Julie Owens (Parramatta, Australian Labor Party) Share this | Link to this | Hansard source

On behalf of the Standing Committee on Economics I present the committee's advisory report on the Passenger Movement Charge Amendment Bill 2012, the Tax Laws Amendment (2012 Measures No. 2) Bill 2012, the Income Tax (Managed Investment Trust Withholding Tax) Amendment Bill 2012 and the Pay As You Go Withholding Non-compliance Tax Bill 2012, incorporating a dissenting report, together with the minutes of proceedings and evidence received by the committee.

In accordance with standing order 39(f) the report was made a parliamentary paper.

by leave—The bills make a number of significant improvements to the tax laws across five areas, each of which the committee examined during the inquiry. Schedule 1 of the Tax Laws Amendment (2012 Measures No. 2) Bill 2012 and of the Pay As You Go Withholding Non-compliance Tax Bill 2012 seeks to make directors personally liable for their companies' unpaid superannuation guarantee amounts. This will prevent unscrupulous directors from phoenixing their businesses to avoid their super responsibilities. This practice has cost Australian employees hundreds of millions of dollars in lost superannuation. The committee commends both the intent and the operation of the bills in this regard.

Last year, the committee inquired into a package of bills in similar terms. The committee recommended that the government should investigate whether additional defences for directors could be inserted in the bills. This has occurred. If passed, the legislation will give new directors 30 days—that is up from the current 14 days—to conduct due diligence before adopting a company's pre-existing obligations. Directors will also not be liable for a direct penalty where they took reasonable care in a matter and applied the super legislation in a reasonable way.

The committee also recommended that the government should investigate whether the provision should only apply if an individual has been engaged in phoenixing. The bills do not have this feature, and industry argue that they should be amended along these lines. Ultimately, the committee has come to the view that such a change is not warranted. The provisions will only apply when a company has not only failed to pay a super amount but failed to notify the Australian Taxation Office of this within two months of the event. The provisions are only triggered by a consistent high level of noncompliance.

Schedule 2 of the main bill is designed to ensure that the tax treatment of financial arrangements is consistent with the TOFA tax timing rules. The provisions are to be retrospective from the commencement of other TOFA amendments on 1 July 2010, and this retrospectivity was the key issue in the inquiry. Stakeholders expressed concern that taxpayers who had chosen to adopt the new TOFA rules, rather than elect to keep prior arrangements, would be disadvantaged. However, the committee accepts that the measures restore the original policy intent and that the government had previously flagged that retrospectivity will be necessary with TOFA to restore the policy intent from time to time.

Schedule 3 aims to protect a $6 billion revenue risk that has arisen as a result of retrospective amendments in 2010 in relation to consolidation rules. These changes allowed consolidated groups to claim deductions back to 2002 in relation to the residual tax cost-setting rule and the rights to future income rule. In 2011, revenue problems with the 2010 changes became apparent and the Board of Taxation conducted an inquiry into the matter. The bill largely reflects the Board of Taxation's report. Groups that have already received a refund or who have an ATO ruling will generally be protected from the retrospective changes. Given the transparency of the process and the amount of revenue at stake, the committee again accepts that retrospective legislation is appropriate.

The Income Tax (Managed Investment Trust Withholding Tax) Amendment Bill 2012 and schedule 4 of the main bill increase the tax rate on managed investment trusts for foreign investors from 7.5 per cent to 15 per cent. This is a partial reversal of the recent decreases on this tax rate from 30 per cent a few years ago. The committee is mindful that, for equity investments, the comparison rate is the company tax rate, currently set at 30 per cent. The committee noted that the industry sector was concerned about how the change would affect it. However, the committee accepts the government's argument of the wider macroeconomic importance of Australia having a sound fiscal strategy, an important driver for the whole economy.

The Passenger Movement Charge Amendment Bill 2012 increases the charge from $47 to $55 from 1 July 2012 and indexes it to the consumer price index. Similar to the managed investment trust provisions, the issues revolved around an industry sector being concerned about how it would be affected by a revenue increase. Once again, however, the committee supports the provisions on a national basis because of the government's overall fiscal strategy. The committee notes that the government remains committed to the Tourism 2020 initiative and continues to support the industry through programs such as T-QUAL, infrastructure upgrades and maintaining and expanding tourism attractions.

The bills represent a responsible package aimed at securing a sustainable revenue base for Australia as well as protecting the superannuation entitlements of Australian workers. The bills should pass.

On behalf of the committee I think the organisations that assisted the committee during the inquiry through making submissions or participating in the hearing in Canberra. I also thank my colleagues on the committee for their contribution to the report. I commend the report to the House.

Steven Ciobo (Moncrieff, Liberal Party) Share this | Link to this | Hansard source

by leave—I rise to speak on the advisory report on the Passenger Movement Charge Amendment Bill 2012, the Tax Laws Amendment (2012 Measures No. 2) Bill 2012, the Income Tax (Managed Investment Trust Withholding Tax) Amendment Bill 2012 and the Pay As You Go Withholding Non-compliance Tax Bill 2012. There was, as the chair outlined to the House, a dissenting report from coalition members with respect to each of the bills insofar as it is our recommendation as Liberal members on the committee that the bills not be passed by the House in the current form but, rather, require change.

The Tax Laws Amendment (2012 Measures No. 2) Bill 2012 and the Pay As You Go Withholding Non-compliance Tax Bill 2012 amend the Taxation Administration Act 1953 and four other acts to extend director penalties so that directors are personally liable for a wide range of company guarantees in relation to superannuation and pay-as-you-go withholding even if a company is placed into administration or liquidation. Liberal members of the committee are concerned that the government has not adequately addressed bipartisan concerns previously raised during the last inquiry into the measures. Importantly, the bill has failed to appropriately target phoenix activity and concerns that liability would apply indiscriminately to all directors, including those of charities and not-for-profits that are limited by guarantee, as many are. There are some 11,700 companies in Australia that are limited by guarantee.

It is typical of this Labor government, unfortunately, that directors would appear to be saddled with liabilities even where there is no illegitimate activity or undue liability. Questions were raised in the inquiry about whether the directors of the company may be liable to pay these measures if they join a board after the fact, and these questions were not adequately answered. It is repugnant not only to the rule of law and the processes of natural justice but also in terms of assigning all directors an indiscriminate liability, the history of company law and the legal principle of persona ficta.

The Australian Institute of Company Directors and many other stakeholders contend—and Liberal members of the committee concur—that phoenix activity is not appropriately defined in the bill. We as Liberal members were concerned about the need to do something with phoenixing activity. It is just that this approach is too broad and not effective in terms of its operation—and that is why we are not supporting the government's steps in this respect. The consolidation tax, cost-setting arrangements and related taxation of financial arrangements are retrospective tax changes. Liberal members of the committee are fundamentally opposed to post factum law, especially taxation legislation. This government has failed to justify both to the public and to members of the committee the retrospective aspect of this legislation.

Similarly, issues arise under the Income Tax (Managed Investment Trust Withholding Tax) Amendment Bill 2012, which amends the Income Tax Managed Investment Tax Withholding Act 2008 to increase the managed investment trust withholding tax from 7.5 per cent to 15 per cent. Both investments made, especially in infrastructure, and the reputation of Australia as a safe and stable place will now be placed at risk because of the facilitation of the government. Taxpayers who made a sound effort to comply with the prevailing law as it was when they entered into financial arrangements are particularly affected. In submissions made to the committee there were instances of entities that, with these changes in place, may not have entered into financial agreements outlined. Fundamentally it is a function of the mismanagement and, in our view, incompetence of the government that only serves to encourage the lack of certainty that already plagues public confidence.

Finally, the Passenger Movement Charge Amendment Bill 2012 increases the passenger movement charge from $47 to $55 from 1 July this year and indexes the charge to the consumer price index from 1 July next year. This is simply a revenue-raising measure and presents an enormous cost to the tourism sector not only directly but also in terms of the relative competitive disadvantage that it will present. Liberal members of the committee are gravely concerned that, at a time when Australia's tourism industry is already struggling, at a time when Australia has gone from being an exporter of tourism to being a multibillion dollar importer of tourism, this government is flying blind with respect to the extra impost it is putting on the industry. It is particularly obnoxious for an industry that employs roughly 500,000 Australians that this government would continue to reduce funding to that industry in real terms and at the same time impose an extra $600 million to $800 million of new tourism taxes. This is not good public policy. This is nothing other than a money-grabbing exercise from a government that has completely eroded Australia's fiscal position and now must lash out with new taxes on an industry that can ill afford it. It is a bad policy choice and all Australians involved in the tourism industry, directly or indirectly, know it to be exactly that.