow burden on small business and self-funded retirees.
The amendment is an important example of the coalition delivering on its election promises. The government is committed to the small business sector and self-funded retirees, both of whom will benefit from this measure.
The bill will give effect to the 1995-96 budget announcement that the full buyback price of a share in an off-market share buyback is to be treated as consideration for ordinary income and capital gain purposes. Relief from double taxation is provided by reducing the amount of the ordinary income gain or capital gain by the amount of the dividend included in assessable income or paid out of profits. If the dividend is rebatable, it will not create or increase a capital loss or allowable deduction. A market value rule is also to apply to off-market share buybacks. Any excess over the market value of a share--that is, a dividend--will not be frankable.
These amendments will apply to share buybacks that take place after 7.30 p.m. AEST on 9 May 1995, unless they occur under certain transitional arrangements. The amendments have the potential to prevent a future loss to the revenue.
The bill will amend the gift provisions of the income tax law to allow deductions for gifts of $2 or more to the Polly Farmer Foundation, the Australian Games Uniform Company Ltd and the Cobram and District War Memorial Incorporated Fund. The bill also extends the time for tax deductibility of donations to the Shrine of Remembrance Restoration and Development Trust and the Sandakan Memorials Trust Fund.
I commend the bill to the House, and I present the Explanatory Memorandum.
Debate (on motion by Mr Crean) adjourned.