House of Representatives

Second Reading Speech

Senator ABETZ (Parliamentary Secretary to the Minister for Defence)

I move:

That these bills be now read a second time.

I seek leave to have the second reading speeches incorporated in Hansard.

Leave granted.

The speeches read as follows-

SUPERANNUATION LEGISLATION AMENDMENT BILL 1998

This bill amends the superannuation legislation to strengthen the efficiency and effectiveness of the superannuation supervisory framework.

Superannuation plays a significant role in the Government's commitment to increase national saving and in the Government's retirement income policy. It is therefore vital that an effective regulatory regime is in place and maintained to enhance the security of members' benefits and to ensure that superannuation entities operate for genuine retirement purposes.

The Superannuation Industry (Supervision) Act 1993 (the SIS Act) provides for the prudential regulation of the superannuation industry between the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investment Commission (ASIC). An important aspect of prudential regulation is the monitoring and investigation powers of both Regulators.

This bill will improve monitoring and investigation powers by increasing the flexibility of the Regulators' existing powers, expanding the parties to whom they apply and increasing penalties for non-compliance. It is vital to the prudential regulation of superannuation moneys in Australia that the Regulators have effective monitoring and investigation powers.

Another important aspect of the regulatory framework is the existence of a complaints handling body to deal with member's superannuation complaints. The Superannuation (Resolution of Complaints) Act (the SRC Act) established the Superannuation Complaints Tribunal to resolve fund member complaints about trustee decisions in a manner that is fair, informal and quick. This bill will enable the efficiency and productivity of the Tribunal to be improved, including allowing single member review panels. This will enhance the Tribunal's role in promoting public confidence in the superannuation regime.

The bill also contains a number of measures which will finetune and clarify the operation of the supervisory framework which will assist trustees in discharging their obligations to fund members.

In conclusion, this bill implements miscellaneous amendments to maintain and strengthen the superannuation supervisory framework. The amendments will increase the efficiency and effectiveness of the regulatory regime and improve confidence in the superannuation system more generally.

I commend the bill to the Senate.

SUPERANNUATION LEGISLATION AMENDMENT (CHOICE OF SUPERANNUATION FUNDS) BILL 1998

The bill implements the Coalition Government's choice of superannuation fund measure. This measure was a key initiative in the 1997-98 Budget and involves reforms to give employees greater choice over which superannuation fund or Retirement Savings Account will receive superannuation contributions made on their behalf by their employer.

The choice of fund arrangements are about giving employees greater choice and control over their superannuation savings, which in turn will give them greater sense of ownership of these savings. The arrangements will increase competition and efficiency in the superannuation industry, leading to improved returns on superannuation savings.

The Government has consulted widely in putting together the details of this important reform. Extensive consultation led to enhancements of the original model being announced in November 1997. These were designed to significantly reduce the administrative burden on employers by allowing greater flexibility in how choice is offered, while ensuring that employees still had an effective choice of fund. The announced enhancements were widely welcomed by industry.

The Government is continuing to work with industry on the design details of the proposed key features statements. Draft key features statements were prepared in consultation with industry and have been market tested with a variety of groups. The results of the market testing is being fed into a redesign of the key features statements.

While the Government is prepared to consult and listen and respond to ensure the smoothest possible implementation of choice, it is not prepared to compromise on the fundamentals. The fundamentals of this reform are that employees get a genuine choice as to which fund their superannuation is paid. Models for implementing choice which effectively allow employers to veto an employee's choice simply do not meet this essential criteria.

The reforms to which this bill gives effect are scheduled to first operate from 1 July 1999 in respect of new employees, having already been deferred from 1 July 1998. It is time to conclude the debate on these important matters to allow their orderly implementation, for the benefit of all Australians as they save for their future.

I commend this bill to the Senate.

SALES TAX LEGISLATION AMENDMENT BILL (No. 1) 1998

The bill contains two new exemptions from sales tax. The exemptions are for commercial space equipment and for certain goods imported by overseas participants and delegations attending the Sydney 2000 Olympics, Paralympics and associated events.

The bill will also remedy some weaknesses in the recently enacted scheme to prevent sales tax evasion in the computer industry and correct a deficiency in the temporary importation exemption.

The bill will implement the Government's policy to exempt from sales tax space launch vehicles, payloads and other goods intended for launch into outer space or to be brought back from outer space. This measure was announced on the 23 June this year.

The exemption will:

•

encourage the development of a commercial space launch industry in Australia; and

•

provide Australia with access to the growing world demand for commercial space launch facilities.

The space equipment exemption will apply from the date of Royal Assent. However, there will be a transitional credit for dealings on or after 23 June 1998 and before the date of Royal Assent. This will ensure that, as announced by the Government, dealings on or after 23 June do not bear sales tax.

The bill will also provide that certain goods, imported by or on behalf of non-Australian Olympic and Paralympic Family Members and delegations and participants in the Olympics, Paralympics and associated events, will be exempted from sales tax.

This exemption is in line with current sales tax arrangements with respect to SOCOG.

The first events covered by the new exemption and which occur during 1998 will be the Cultural Olympic event "A Sea Change" and the International Sailing Regatta.

The exemption will not apply to goods for sale, alcohol and tobacco products, motor vehicles and motor vehicle parts, television cameras and equipment for radio and television broadcasting.

The amendments complement recent changes to the customs law to exempt the same goods from customs duty.

The exemption will apply from the date of Royal Assent and, as for the space equipment measure, there will be a transitional credit arrangement. The credits will apply to dealings on or after 1 March 1998 (ie the commencement date for the proposed changes to the customs law) and before Royal Assent.

The Government proposes three changes to overcome some technical problems with the new scheme for dealing with sales tax evasion in the computer industry.

The first change will remove anomalies arising from current descriptions and tariff classifications in the law. This will apply from the date of introduction of the bill.

The second change will increase the maximum penalty for a person falsely representing himself or herself to be accredited or falsely representing a transaction to be authorised, and will increase the maximum penalty for making improper or false quotes under the law. The new maximum penalties of $5500 will apply from the date of Royal Assent.

The third change will close a loop-hole that allows traders to falsely present themselves as exporters in order to purchase or lease goods tax-free. This will apply from a date to be proclaimed.

The amendments will enhance the integrity of the new sales tax rules for computers which have addressed the entrenched culture of sales tax evasion previously evident in parts of the personal computer industry.

The bill also amends the sales tax law so that goods imported into Australia under a temporary importation exemption, used in Australia, exported and then re-imported, are subject to sales tax at the time of the second importation.

The amendment will correct a deficiency in the sales tax law from 13 May 1997 which is the date the Government announced the measure.

The explanatory memorandum explains in detail the changes to the law that the bill contains.

I commend the bill to the Senate.

TAXATION LAWS AMENDMENT BILL (NO. 5) 1998

This bill amends the income tax law to give effect to the following measures:

Firstly,

Tax penalty arrangements.

This bill gives effect to the 1998-99 Budget announcement to replace the existing late payment penalties in various taxation laws with a uniform tax deductible general interest charge. The new arrangements will be simpler and better reflect movements in market interest rates. The changes follow a review by the Australian Taxation Office of late payment and notification penalties in consultation with professional and representative bodies. That review flowed from the Government's response to the recommendations of the Small Business Deregulation Taskforce.

The charge on an outstanding amount will be calculated daily on a compounding basis. The nominal interest rate from which the daily charge is calculated will be set at the 13 Week Treasury Note rate plus 8 percentage points. The penalty for late lodgement of income tax returns of individuals and the penalty for underpayment of income tax will also adopt the general interest charge.

Secondly, the

Alignment of remittance dates

This bill implements the announcement in the Government's tax reform paper, Tax Reform: not a new tax, a new tax system, that from 1 July 1999 the remittance dates for medium and small Pay As You Earn (PAYE), Prescribed Payments System (PPS) and Reportable Payments System (RPS) payers will move from the 7th to the 21st of the month.

The alignment to the 21st of the month is in anticipation of a large number of businesses being required to make one payment on the 21st of each quarter to cover most tax debts. Thirdly,

Running Balance Accounts.

This bill also introduces amendments to support a system of running balance accounts. The objective of this measure is to establish a taxpayer accounting system under which the Australian Taxation Office can record and monitor all of a business's different tax liabilities on a single account. Debts under the sales tax, pay as you earn, prescribed payments and reportable payments arrangements for the year ending 30 June 2000 will be administered in this way.

The introduction of running balance accounts will provide for simpler tax accounting and collection arrangements.

These new accounting and penalty arrangements will position the ATO to better assist taxpayers in minimising any escalation of taxation debt and will allow for a simpler and more efficient process of penalty calculation.

They will also enable the ATO to provide a comprehensive statement of a taxpayer's outstanding tax debts at a particular point in time.

These amendments will provide an accounting platform in the lead up to one running balance style account to support most taxation debts after 1 July 2000.

And lastly,

Tax avoidance: foreign tax credit schemes

This measure amends the general anti-avoidance provisions of Part IVA of the Income Tax Assessment Act 1936 (the act) to render ineffective schemes designed to acquire or generate foreign tax credits that can be used to shelter low-taxed foreign source income from Australian tax.

A foreign tax credit scheme operates on the basis that foreign income is earned which gives rise to an entitlement to foreign tax credits. A scheme is entered into whereby a foreign income stream is acquired by another taxpayer. Where the acquisition cost of the income stream is deductible to that another taxpayer those deductions largely cancel out the foreign income the other taxpayer has now acquired. The major portion of the foreign tax credits which relate to the acquired foreign income stream are then available to offset tax payable on the taxpayer's other foreign income of the same class.

The Australian Taxation Office became aware that these types of schemes were being promoted in Australia. The Commissioner of Taxation does not accept the efficacy of these arrangements, and proposes to challenge them under the existing law in the courts. To put a stop to the development of future schemes the Government announced on 13 August 1998 that it would amend the general anti-avoidance provisions of Part IVA of the act to render such schemes ineffective.

These types of arrangements have also been identified in the United States and the United Kingdom and remedial action has also swiftly been taken in both those countries.

The amendment is designed to protect the revenue base. In the absence of such swift action the revenue base could be exposed to a significant threat.

The Government also announced on 13 August 1998, as part of its tax reform package Tax Reform-not a new tax-a new tax system , that it will modernise the general anti-avoidance rules. This process will be conducted in line with the principles of the integrated tax code. In view of the threat that the foreign tax credit schemes posed to the revenue base it was necessary to announce the measures and bring legislation to the Parliament as soon as possible rather than await the modernisation of the general anti-avoidance rules.

Full details of the measures in the bill are contained in the explanatory memorandum circulated to honourable senators.

I commend the bill to the Senate.

GENERAL INTEREST CHARGE (IMPOSITION) BILL 1998

The bill accompanies Taxation Laws Amendment Bill (No. 5) 1998 which replaces existing late payment penalties in various taxation laws with a uniform tax deductible general interest charge.

The Imposition Bill will impose the new general interest charge as a tax to the extent to which the charge cannot validly be imposed as a penalty.

Details of the measures in both bills are contained in the explanatory memorandum circulated to honourable senators.

I commend the bill to the Senate.

Debate (on motion by Senator O'Brien) adjourned.

Ordered that the Superannuation Legislation Amendment Bill 1998 , the Superannuation Legislation Amendment (Choice of Superannuation Funds) Bill 1998 and the Sales Tax Legislation Amendment Bill (No. 1) 1998 be listed on the Notice Paper as separate orders of the day.