House of Representatives

Second Reading Speech

Senator HEFFERNAN (Parliamentary Secretary to Cabinet)

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-

DAMAGE BY AIRCRAFT BILL 1999

The purpose of this bill is to improve compensation for members of the public who suffer personal injury or property damage as third parties on the ground involved in an air accident.

Recent air accidents in Australia have seen six houses damaged in one accident and five members of the public killed in another. Recent accidents overseas have demonstrated the potential for considerably more loss of life and property damage. For example, the crash of a Boeing 747 in Amsterdam in 1989 killed 43 members of the public and in effect destroyed two large apartment blocks.

It should be stressed that the involvement of members of the public in an air accident, as third parties on the ground, is generally not due to any choice or action on their part. In the great majority of cases, they will not have contributed in any way to the accident, for example, by contributory negligence, or, by choosing aviation as a mode of transport.

Improving compensation for members of this non-flying public will complement the Commonwealth government's recent initiative in introducing a national scheme improving compensation for air passengers and their relatives, who suffer loss or injury during an air accident. This involved raising the amount of compensation substantially, and making passenger liability insurance mandatory for all carriers serving the Australian aviation market.

The main concern with the current third party on the ground arrangements is the amount of compensation available to some injured parties. This can differ across Australia according to whether the operator of the aircraft involved is engaged in domestic or international operations, and, in the case of international aircraft, whether or not an aircraft's country of registration is a signatory to the Rome Convention of 1952. The Rome Convention on damage caused by foreign aircraft is an instrument of international aviation law, which unfortunately limits the amount of compensation payable to an inadequate level.

Not only do the compensation outcomes differ across Australia but also the burdens of proof imposed on injured third parties on the ground. As foreign aircraft, whether subject to the Convention or not, are strictly liable for any damage, the plaintiff has no need to establish liability in the first instance before seeking compensation. Domestic aircraft coming under State legislation in the majority of States and making only intrastate flights are also strictly liable. However, aircraft flying within the Territories, and within Queensland and South Australia, are subject only to common law. Under common law, members of the public suffering damage by aircraft must first prove negligence in the courts, before any amount of compensation is considered.

This lack of national uniformity in measures intended to protect the public's personal and property rights is unsatisfactory from the point of view of social justice, and inconsistent with the concept of a single national market for aviation services. The variation in access to compensation, and the different levels of compensation possible, can create considerable uncertainty for the plaintiff and can increase the costs on the judicial system and the plaintiff through the increased levels of litigation necessary to obtain better compensation. As I have just indicated, the most significant concern with the current arrangements is the inadequate level of compensation that would be available from an accident caused by one of the larger foreign aircraft subject to the Rome Convention.

For example, the total liability limit for a Boeing 747 aircraft allowable under the Convention is about $A36 million, on the most favourable interpretation of the gold conversion mechanisms allowed under the Convention. This is clearly insufficient to cover the full compensation required in the event of a major air crash in a metropolitan area in Australia, similar to the 1989 B747 crash in Amsterdam. However, the limit for the B747 could also be as low as around $A4m. This would be on the least favourable interpretation of the conversion mechanisms, which is to use the last official price of gold. This is clearly unacceptable in Australia.

The Convention's limitation on liability and its low amounts of allowable compensation are mainly due to the survival of the infant industry argument into the 1950's when it was being drawn up. This argument has long since lost any force, and is especially inappropriate, when prompt and adequate compensation for the innocent victims of air accidents is being considered.

In addition, the Convention has gained very restricted adherence in its almost 50 years of existence, mainly due to its low compensation limits. It does not therefore provide the international uniformity of rules or adequacy of compensation intended. Canada denounced the Convention in 1976, citing these shortcomings as reasons for doing so.

This bill therefore improves the situation quickly, as far as those large foreign aircraft subject to the Rome Convention are concerned, by repealing the Civil Aviation (Damage by Aircraft) Act 1958, which gives force of law to the Convention in Australia. The Convention will also be denounced at a time to coincide with this bill coming into effect.

The bill replaces the Convention's strict but limited liability regime with strict and unlimited liability. This will make those foreign aircraft currently sub ject to the Convention subject to the same liability regime of strict and unlimited liability that currently applies to the great majority of foreign aircraft serving the Australian market.

The bill's strict and unlimited liability regime will also apply to aircraft operating within the Territories. This will assist in removing the anomalies in the national arrangements covering third party on the ground liabilities. The bill's liability provisions are closely aligned with those currently in legislation in the majority of Australian States. However, as the bill is intended to provide members of the public with compensation that is as prompt and as comprehensive as practicable, it modernises and strengthens the provisions of relevant State legislation, where clear public gains have been possible. The bill also retains provisions of the Rome Convention regime where they will be of advantage to the plaintiff.

Finally, in order to remove the anomalies across the various Australian jurisdictions completely, I propose urging the ministers responsible for aviation matters in South Australia and Queensland to enact very similar legislation as soon as possible. This will be the least complex way of achieving national uniformity in this area. In proposing these measures, the Commonwealth government is reflecting the results of extensive consultation on options to improve the current regime. This showed overwhelming support from the industry and other interested parties for the introduction of a uniform national regime, based on all aircraft being subject to strict and unlimited liability. The introduction of strict and unlimited liability within Commonwealth jurisdiction naturally requires the denunciation of the Rome Convention.

The bill's main provisions therefore provide a coverage of aircraft as comprehensive as practicable. All aircraft coming within Commonwealth jurisdiction will be subject to strict and unlimited liability, except Australian military aircraft. This will include all foreign aircraft operating over Australian territory, all Australian aircraft operating international flights, all domestic interstate carriers, and private owner/operators in the Territories. The great majority of these aircraft are already subject to strict and unlimited liability.

It is intended that compensation will also be as comprehensive as practicable, to cover all economic and non-economic loss possible. The person using the aircraft at the time of impact and its owner will be jointly and severally liable. This will give the courts ample scope to find compensation for the plaintiff, in the absence or insolvency of one or the other.

However, as a balance against this comprehensive and relatively rigorous application of liability, the bill restricts liability to instances of damage resulting from actual impact with either the aircraft or parts of it or with an object falling from it when the aircraft is in flight. This accords with legislation in the majority of Australian States. Normal aircraft operations should remain unaffected. Alleged minor damage from such incidents as tile movement from wake vortices, or trespass or nuisance claims from noise or vibrations and the like are not included.

Restricting liability for damage to the period of flight will also allow normal operations at airports, and the minor and frequent incidents associated with them, to continue without the application of the new act. Minor damage occurring at times other than during flight, for example, when the aircraft is being towed to a hangar, or is taxiing to a hard stand, should be covered by the common law as it has been in the past. However, serious incidents on landing at airport sites such as overshooting the runway or veering off a taxiway at speed and causing damage, and crash landings, are included in the bill's provisions. This restriction of strict liability to incidents during flight is also consistent with provisions in State legislation.

I consider that this bill will allow the introduction of an improved regime for third party on the ground compensation that falls within Commonwealth jurisdiction. It will also provide the basis for the Commonwealth's initiative to unify national compensation arrangements. Applying strict and unlimited liability to all aircraft across Australia will be the best outcome from the point of view of social justice.

It will assist in establishing compensation as prompt and as comprehensive as practicable for those members of the non-flying public unfortunate enough to be included among the victims of an air accident, through no choice or action of their own.

ACIS ADMINISTRATION BILL 1999

This bill, along with the ACIS (Unearned Credit Liability) Bill 1999 and Customs Tariff Amendment (ACIS Implementation) Bill 1999, implements two key elements of the Government's post-2000 arrangements for the automotive industry by:

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Reducing the rates of Customs duty on passenger motor vehicles and certain related componentry from 15 per cent to 10 per cent on 1 January 2005; and

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Establishing the Automotive Competitiveness and Investment Scheme (ACIS) which will start on 1 January 2001.

The government announced its post-2000 arrangements for the industry on 5 June 1997, in response to the Industry Commission report on the automotive industry. The government decision recognised the significant progress this industry has made over a period of more than a decade, and the need to ensure the industry would maintain its progress in the transition towards becoming a competitive player in the global market.

On 22 April 1998, the government announced that ACIS would be the centrepiece of its post-2000 transitional arrangements for the automotive industry.

The present arrangements for the automotive industry are due to finish at the end of 2000. In developing a new assistance package for the industry, the government was acutely aware that the central element of the new package would need to be consistent with our international obligations. ACIS represents the result of extensive policy design work, close consultation with industry and careful consideration of our trade obligations.

The Customs Legislation (Automotive Competitiveness and Investment Scheme) Bill 1998 to implement ACIS was introduced into Parliament on 2 July 1998, but the legislation lapsed with the proroguing of Parliament.

Since the introduction of legislation last year:

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Customs has become part of the Attorney General's portfolio, and principal responsibility for administering ACIS now resides with the Department of Industry, Science and Resources; and

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Industry has had the opportunity to provide further input to the scheme, resulting in a more rigorous legislative design, and a scheme which, from an administrative standpoint, better meets industry needs.

Automotive Competitiveness and Investment Scheme

This bill provides for the establishment of the Automotive Competitiveness and Investment Scheme (ACIS).

ACIS will encourage the development of internationally competitive firms in the automotive industry through rewarding eligible production, strategic investment and research and development (R&D).

Within the scheme:

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Those qualifying as Motor Vehicle Producers (MVPs) will be able to claim:

Duty credit to the value of 25 per cent of the value of production of motor vehicles, engines and engine components, multiplied by the tariff rate; and

Duty credit to the value of 10 per cent of their investment in eligible plant and equipment.

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Those qualifying as Automotive Component Producers, Automotive Machine Tools and Tooling Producers, or Automotive Service Providers will be able to claim:

Duty credit to the value of 25 per cent of their investment in eligible plant and equipment; and

Duty credit to the value of 45 per cent of their investment in eligible R&D.

Where MVPs produce automotive components, automotive machine tooling or automotive services for a third party, they too can apply for these benefits.

Duty credit will be fully transferable, so credit can either be used to offset Customs duty on eligible imports, or it can be sold to a third party.

To meet Australia's World Trade Organisation obligations, benefits under ACIS for each participant will not be permitted to exceed 5 per cent of its eligible sales for the preceding year.

Benefits under ACIS will also be capped for the industry as a whole at $2 billion over the years 2001 to 2005. The production credit which directly replaces the Duty Free Allowance (that is, 15 per cent of value of production of passenger motor vehicles sold in Australia and New Zealand) is not included within the fiscal cap, and the revenue forgone is expected to be around $825 million over five years.

The key changes embodied in the new bill include:

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Focussing the scheme on the now seamless market for light vehicles under 3.5 tonnes, comprising cars, four wheel drives and light commercial vehicles;

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Tightening the scheme to minimise the scope for abuse;

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Including the ACIS (Unearned Credit Liability) Bill 1999 to enable any necessary adjustments to benefits;

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Shifting primary responsibility for administering ACIS from the Australian Customs Service to the Department of Industry, Science and Resources, in line with changes to Administrative Arrangement Orders announced in October 1998; and

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Providing officers of the Department with powers to properly administer ACIS, such as audit powers.

The changes will make administration of the scheme easier to manage, and more robust. The changes will also ensure that the scheme more accurately reflects current industry practice, so that the industry receives the intended benefits from ACIS, with the least administrative burden.

The bill provides for the administrative detail for ACIS to be set out in subsidiary legislation, in the form of Regulations and Ministerial guidelines.

Summary

This bill, and the two associated bills are an integral part of the overall package of government initiatives for the automotive industry. Along with the Automotive Market Access and Development Strategy, which is being oversighted by the Automotive Trade Council, the package will help position the industry as a competitive player in the global market.

The package has the support of the major industry stakeholders. They have contributed significantly to the improvements devised since the legislation was first introduced.

Each measure of the package is contingent on the success of the other, and it is essential that the integrity of the package be maintained during the passage of this, and the two associated bills.

I commend this bill to the Senate, and present the explanatory memorandum to this bill.

ACIS (UNEARNED CREDIT LIABILITY) BILL 1999

This bill, along with the ACIS Administration Bill 1999 and the Customs Tariff Amendment (ACIS Implementation) Bill 1999, will implement the government's package of post-2000 initiatives for the automotive industry.

Recovery of Unearned Credit

This bill gives the Department of Industry, Science and Resources the ability to recover ACIS duty credit paid to participants where:

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There has been an error or mistake of fact in calculating a benefit;

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Information provided to the Department was incorrect or incomplete;

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There is a clerical error or mistake in the ACIS ledger which records the balance of credit; or

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The credit was claimed in respect of a transaction that was not at arm's length and involved "non-arm's length values."

The ACIS Administration Bill 1999 sets out the circumstances in which credit may have to be paid back to the Commonwealth, and sets out a process for recovering unearned credit. This bill imposes the liability.

I commend this bill to the Senate, and present the explanatory memorandum to this bill.

CUSTOMS TARIFF AMENDMENT (ACIS IMPLEMENTATION) BILL 1999

This bill, along with the ACIS Administration Bill 1999 and the ACIS (Unearned Credit Liability) Bill 1999, will implement the government's package of post-2000 initiatives for the automotive industry.

Customs Tariff Reduction

Under the current provisions of the Customs Tariff Act 1995, the rate of Customs duty imposed on passenger motor vehicles and certain parts for passenger motor vehicles is declining each year. At present it is at 17.5 per cent, and it will reach 15 per cent on 1 January 2000, after which there are no more annual reductions. This bill provides for the tariff to be reduced to 10 per cent from 1 January 2005.

The stable tariff regime between 1 January 2000 and 31 December 2004 will offer firms in the industry vital breathing space to adjust and to integrate their operations into global markets.

The tariff reduction in 2005 is in line with the government's commitment to trade liberalisation, and is a tangible step in Australia meeting its APEC goal by the year 2010. It will continue the downward pressure on the automotive tariff, and will also deliver cheaper prices and higher quality to consumers.

Customs Item

This bill also provides the Item under which Customs duty liabilities on eligible imports can be discharged by duty credit earned under the ACIS Administration Bill 1999.

Summary

The tariff reduction and new Item are integral to the whole package of government initiatives for the automotive industry.

Each measure of the package is contingent on the success of the other, and it is essential that the integrity of the package be maintained during the passage of this, and the two associated bills.

I commend this bill to the Senate.

TAXATION LAWS AMENDMENT BILL (NO. 7) 1999

Restructuring of managed investment schemes

This Bill provides relief from any unintended tax consequences arising on a managed investment scheme restructuring for the purposes of the Managed Investments Act 1998.

The relief will be available to schemes operating on 1 July 1998, which restructure in accordance with the Managed Investments Act 1998 during the period 1 July 1998 to 30 June 2000.

Members of these schemes will also receive relief from any unintended taxation consequences resulting from their scheme restructuring for the purposes of the Managed Investments Act 1998.

Company Law Review

This Bill will amend the Income Tax Assessment Act 1936 and associated tax laws to ensure that a company's share capital account does not become tainted by the merger of tainted share premiums with share capital under recent Corporations Law amendments.

The amendments also provide that all debt for equity swap arrangements which should qualify for the exception to the tainting rule do so and the delayed crediting of share capital to the share capital account does not trigger the share capital tainting rule.

The proposed amendments apply from 1 July 1998

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

I commend this Bill and present the explanatory memorandum.

Ordered that the Damage by Aircraft Bill 1999 and the Taxation Laws Amendment Bill (No. 7) 1999 be listed on the Notice Paper as separate orders of the day.

Debate (on motion by Senator Gibbs) adjourned.