Wednesday, 31 July 2019
Treasury Laws Amendment (2019 Tax Integrity and Other Measures No. 1) Bill 2019; Second Reading
We don't support the amendment moved by the shadow minister. I'll get onto schedule 3 in particular, on which particular comments were made by the shadow minister. We welcome and thank them for their support for the vast majority of this bill. I'm very grateful to all of the members who've contributed to the debate. The Treasury Laws Amendment (2019 Tax Integrity and Other Measures No. 1) Bill 2019 contains very important integrity measures which strengthen our tax base; save businesses time and money, through implementing an electronic invoicing framework; and, of course, improve the integrity of the super system.
Schedule 1 to the bill denies deductions that arise in respect of repayment of the principal of a concessional loan by a tax-exempt entity that is privatised and then becomes taxable. This measure applies to entities that become privatised on or after 7.30 pm on 8 May 2018. This will strengthen our corporate tax base by improving the integrity of the tax treatment of funds that are borrowed on concessional terms by tax-exempt entities, such as government-owned entities that subsequently become privatised. In addition, the government is ensuring that partners in partnerships can't inappropriately access the small-business capital gains tax concessions when dealing in rights that alienate the future income from that partnership.
Schedule 2 to the bill amends the act to deny access to the small-business capital gains tax concessions in those cases where the partners alienate their income by creating an assignee or otherwise dealing in rights to the future income or capital of a partnership. Partners will now only be eligible for the concessions when such rights make the assignee a partner in the partnership. This will implement an integrity measure announced by the government in the 2018-19 budget, and the amendments apply from 7.30 pm on 8 May 2018. The concessions themselves are not changing and will continue to be available for genuine disposals and transactions that affect the substance of the operation of the partnership.
Schedule 3 of the bill amends the Income Tax Assessment Act 1997 to deny deductions for some taxpayers for expenses associated with holding vacant land. These amendments are simply an integrity measure to tighten the link between claiming deductions for holding vacant land and earning assessable income. These amendments will not apply to land held by the owner or related entities to carry on a business where there is a substantial building or premise on the land or where a property has been built on the land and it's available for rent. These amendments won't apply to corporate tax entities, managed investment trusts, superannuation plans other than self-managed super funds and unit public trusts. Expenses for which deductions will be denied that would ordinarily be a cost base element may be included in the cost base of the asset for capital gains tax purposes when sold, and these will apply to the 2019-20 income year and later.
On the shadow minister's folly in trying to in some way connect these to Labor's disastrous housing taxes and proposed abolishing of negative gearing: I know the shadow minister is new to a Treasury portfolio in opposition. Had he been paying attention during the 2017-18 budget, he would have seen a range of integrity measures, including limiting deductions for travel in relation to investment properties. This is another step in the plan of the government, ensuring integrity in our tax system without the associated higher taxes that the Labor Party proposed. To in any way liken these to Labor's very failed approach on abolishing negative gearing is factually wrong and clearly shows that the shadow Assistant Treasurer is trying to grapple with a new portfolio. We'll give him some time.
Schedule 4 to the bill amends the Income Tax Assessment Act 1936 to extend to family trusts a specific anti-avoidance rule that applies to other closely held trusts that engage in circular trust distributions. This will implement an integrity measure announced by the government in the 2018-19 budget, and the amendments will apply from 1 July 2019. In essence, the amendments will better enable the ATO to pursue family trusts that engage in these arrangements by extending the specific anti-avoidance rule, which imposes tax on such distributions at a rate equal to the top personal tax rate plus the Medicare levy.
Schedule 5 to the bill amends the tax administration act to allow the ATO the discretion to disclose to credit-reporting bureaus the tax debt information of particular businesses that are not effectively engaging with the ATO to manage their debts. This will allow tax debts to be placed on a similar footing as other debts, strengthening the incentives for businesses to pay their debts in a timely manner and effectively engage with the ATO to avoid having their tax debt information disclosed. The reporting of particular tax debts will reduce the unfair advantage that is inevitably obtained by businesses that don't pay their tax on time, and contributes to more informed decision-making within the business community by enabling businesses to make a more complete assessment of the credit worthiness of those businesses.
Tax debt information may only be disclosed to credit-reporting bureaus where some very strict procedural conditions and safeguards are satisfied, including: the debt is for a taxpayer who has an ABN; the debt amount is at least $100,000 and overdue for at least 90 days; and the business is not effectively engaging with the ATO to manage that tax debt. It's only then, if those criteria are satisfied, that the ATO will make the particular businesses aware that they are considering disclosing their information and afford them with an opportunity to engage with the ATO to prevent their debts from being reported. This will be supported by rigorous administrative arrangements that will also provide taxpayers with the opportunity to initiate a review process to any disclosure and the ATO consulting with the Inspector-General of Taxation prior to any disclosure. Once a business no longer meets the criteria, the tax debt information will be removed.
Schedule 6 to the bill amends the tax administration act to allow the ATO to implement an electronic invoicing framework, known as e-invoicing in Australia, and as I mentioned at the beginning of this speech. E-invoicing is the direct electronic exchange of invoices between suppliers and buyers of financial systems, and is an opportunity to streamline invoice transactions, saving businesses time and money. We know that e-invoicing can reduce processing times and errors, leading to faster payments of invoices. Deloitte Access Economics estimates that e-invoicing could result in economy-wide benefits of up to $28 billion over 10 years.
The Australian and New Zealand governments, it's worth noting, are working together to pursue common approaches to e-invoicing as part of the single economic market agenda. In February this year, the Prime Minister announced jointly with the New Zealand Prime Minister that Australia and New Zealand intend to adopt the Pan-European Public Procurement Online—PEPPOL, as it's more commonly known—an interoperability framework for invoicing. The PEPPOL framework is a secure network that enables government organisations and private enterprises to exchange business documents, such as invoices, electronically.
PEPPOL connects different electronic procurement and invoicing systems by establishing a set of common business processes and technical standards, and this provides a seamless exchange of information between trading partners who use different software applications. PEPPOL is currently used, it's worth noting, in over 30 countries in Europe, Asia and North America.
Schedule 7 to the bill will close a loophole that's being used by unscrupulous employers to short-change employees who make salary sacrificed superannuation contributions. There are instances where employees who enter salary sacrifice arrangements discover that their super has increased by less than they were expecting because the employers have used salary sacrifice amounts to satisfy their SG obligations, or have based their SG contributions on the lower post-salary-sacrifice earnings base. To prevent these practices, the changes in this bill will ensure that an individual's salary sacrifice contributions don't reduce their employer's SG obligations in any way. This amendment is crucial to ensuring that Australians continue to have confidence in the integrity of the super system by making certain that employers are paying workers their full entitlements.
Of course, full details of the measures are contained in the explanatory memorandum. I therefore commend this bill to the House.