It gives me great pleasure to stand here in the House and give an overview of, and speak to, the Tax and Superannuation Laws Amendment (2014 Measures No. 7) Bill 2014. The bill has its complexities. It has seven schedules to it. Schedule 1 provides for fairer taxation of excess, non-concessional superannuation contributions. Schedule 2 transfers to the Inspector-General of Taxation the tax investigation and complaint-handling function of the Commonwealth Ombudsman. Schedule 3 talks about CGT exemptions for compensation and insurance. Schedule 4 provides certainty for superannuation fund mergers, which are happening in the marketplace as we speak. Schedule 5 speaks to the disclosure of tax information relating to proceeds-of-crime orders. Schedule 6 speaks about the exploration and development initiatives that this government is putting in place. Schedule 7 deals with miscellaneous amendments.
The public who are listening to these proceedings do not have the same regard for debates on tax and superannuation legislation as they do for question time. There is no theatre around it. But this is where we do the heavy lifting in this House. The outcomes of these debates influence the direction of our markets. These debates—and, hopefully, the victories we will have—give certainty to sectors of the market who are looking to the superannuation space for certainty for their funds into the future.
Schedule 1 deals with the fairer taxation of excess, non-concessional superannuation contributions. This government has introduced fairness to the taxation of excess, non-concessional superannuation contributions—after-tax contributions made by an individual. We believe the current treatment of breaches of the non-concessional contributions cap can be punitive and need to be made fairer. The overall tax rate that has applied to some breaches has been as high as 93 per cent, which is alarming. We are honouring our election commitment to make sure inadvertent breaches of the non-concessional contributions cap do not occur and thus do not receive a disproportionate penalty. We are delivering on our commitments at the election. There is an expectation from the Australian public that we tidy up some of these areas, and these bills are the vehicle for those amendments to be put.
Most breaches of the non-concessional superannuation contributions caps are inadvertent and can be due to events that are out of the taxpayer's control. The changes the government is introducing will allow people the option to withdraw these excess contributions and any associated earnings, with the earnings taxed at the individual's marginal tax rate. The measure applies to the non-concessional contributions made from 1 July 2013. The measures provide Australians with the opportunity to correct their mistakes and avoid the most punitive aspects of the excess contributions tax regime. It will ensure that the treatment of excess concessional and non-concessional contributions is broadly consistent. This bill tightens up the wording so that there is greater clarity for mums and dads and those brokers or agents who are giving advice, which will hopefully take away the ambiguity that exists at the moment. The government consulted widely on these measures, and our approach balances compliance costs against measures to discourage aggressive tax planning strategies. Everyone looks for loopholes. So if we can make legislation more understandable, more transparent, we will not then have a growth industry driving outcomes we do not want. This measure is expected to affect around 1,000 individuals to 2013-14, resulting in average tax saving of around $15,000.
Schedule 2 of the bill transfers the tax investigation function of the Commonwealth Ombudsman to the Inspector-General of Taxation. That is not in itself controversial, but I will take you through some of the reasoning for it. The schedule transfers from the Commonwealth Ombudsman to the Inspector-General of Taxation the complaint-handling function and the general tax revenue function relating to individuals. Inspectors will now have a single, specialised scrutiny agent for handling both individual tax complaints and systemic tax reviews. All investigations and complaint-handling powers and functions relating to taxation administration by tax officials will now be handled by the Inspector-General of Taxation. Centralising these functions will purely provide efficiencies in that department.
The role of external scrutiny is to provide independent assurance that ATO services are well managed and fit for purpose and that public money is being used properly. The current external scrutiny systems for the Australian Taxation Office include the Commonwealth Ombudsman, the Inspector-General of Taxation, the Auditor-General, the Board of Taxation, the Administrative Appeals Tribunal, the courts and the parliament. So in no way is this a dilution of anyone's right to make a complaint; there are many vehicles for that. This is just about trying to streamline the complaints department so that customers of the Australian Taxation Office are able to get quicker and accurate resolution of their issues. The transfer of tax complaints to the Inspector-General of Taxation will also enable earlier flagging of emerging issues that require more general review, and this ensures better customer outcomes for both individual complaints and the government.
We note that Labor at one stage wanted to close down the Office of the Inspector-General of Taxation. That was a commitment during their 2007 election campaign. To their credit, they dropped it in the following year. At that time the then Assistant Treasurer said, 'The Inspector-General of Taxation plays an important role in ensuring high standards of tax administration for Australian taxpayers'—and we believe that statement to be sound. Subsequently, in 2013, he acknowledged that the Inspector-General of Taxation 'has an important role to play in the functioning of our tax system by providing independent oversight of the Australian Taxation Office and helps to underpin community confidence in the taxpayer system'. So from the commentary in this place and other places, there is wide-held support for that office. We would expect Labor support. The new arrangements are scheduled to commence on—
Mr Perrett: That's generous of you, Scotty!
Mr BUCHHOLZ: I diverted from my speech because I come to this House in the spirit of bipartisanship. On schedule 3, the capital gains tax exemption for compensation and insurance: this schedule provides certainty about the operations of the capital gains tax law, which in itself can be complex. In brief, the schedule confirms the existing administrative treatment of the capital gains tax exemptions relating to life insurance and compensation, providing greater certainty for taxpayers, businesses and superannuation funds. There is a large grey area there and these funds are becoming full of capital, and it is imperative that as a government we provide clear and transparent vehicles of legislation so that there is a clear path, taking away ambiguousness.
The measures in the schedule were announced by Labor in their 2011-12 and 2012-13 budgets. The schedule addresses complexities in the law that affect trustees and beneficiaries where a trustee receives compensation or damages for loss or injury to beneficiaries. The policy intent is that neither the trustee nor the beneficiary should be subject to capital gains tax where compensation is received by the trustee in respect of a claim made for injury suffered by a beneficiary of the trust. That, in itself, is the summary of schedule 3. Similarly, there is a CGT exemption for taxpayers such as trustees who hold life insurance policies and annuity instruments for beneficiaries.
The schedule also clarifies that where the trustee of a superannuation fund holds a total and permanent disability policy for a member, the fund trustee will not be subject to capital gains tax nor be taxed on revenue account. The government is legislating the measures and providing certainty around complex issues of interpretation of the capital gains tax legislation.
The government has consulted widely with stakeholders. Minor amendments were made following consultations to ensure that the legislation achieves its intended purposes—that is, to deliver certainty for taxpayers, businesses and superannuation funds. This measure is estimated to have a small but unquantifiable cost to revenue over the forward estimates period.
Schedule 4 provides certainty for superannuation fund mergers. Again, in my opening commentary, I said that these mergers are taking place in the market as we speak. This measure makes it clear that a tax integrity rule will not be triggered when a member's super benefits are involuntarily transferred from one super fund to another as a result of a merger between two funds which is outside the member's control.
A rule known as the proportioning rule requires the proportion of the tax-free and taxable components of a member's interest in a fund to be retained on transfer of the interest. The super industry has been seeking certainty because applying the proportioning rule in a merger transaction could, in some circumstances, have left some members in a worse tax position than if the merger had not gone ahead. It is not the intention or the will of this government to disadvantage members. The schedule will ensure that the application of the proportioning rule does not disadvantage the interest of the member whose interest is being transferred involuntarily, say on a merger of funds.
The government is getting on with its legislative program. This measure is one of Labor's announced but unenacted measures that was inherited on our coming to government so I see no hurdles. When this bill is put to the House, it should have bipartisan support for the immense amount of good it will do throughout the industry.
Schedule 5 speaks to disclosing tax information relating to proceeds of crime orders. This measure amends the tax law to clarify the Australian Tax Office's ability to share protected taxpayer information with Commonwealth, state and territory law enforcement agencies concerning proceeds of crime orders.
Differences between the Commonwealth's unexplained wealth orders and state and territory unexplained wealth schemes has led to uncertainty for law enforcement agencies about whether they can use protected information shared by the ATO for the purpose of a proceeds of crime order. The most notable example of the differences between state and territory and Commonwealth unexplained wealth orders is where a state or territory law does not require a person to have committed a criminal offence for an order to be made. This measure clarifies that all orders relating to unexplained wealth that may be made under a state or territory law will be included in the definition of a proceeds of crime order, regardless of whether there are differences between the state or territory and Commonwealth schemes.
A person's tax information may be of central importance to investigations, law proceedings and enforcement concerning the proceeds of crime. In most cases, a state or territory law enforcement agency would request protected information from the ATO in order to make a proceeds of crime order. However, the ATO is prevented from sharing a person's tax information with authorised law enforcement agencies in order to support or enforce a proceeds of crime order that already exists. This measure will remove any doubt about the ATO's ability to share protected information, which is the ambiguous area of that bill. The new arrangement will come into place upon royal assent.
In the time remaining to me, on the government's exploration expenditure incentive: the government has delivered on its election commitment to introduce an incentive to undertake exploration for mineral resources. The mining sector has long sought a form of incentive that recognises the long lead times between investment, exploration and production. There are some tax measures we will put in place to assist that sector. Labor introduced the minerals resource rent tax, which failed to produce anything like the levels of revenue Labor predicted in its first year. In the 2012-13 reporting period, the mining tax raised a couple of hundred million dollars, or just five per cent of the amount it was intended to.
Mr Perrett: A couple of hundred million shouldn't be thrown away. Could help the budget!
Mr BUCHHOLZ: I take the interjection from the good member from the other side. The mining tax revenue raised was not Labor's high point. Only Labor could come up with a tax, spend the money and have the tax raise little or no money—less than five per cent of its forecast revenue. It was not Labor's finest hour in the parliament.
Schedule 7 is on miscellaneous amendments. This is rats-and-mice stuff. Predominantly, tax law amendments, and tax and superannuation laws are not sexy, but they important to the country. I commend the bill to the House.
