Wednesday, 31 July 2019
Treasury Laws Amendment (2019 Tax Integrity and Other Measures No. 1) Bill 2019; Second Reading
The Treasury Laws Amendment (2019 Tax Integrity and Other Measures No. 1) Bill 2019 contains seven separate measures dealing with various Treasury laws and tax activities. I foreshadow that at the conclusion of my remarks I'll be moving an amendment to the question before the House.
Schedule 1 of the bill prevents certain tax deductions from arising when newly privatised entities repay a concessional loan. Schedule 2 amends the tax law to prevent small business capital gains tax concessions from being available for assignments of the income of a partner and other rights or interests in the income or capital of a partnership that are not a membership interest of the partnership. Schedule 3 limits deductions for losses or outgoings incurred that relate to holding vacant land under certain circumstances. This would essentially end negative gearing in relation to vacant land. Schedule 4 extends anti-avoidance rules for circular trust distributions to cover family trusts. Schedule 5 allows the Australian tax office to disclose certain business tax debts to credit reporting agencies. Schedule 6 allows the Australian tax office to develop and administer a framework for electronic invoicing. It will surprise many that that does not already exist. Schedule 7 ensures that an individual's salary sacrifice contribution cannot be used to reduce an employer's minimum superannuation guarantee contribution.
We'll not be opposing the bill in the House. I will be moving a second reading amendment, and I also foreshadow that we will be referring the bill to a committee in the other place. I'd like to make a few important observations, particularly about schedule 3 of the bill, because it does deal with the politically hot topic of negative gearing on real estate. You would have had to have been living on another planet if you don't know that this was a very hot issue during the May election campaign. During the election, the Prime Minister said that Labor's policy on negative gearing would force a 'concrete landing' for Australia's housing market and 'erode the value of Australians' homes'. He said changes to negative gearing could drive up rents by 22 per cent in Brisbane, while prices could fall by 16 per cent in Melbourne. He also said that 30,000 jobs could be lost across the construction sector. This was all true—but how so much can change over a very few short weeks!
I'm absolutely astounded that a bill made it through the coalition's caucus to remove negative gearing arrangements on certain real estate. There'll be owners of real estate throughout urban and regional Australia who'll be surprised that a government that campaigned so hard against these measures is introducing such a bill in the second sitting week of its new term of office. There'll be tradies throughout New South Wales and other places who I'm sure are going to be saying, 'We voted for this government because we were concerned about negative gearing and here they are introducing a bill that abolishes the very rights they vowed to protect.' So I'm sure this is a matter that will get a bit of attention during the committee consideration of this bill in the other place.
I'd also note that there have been some significant stakeholder concerns with the measure included in schedule 5 of the bill. We broadly support the measure, but the disclosure of business tax debts to credit reporting agencies will be a sensitive matter—and I'm sure the Assistant Treasurer knows that. It will be a sensitive matter for many businesses, and it's worth careful consideration by all parties before we jump into it. We'd like to hear from some of those parties to ensure that we've got the details of the legislation right.
We note that concerns have been raised in relation to this matter by the Institute of Public Accountants, for example. They have made the points that there are likely to be difficulties in keeping the information stored by credit reporting bureaus accurate and up to date; there's a need, in addition to that, to put in place safeguards that ensure data is removed once debts are paid; and there's the need for privacy protections to be embedded in the legislative framework. We share these concerns while not taking away our general support for the provisions which would enable the ATO to disclose to credit agencies the nature of these tax debts. I'd expect these matters to be considered by the Senate committee as the bill is investigated.
We also note that schedule 7 of this bill would prevent employers from underpaying superannuation when an employee chooses of their own volition to salary sacrifice into their superannuation account. This is a loophole that's well past its due date, and we commend the government for finally getting around to working on this. It is actually the subject of my second reading amendment. We call on the government to act swiftly to close other loopholes that allow employers to get away with ripping off their workers, whether through underpayment of superannuation or through wage theft, but we won't be holding our breath on that.
This government has been asleep at the wheel when it comes to tax integrity. One or two bills that fiddle around the edges of our tax system are not going to change that. The Liberal's signature policy on tax so far, in their six years of flailing government, has been an $80 billion giveaway to the big banks and multinational corporations. Only Labor has been serious about cracking down on these loopholes and making multinational corporations pay their fair share of tax. It was Labor's laws that the Liberals opposed that underpinned the tax office's $300 million win against Chevron. It was Labor's laws that the Liberals opposed that delivered the tax office's $529 million settlement with BHP. But Labor is here to be constructive. We're keen to ensure that the integrity of our tax system is maintained. We're keen to ensure that the tax integrity bills brought before this parliament are the best bills possible. This is why we have referred this bill to a full and proper Senate inquiry. I move:
That all words after "That" be omitted with a view to substituting the following words:
"whilst not declining to give the bill a second reading, the House calls on the Government to do more to combat superannuation theft and ensure that workers receive their rightful superannuation entitlements in full".
I'd hope this is an amendment that might enjoy the support of members opposite. With those remarks, I understand that the amendment is going to be seconded by the member for Cooper.
The original question was that this bill be now read a second time. To this, the honourable member for Whitlam has moved as an amendment that all words after 'That' be omitted with a view to substituting other words. The question now is that the amendment be agreed to.
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.
The original question was that this bill be read a second time. To this the honourable member for Whitlam has moved as an amendment that all words after ‘That’ be omitted with a view to substituting other words. The question before the House is that the amendment moved by the member for Whitlam be agreed to.