Wednesday, 28 March 2018
Treasury Laws Amendment (Tax Integrity and Other Measures) Bill 2018; Second Reading
That this bill be now read a second time.
This bill represents another important step in the government's efforts to protect Australia's tax base from multinational tax avoidance. The bill also improves the integrity of the small-business capital gains tax concessions, contributes to the government's digital innovation agenda and makes the taxation of Defence abuse reparation payments fairer.
Schedule 1 of this bill amends the income tax law to toughen the multinational anti-avoidance law. The law took effect from 1 January 2016 and prevents large multinationals from avoiding tax on their Australian business profits by artificially structuring their affairs in a way that results in them not having a taxable presence in Australia.
Schedule 1 will improve the integrity of the multinational anti-avoidance law by bringing schemes involving the interposition of certain trust or partnership arrangements within its scope.
This is a further demonstration of the government's strong track record on tackling multinational tax avoidance. Together with other key government initiatives, such as the diverted profits tax, country-by-country reporting, updated transfer pricing rules and the Organisation for Economic Cooperation and Development multilateral instrument, this measure will ensure that multinationals pay the right amount of tax on their Australian income.
The government is committed to assisting small businesses. With over three million small businesses in Australia, the small-business sector plays a significant role in the Australian economy. Small businesses contribute around $380 billion to the economy. A strong small-business sector means more jobs for Australians and, ultimately, more opportunities to build vibrant local communities across our country.
Schedule 2 of this bill amends the Income Tax Assessment Act 1997 to improve the integrity of the small-business capital gains tax concessions.
These important concessions provide small-business owners with relief from CGT on the disposal of assets related to their business. This helps them to grow and reinvest their profits, as well as contribute to their retirement savings through the sale of their business.
Currently, though, some taxpayers can access these concessions for assets which, in the end, are unrelated to that particular small business.
That is why, in the 2017-18 budget, we announced that we would take action to improve the integrity of these concessions.
Schedule 2 of this bill will introduce additional conditions that must be met where a taxpayer sells their share in a company or interest in a trust. These conditions will test the size of the business being disposed of so that taxpayers can only obtain the concessions in respect of genuine small businesses.
Additional tests will apply to prevent the concessions from being available for shares in companies or interests in trusts where most of the value of that company or trust is unrelated to the respective small-business activities.
The concessions themselves, though, are not changing. They will continue to be available to genuine small-business taxpayers with an aggregated turnover of less than $2 million or business assets less than $6 million.
The government is also committed to supporting the Australian innovation ecosystem by providing a tax and regulatory environment that will help innovative Australian businesses raise capital, grow and, we hope, ultimately succeed.
Schedule 3 of this bill amends the income tax law to clarify that early stage venture capital limited partnerships and venture capital limited partnerships can make investments in fintech businesses.
These amendments will provide certainty to investors in innovative fintech businesses and Australian innovation more broadly.
The amendments allow early stage venture capital limited partnerships and venture capital limited partnerships to invest in entities with predominant activities that include the development of technology for use in finance, insurance or making investments.
The development of technology is not intended to be narrowly interpreted and extends to adapting existing technology to a new purpose, such as in developing a novel product or service.
The amendments also allow Innovation and Science Australia to make public and private findings on the eligibility of investments, to ensure stakeholders can obtain certainty around the eligibility of their investments and improve integrity.
This is a further illustration of the government's ongoing commitment to support Australia's fintech sector and help establish Australia as a leading global fintech hub.
Schedule 4 of this bill amends the income tax law to ensure the reparation payments, recommended by the Defence Force Ombudsman, are exempt from income tax.
Defence has zero tolerance for abuse and has well established frameworks to encourage individuals to report abuse.
Reparation payments recognise that abuse is wrong and should not have occurred.
The payments are not intended to be compensation and complainants are not required to release the Commonwealth from liability.
As announced in the 2017-18 Budget, the Defence Force Ombudsman role has been expanded to make recommendations for reparation payments related to complaints of abuse in Defence.
This bill ensures that the recipient of a reparation payment receives the full benefit of the payment by making it exempt from income tax. In this way this bill aligns the tax treatment of reparation payments recommended by the Defence Force Ombudsman with the tax treatment of reparation payments made through the Defence Abuse Response Taskforce.
Full details of all of the measures contained in this bill are contained in the explanatory memorandum.