House of Representatives

Second Reading Speech

Mr BOWEN (Minister for Competition Policy and Consumer Affairs, and Assistant Treasurer)

I move:

That this bill be now read a second time.

This bill amends various taxation laws to implement a range of improvements to Australia's tax laws.

Schedule 1 to this bill amends the income tax law to restore the original tax treatment of rights issued by companies to shareholders to acquire additional shares. This will overcome the impact of the High Court of Australia's decision in Commissioner of Taxation v McNeil.

McNeil's case overturned longstanding tax treatment in relation to put options which has caused great uncertainty in the market. The changes in schedule 1 will provide certainty to the market as to the tax treatment of put options and call options which will allow companies to continue to raise capital through the use of such options.

These amendments will ensure that no amount is included in the assessable income of a shareholder in a company as a result of acquiring certain rights issued by the company to acquire further shares.

The amendments will also ensure that an amount that is included in the assessable income of a shareholder, as a result of acquiring rights issued by the company to dispose of shares, is appropriately reflected in the cost base of the rights.

To ensure that taxpayers are not disadvantaged, these amendments will apply to rights issued on or after 1 July 2001.

Schedule 2 to this bill amends the Taxation Administration Act 1953 to overcome a deficiency in the scope of the restriction of GST refunds following the Federal Court of Australia decision in KAP Motors versus the Commissioner of Taxation. The restriction of GST refunds will apply regardless of whether transactions giving rise to a refund are supplies for GST purposes.

This schedule also amends the Taxation Administration Act 1953 to overcome a deficiency in the four-year time limit on payment and refund of indirect taxes and ensures that it applies as intended to bring finality and certainty to the indirect tax affairs of taxpayers.

Schedule 3 to this bill exempts rent assistance paid to Austudy recipients from income tax. This will ensure consistency with the taxation treatment of rent assistance paid to Newstart allowance, youth allowance and Abstudy recipients.

Rent assistance has been payable to Austudy recipients from 1 January 2008. The payment provides assistance with the living costs associated with full-time study and training.

Schedule 4 to this bill exempts the carer adjustment payment from income tax. This will ensure consistency with the taxation treatment of other one-off payments made to carers in previous years.

The carer adjustment payment provides up to $10,000 in financial assistance to families with a child, up to six years of age, who has suffered a catastrophic event after 1 January 2007. It is designed to assist families adjust with the increased costs arising from a severe illness or medical condition, or major disability as a result of the catastrophic event.

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

I commend the bill to the House.

Debate (on motion by Mr Haase) adjourned.