House of Representatives

Second Reading Speech

Mr Slipper (Parliamentary Secretary to the Minister for Finance and Administration)

I move:

That this bill be now read a second time.

The measures contained in this bill amend various taxation legislation.

Schedule 1 to this bill will increase the Medicare levy low-income thresholds for individuals, married couples and sole parents in line with increases in the consumer price index. Schedule 1 also increases the Medicare levy low-income threshold for pensioners below age pension age to ensure that where these pensioners do not have a tax liability they will not also have a Medicare levy liability.

The amendment to the Medicare levy low-income thresholds will apply to the 2002-03 year of income and later years of income.

Schedule 2 to this bill will modify the general value shifting regime so that, as a transitional measure, the consequences arising from operating under this regime do not apply to most indirect value shifts involving services. This measure will help to reduce compliance costs for business during the transition to consolidation.

Schedules 3 to 8 further refine the consolidation regime.

Schedule 3 will limit the extent to which a linked asset tax cost can change when it comes into a consolidated group, minimising possible distortions in asset values.

Schedule 4 modifies the cost setting rules to ensure they apply appropriately to a partner's interest in a partnership as well as partnerships that enter consolidated groups.

Schedules 5 to 7 align the membership rules for multiple entry consolidated groups with the current membership rules for consolidated groups where subsidiaries are held through an interposed non-resident entity. Broadly, only those multiple entry consolidated groups that consolidate before 1 July 2004 will be eligible to have non-resident entities interposed between members of the group.

Schedule 8 makes some minor technical amendments. These refinements to the consolidation regime will apply from 1 July 2002, which is the commencement date of the consolidation regime.

Schedule 9 streamlines the procedures under which an individual taxpayer can be released from a tax liability where payment of the liability would entail serious hardship. The existing authority to grant release will be transferred from tax relief boards to the Commissioner of Taxation. Consistent with contemporary review practices, the amendments will also introduce a new right to have tax relief decisions reviewed internally under the Australian Taxation Office objections process, and externally by the Administrative Appeals Tribunal sitting as the Small Taxation Claims Tribunal. Also, the scope of the release arrangements will be expanded to cover instalments of pay-as-you-go and fringe benefits tax under A New Tax System.

Schedule 10 will amend the imputation rules to allow New Zealand companies to choose to enter the Australian imputation system. A New Zealand company will be able to maintain the Australian franking account and attach Australian franking credits to dividends.

This measure will enable Australian shareholders of New Zealand companies deriving income in Australia to receive franking credits, and consequently a tax offset, for Australian tax paid on that income.

This measure fulfils Australia's commitment to the reform of triangular taxation. It reflects the commitment of this government to the continued strengthening of the Closer Economic Relations Agreement between Australia and New Zealand and the promotion of trans-Tasman business.

Schedule 11 amends the GST Act and the GST Transition Act to apply the GST insurance provisions to payments and supplies made in settlement of claims arising under a compulsory third-party scheme. The GST insurance provisions are also extended to apply to transactions undertaken by insurers, pursuant to an agreement to share the cost of settlements made under a compulsory third-party scheme.

Lastly, Schedule 12 to this bill provides for the establishment of a new category of deductible gift recipient, namely, a register of harm prevention charities. Harm prevention charities are charitable institutions whose principal activity is to promote the prevention or the control of behaviour that is harmful or abusive to human beings.

Under this measure, these institutions will be entitled to apply to the Australian Taxation Office for endorsement as deductible gift recipients. Such deductible gift recipient status will assist these institutions in attracting public support for their activities.

Full details of the measures in this bill are contained in the explanatory memorandum.

I commend the bill to the House and present the explanatory memorandum.

Debate (on motion by Mr Edwards) adjourned.