House debates

Tuesday, 8 August 2023


Treasury Laws Amendment (Making Multinationals Pay Their Fair Share — Integrity and Transparency) Bill 2023; Second Reading

4:28 pm

Photo of Allegra SpenderAllegra Spender (Wentworth, Independent) Share this | | Hansard source

When this legislation was first introduced, I think many stakeholders breathed a huge sigh of relief. The government's consultation for country-by-country reporting and changes to the thin capitalisation rules have caused concern for the impact they would have on entirely legitimate business activities. To its credit, the government accepted feedback from stakeholders and made sweeping changes to its proposal to both be workable and address the integrity issues that the government is legitimately pursuing. But that relief was short lived.

It has now become apparent that there are new rules that have been inserted after the consultation, the debt deduction creation rules, that would, once again, have a significant impact on legitimate business activities. The rules would impact multinationals which loan money to a subsidiary in order to purchase assets from another subsidiary. The borrowing subsidiary is entitled to claim a tax deduction with regard to the interest expense. Each element of this is routine. Conglomerates often provide loans to subsidiaries, as it is cheaper than external finance, and related parties often acquire assets from each other. The integrity concern is that the parent entity may set an excessively high interest rate on the loan and allow profits from Australian businesses to be siphoned offshore. This is a legitimate concern, and I support the government's actions in terms of ensuring that we prevent this. The debt deduction creation rules, the DDCRs, are intended to deal with this concern appropriately.

It seems that the stakeholders I've spoken to are broadly supportive of the integrity principle that the government is trying to pursue. However, they have serious concerns with how broadly these rules have been drafted. They're likely to capture legitimate business activities, denying a tax deduction for those activities and thereby creating undue distortion in the market. These rules are likely to force some businesses to seek external financing when internal financing is available, or to acquire assets from third parties when they are already available internally. They will also create an inconsistency when the same activity incurs different tax treatment for different business types.

These changes, as far as I can tell, are not the intent of the legislation. They will increase the complexity and cost of certain business activities in Australia but serve no public benefit. There is no real justification I've seen for these changes, and, from my conversations with stakeholders and their submissions to the Senate inquiry, it is clear that they're unworkable. I'm certain that the government understands that the changes are unworkable and do not believe there is any chance of them passing into law in the present state. Given this, I'm not clear why the House is considering the bill. The legislation should be deferred until these concerns are resolved or discharged from the Notice Paper.

I'd also like to share concerns with the consultation process. I think it's absolutely critical in this House that we engage with stakeholders to understand the impact that legislation will have and ensure changes are well targeted with minimal unintended consequences. There were two rounds of consultation on this bill, which is appropriate. However, I do find it concerning that the problematic parts of the bill, these ones that I'm talking on right now, were not consulted on. It is hardly surprising that problems emerge when policies are produced without the input on those important parts from those who are affected. The government does sometimes do better in this, and certainly can do better on this, and I think the government should, in the case of this particular bill, try again. Given all of this, I'm actually alarmed that the government is nevertheless asking the House to agree to this bill.

When Labor were in opposition they were extremely critical of how the coalition governed, and promised Australians they would govern responsibly. I have to say that that is difficult to square with the claim on this bill. I also think that it is inappropriate for the government to try and pass legislation in this House which it surely knows is unworkable. Even if they are going to consult and defer consideration to the other place, I think the bill will then return to the House completely transformed for us to consider once again. I would like to ask the government to consider whether this process is the best use of the government's time. Perhaps it would be better to defer consideration by the House until the government can consult with stakeholders and prepare amendments. This is the point of my second reading amendment, which I now move:

That the following words be added after paragraph (5):

"(6) that parts of the Bill have not been subject to consultation but will have significant unintended impacts on businesses, which ought to have had an opportunity to review the proposal and provide constructive feedback prior to the Bill's introduction;

(7) that the Government has an ethical and practical obligation to undertake consultation and engagement with stakeholders on all significant changes across all portfolios; and

(8) it calls on the Government to:

(a) defer further consideration of the parts of this bill not yet subject to consultation until concerns about unintended impacts have been resolved; and

(b) establish an independent Tax Reform Commission, which could undertake genuine consultation on changes to Australia's tax laws and provide neutral, expert advice to the Government and Parliament".

This amendment makes the point that businesses ought to have had the opportunity to provide feedback on the changes that affect them before the legislation was introduced, and it calls on the government to defer consideration until those concerns have been resolved. It also calls on the government to establish an independent Tax Reform Commission. There is a serious problem with our tax policy making institutions when a government can propose three tax measures—multinational reporting, thin capitalisation and debt creation rules—with each of them being problematic. An independent commission could provide the government and the parliament advice on how tax policy issues could be resolved based on expert advice and broad effective consultation. It could be based on the Australian Law Reform Commission, a Whitlam innovation that was built on by the Howard government and enjoys strong bipartisan support today. This would be a significant improvement to existing processes and would provide the community with more confidence in the proposals put before the parliament. It would be an important and valuable change to the policymaking process, and one that I encourage the government to consider.

Today I'm also moving my consideration in detail amendments, which would simply remove the unworkable provisions from the bill. This would allow for the timely passage of the rest of the bill while the government undertakes proper consultation and resolves concern with the debt creation rules. This would be a sensible way for the parliament to proceed with this legislation. I hope the government will recognise it is simply not appropriate to ask the House to support legislation which the government has no intention of implementing in its current form.

Finally, I'd like to make a comment on tax reform more broadly. This is a bill around tax reform. I have been very vocal in the House and externally in my support of tax reform. But I urge the government, when it is looking at these tax reforms, to develop an institute such as a tax reform commission and to use it to help develop detailed policies that would help improve the tax situation and the tax laws in this country. I believe that if we have that support for micro-reforms and for small-scale and technical but very important reforms, we will also help build the muscle for broader reforms for the tax system, which are absolutely critical for our ongoing prosperity, for equity in our communities and for other important social and economic objectives such as housing and climate action.

Photo of Ross VastaRoss Vasta (Bonner, Liberal Party) Share this | | Hansard source

Is the amendment seconded? If the amendment is not seconded, then the amendment will lapse, and we will go back to the original amendment which the member for Hume has moved.

4:36 pm

Photo of Kate ThwaitesKate Thwaites (Jagajaga, Australian Labor Party) Share this | | Hansard source

I welcome the opportunity to speak on this bill, which will deliver on our government's commitment to ensuring that multinationals pay their fair share of tax. This is good policy. It's an important reform and, more than that, it reflects something that I know is important to a lot of Australians, including many people in my community who have brought up this issue with me and who want to see multinationals paying their fair share of tax. This goes to one of those core values that we like to think we hold as Australians—that idea of fairness. Whether you're an individual or a big business, everyone who can play their part and pay their fair share should do so. We know there's work to do in holding companies to account, and we know that this bill won't fix all the loopholes and problems that are there, but it certainly is a good start. It will level the playing field for Australian businesses and it will increase transparency. It will help ensure that large corporate groups can't avoid being upfront with the public on their corporate structures and whether they are operating with opaque or atypical tax arrangements.

Australia is not the only country trying to bring in reforms of this kind. In fact, we are in a way playing global catch-up. There is global momentum towards ensuring that firms do pay their fair share of tax. It is in our interests as a nation to do this reform. It is the interests of shareholders in this country that they have more information. It is also in the interests of these companies, who want the social licence to operate in our country, to have these rules in place and abide by these rules.

This government knows there is more to be done on multinational taxation. Two-fifths of multinational profits are currently booked through tax havens. That's $100 billion of Australian money in places like Panama and the Bahamas, where the tax rates are very low. Estimates suggest 80 per cent of the money in those tax havens is money that is in breach of other countries' tax laws. These are tax avoidance mechanisms, but they are also places where we know the consequences of that avoidance can be dire. Terrorists, kidnappers, crime syndicates and drug lords all store their money in these types of places. They are not places that Australian businesses should be transferring their money to.

Tax havens are an issue for us here in Australia, but they are also a global issue. As I said, it is a problem that the global community is trying to tackle, and it is something that Australia should be part of cracking down on. I know there have been consequences from this type of tax avoidance and issues with multinationals not doing the right thing. In my home state of Victoria, we had a case a few years ago of a tyre dump that had been transferred to a company in Panama, all in order to avoid their obligations. There were nine million tyres sitting at that dump and, by shifting the ownership off to Panama, the owners were attempting to avoid liabilities that they would otherwise have been held to. That is not acceptable. Our communities do not want that to be the type of business environment that this country allows. It is the sort of issue the government is hoping to address through this bill and through its work on multinational taxation.

In the face of what we know about the avoidance that is happening in Australia and globally, it is remarkable that those opposite have criticised this government for taking action on this issue. The member for Deakin and Senator Hume from the other place put out a media release that criticised the Prime Minister for wanting to do more on multinational taxation. That is so out of step with community sentiment. It is so out of step with where our business community should be in terms of the social licence to operate, in terms of making sure that they are upholding the standards that our community expects of them and in terms of making sure that they are holding fast to that ideal of fairness.

While those opposite were in government, they tinkered around the edges. They nibbled at the edges. They pretended they wanted to take action but, in fact, their inaction made it clear: they weren't on the side of Australians; they were on the side of the multinationals. In the lead-up to the election last year, the coalition told Australians not to support anyone proposing to raise taxes on multinational tax dodgers. Just contemplate that for a minute. They said to the Australian people: 'Don't support a party proposing to make sure that companies in this country don't avoid their tax obligations by sending money overseas.' It really is almost incomprehensible, even from those on the other side.

When Labor were last in office, the coalition voted against our multinational taxation measures, including a measure that recently saw Chevron paying an additional $300 million in tax. Those opposite abandoned multiple multinational tax measures which were ready to go. They took things down a few gears. They put things on the go-slow. They made it clear, once again, that they are not on the side of the Australian community. They are not on the side of Australian individuals who do the right thing—who file and pay their taxes. They are on the side of multinationals who choose to not face and not meet their tax responsibilities.

In 2021 a group of countries from right across the world came together to reach a deal on taxation that is an important step in the right direction on multinational taxation. More than 100 countries were part of this important deal. Australia is playing its part under that. This government is working to see the measures that were part of that implemented. Do you know who isn't playing their part in that global framework and joining with like-minded countries to say tax avoidance isn't acceptable? Those opposite. They are walking away from the issue of multinational taxation. They are at odds with the reality that this problem is deeply unfair to many Australian firms, who are left battling an unequal playing field.

If you're a new startup business in Australia, you are very unlikely to be banking in the Bahamas. You will not be out there finding an accounting trick that takes you through the Cayman Islands. You don't have an army of lawyers, accountants and consultants sitting in a conference room working to find every possible loophole they can. Instead, you are working hard to come up with a business model for your company. There is enough for you to do without having to face the inequity of big multinational firms and tax dodgers who are tipping the scales in their own favour and using tax havens to cheat Australian businesses who are doing the right thing out of competition and business they should have. Our government wants to level the playing field. We know that that is the right thing to do and the fair thing to do for Australian businesses who want to do the right thing and who want to be competing on a level playing field.

This bill contains two schedules. Both are important to the aims this government is pursuing in taking action on multinational taxation. The first targets listed and unlisted Australian public companies to disclose their subsidiaries and where they are located. This will help in holding companies to account, particularly large corporate groups, requiring them to be more transparent about their corporate structures and about whether they are operating with opaque tax arrangements. For example, this would apply if they were using a subsidiary located in a low-tax jurisdiction.

The information revealed by these changes will help inform us as to whether tax laws are operating as intended in collecting the right level of revenue. It will give us the opportunity to conduct a better economic analysis. As part of a company's annual financial report, we will see this information in line with international approaches such as those already underway in the United Kingdom. It's an approach that aims to reduce the compliance burdens many businesses may face. From the time our government included these plans for reform in 2022, as we looked towards the election, through to now, we have been conducting valuable consultations to ensure that stakeholders have been heard and had their concerns understood in the work that is being done. So there has been consultation around these measures and how they will apply.

The second schedule is a measure aimed at revenue raising. It targets a known tax planning arrangement to ensure that those utilising them are paying their fair share of tax. That's what this bill is about: making sure that people are paying their fair share of tax. It will limit multinationals' debt deductions. It will help to level the playing field for Australian businesses. The reforms will strengthen Australia's thin capitalisation rules and, as I said, will align Australia's approach with those of many other countries around the world—the United States, the United Kingdom and most of the European Union—in implementing earnings based interest limitation rules.

There are real differences between the approach our government is taking—and, in fact, the work on multinational taxation that was done under the previous Labor government—and the approach we have seen from those opposite. Labor have a track record, and we plan to build on it. We will keep a focus on this issue. It is something we promised before the last election. It is something that I know people in my community want to see implemented. It is something that they continue to talk to me about. We are following through on that commitment. We know that it is an important commitment for the Australian community, Australian businesses and our country more broadly that we have these rules in place and that we make sure this key issue of fairness is being addressed through our laws, through the system, through the way we say businesses should be operating in this country. It is that idea of fairness that we all sign up to as Australians, the idea of making sure that the rules don't rig it for those who have an army of lawyers on speed dial, that the rules don't rig it for those who can make these kinds of complex arrangements and avoid their tax liabilities.

We are supporting those who play by the rules. We are supporting those who are trying to start new businesses in this country. We are supporting those who are trying to do the right thing. We are making sure that those Australian individuals who do the right thing when they pay their tax on time know that there isn't one rule for them and another rule for that big multinational around the corner. That is a fundamental, simple thing that should really be at the heart of what we do in this place but has been ignored for too long.

Those opposite have criticised the approach this government is now bringing to this place. That is disappointing. I say to those opposite: now might be an ideal time to reconsider that approach and the decision you've taken on this legislation. Have a chat to your communities and see if they're really saying: 'Yes, absolutely. It's time to stand up for multinational tax avoiders. That's what we sent you to Canberra to do. Please make sure you get on your feet in the House and say that's what you're there for.' That's certainly not what I'm here for and it's certainly not what this government is here for.

We don't like it when someone gets an unfair advantage, when they find the loopholes to work their way around the rules that are there for a reason. We don't like it when someone doesn't pay their fair share. Australian businesses shouldn't be disadvantaged by going up against multinational firms and the tax havens they're running their profits through. It's not fair. Our government is taking action on it, and we will continue to do the work that needs to be done to fix it.

4:49 pm

Photo of David SmithDavid Smith (Bean, Australian Labor Party) Share this | | Hansard source

I also rise today to speak on the Treasury Laws Amendment (Making Multinationals Pay Their Fair Share—Integrity and Transparency) Bill and to recognise the work of my good Canberra colleague the member for Fenner in bringing it to the House. I also want to recognise another champion for fair taxation in the House, the member for Fraser, and the contribution just made by the member for Jagajaga.

In Australia, we have a situation where we have two-fifths of multinational profits currently going to tax havens. This equates to some $100 billion of Australian money sitting in tax havens, in places like the Bahamas and Panama, where there are very low tax rates and where, in one estimate, four-fifths of the money is there in breach of other countries' tax laws. These aren't just tax avoidance mechanisms. These are also the places where terrorist, kidnappers, crime syndicates and drug lords store their money. We have a moral responsibility to crack down on tax havens because they are a blight on the global tax system.

It's laughable that the member for Deakin and Senator Hume, just a little while ago, put out a press release criticising the Prime Minister for wanting to do more on multinational taxation—laughable—particularly when, in their home state of Victoria, we had the incident a couple of years ago of the Stawell tyre dump being transferred to a company in Panama to avoid their clean-up obligations. Some nine million tyres were sitting at that dump. The owners attempted to shift its ownership off to Panama, to a tax haven, thereby avoiding their liabilities. We probably shouldn't be surprised by this approach to recycling, but this avoidance of responsibility is the sort of problem that this government wants to address.

Over nearly a decade in government, the coalition tinkered around the edges. They made tweaks here and there, but throughout their term, they very clearly showed which side they were on—not the side of working Australians, but on the side of multinational tax dodgers. What a side to choose! And before the 2022 election, they told Australians not to support anyone that proposed to raise taxes on multinational tax dodging. Just think about that for a moment. It was the view from Labor in opposition that, when the international community came together in 2021 to strike a deal on global taxation, it was a step in the right direction in what needed to be done. Now, as the Australian government, we're working to see those measures implemented.

During the 2022 election campaign, the Albanese government committed to ensuring multinationals pay their fair share of tax. That's why we are moving forward with this comprehensive legislation. The purpose of the Treasury Laws Amendment (Making Multinationals Pay Their Fair Share—Integrity and Transparency) Bill 2023 is to amend taxation incorporation laws to introduce new rules to protect the integrity of the Australian tax system and improve tax transparency. The OECD released its report titled Addressing Base Erosionand Profit Shifting. Subsequently, the OECD and G20 countries adopted the base erosion and profit-shifting action plan, which identified 15 clearly defined actions for implementation aimed at improving international tax cooperation and tax transparency. This plan was designed in response to a growing global perception that the domestic and international rules on the taxation of cross-border profits are now broken and that taxes are only paid by the naïve—a perception that must change.

This government's approach is split into two schedules. Schedule 1 is designed to enhance multinational tax transparency, specifically the disclosure of subsidiaries. The measure in schedule 1 targets Australian public companies, listed and unlisted, to disclose their subsidiaries and where they are located, which is something that should be pretty desirable for those interested in transparency. This will hold companies to account, particularly the large corporate groups, requiring them to be more transparent about their corporate structures and whether they are operating with opaque tax arrangements, such as those through subsidiaries located in low-tax jurisdictions. This information will support better economic analysis and help to inform whether tax laws are operating as intended in collecting the right amount of revenue. This amendment is part of the government's broader regulatory mix to improve corporate disclosures.

Ensuring this information is in the public domain will facilitate an informed discussion on tax compliance, helping to build trust in the integrity of the tax system. Companies will disclose this information as part of their annual financial report, helping to reduce compliance burdens. This is in line with international approaches. For example, the United Kingdom has a similar measure already in place. This measure was informed by stakeholder feedback in August 2022 and April 2023. This is aimed at ensuring increased tax transparency. It complements the ongoing work to implement a beneficial ownership register and public country-by-country reporting, which the government is continuing to engage with stakeholders on.

The intent is that increased public disclosure will lead to enhanced scrutiny on companies' arrangements, including on how they structure their subsidiaries and operate in different jurisdictions, including for tax purposes. From a tax perspective, the expectation is that more information in the public domain will help to encourage behavioural change in terms of how companies view their tax obligations, including their approach to tax governance practices, decision-making around aggressive tax planning strategies and potential simplification of group structures.

Schedule 2 of this bill addresses issues around thin capitalisation. Thin capitalisation may be described as the process of financing subsidiaries with more debt, in comparison with equity, than would be normal in an arms-length funding arrangement. Such a process may be carried out for tax related reasons. Schedule 2 is a revenue-raising measure. It targets a known tax planning arrangement by limiting a multinational's debt deductions, ensuring they pay their fair share of tax in Australia, and helps to level the playing field for Australian businesses. This measure limits a multinational's debt deductions by strengthening Australia's thin capitalisation rules. By strengthening Australia's thin capitalisation rules, we can combat multinational profit shifting and tax avoidance by ensuring that debt and interest deductions are linked to an entity's economic activity and taxable income in Australia.

This legislation has its objectives. You simply don't make too many friends when making multinationals pay their fair share. Some naysayers will argue that these amendments put Australia at a competitive disadvantage to other countries. Of course, they're not speaking in their own self-interest. But the system will not be a global outlier. Reporting of subsidiary information is in line with other international approaches—for example, the United Kingdom's listing rules introduced around 2016. Anecdotal feedback from some industry groups was that this change resulted in some companies simplifying their corporate structures. The reality is that the new rules bring Australia in line with other comparable jurisdictions around the world. Most OECD countries have adopted the '30 per cent of earnings' benchmark ratio, including the UK, the US, Canada and most EU countries. Each country has their own nuanced version of the rules.

The final legislation has been designed to balance tax integrity with broader considerations, such as continuing to ensure Australia is an attractive destination for investment. Some will argue that this legislation needs transitional rules given the suddenness of the changes, but these changes are not sudden. This has been Labor policy for a long time. The amendments were first announced in April 2022 as part of the government's election commitment platform. They have since been subject to extensive stakeholder consultation, and the final legislative approach reflects this stakeholder feedback to accommodate genuine commercial arrangements as much as possible, noting that this is a tax integrity measure.

These critics also want to know why there are no carve-outs from these amendments. The amendments adopt the existing exemptions within the existing thin capitalisation rules. This excludes smaller entities with less than $2 million in debt deductions and entities whose assets are mostly Australian. However, there are no sectoral specific exemptions. The use of third-party and related party interest is one of the simplest profit-shifting techniques available in international tax planning. This is a technique available to entities in all sectors. Excessive interest deductions or debt deductions are a risk to Australia's domestic tax base and are commonly used by multinationals as a base erosion and profit-shifting tax avoidance strategy.

Representatives in the property and infrastructure sectors have sought an exemption on the basis that the United States, the United Kingdom and Canada provide some form of exemption. However, the Australian approach introduces an Australia-specific rule expected to be used by the property and infrastructure sectors, to allow genuine third-party commercial financing arrangements, such as with greenfield construction projects, to be deducted with no link to earnings, subject to some eligibility rules.

These amendments will hold companies, particularly large corporate groups, to account on their corporate structures and whether they are operating with opaque or atypical tax arrangements. Given the global momentum towards ensuring that firms pay their fair share of tax, it's in the public interest that shareholders and the community have more information of this kind. This legislation represents the Albanese Labor government getting on with our election commitments and joining a global fight to stop companies shifting profits to tax havens.

We on this side of the House believe that, if you make money in Australia, you should pay tax in Australia. It should come as no surprise to the House that it's up to Labor to fix this. Only one party in this parliament has the record in promising and delivering tax reform to ensure multinationals pay their fair share, and you only need to look back at history in this space. But, when the previous government came to office, they abandoned multiple multinational tax measures which were ready to go, and they've been on the go-slow on multinational taxation ever since.

Labor has a track record here. We'll continue to focus on that issue in government because we believe it's fundamentally one of fairness. Australian business shouldn't be disadvantaged by going up against multinational firms that are channelling their profits through tax havens. If you're a new start-up business, you're not banking your money in the Bahamas, you're not looking for an accounting lurk to run through the Cayman Islands and you don't have an army of lawyers and accountants to seek out every loophole. Instead, you're working hard to try and come up with a new business model. But, right now, you face the potential of being cheated by multinational firms and tax dodgers who are using tax havens.

We still have a lot more to do to level the playing field and support those Australian businesses, but this is a huge step in the right direction. I commend the work of the minister and the assistant minister, and I commend this bill to the House.

5:03 pm

Photo of Emma McBrideEmma McBride (Dobell, Australian Labor Party, Assistant Minister for Mental Health and Suicide Prevention) Share this | | Hansard source

McBRIDE (—) (): I'm pleased to rise to speak to the Treasury Laws Amendment (Making Multinationals Pay Their Fair Share—Integrity and Transparency) Bill 2023. This bill will level the playing field for Australian businesses and increase transparency of large corporate groups, and I'm pleased to follow the contribution of the member for Bean.

This legislation is important for all Australians as it will make a fairer Australian tax system that will benefit the millions of individuals and businesses who pay their fair share and make their contribution. At last year's election, we were clear—we could not have been plainer—that a Labor government would make sure multinationals paid their fair share of taxes. That's just what we're doing.

This bill is split into two schedules. Schedule 1 of this bill will hold multinational companies to account, increase transparency and shine a light on the use of subsidiaries in low-tax jurisdictions—important work. Having companies disclose their subsidiaries and where they are located will also help reduce compliance burdens. This disclosure will allow the Australian Taxation Office to ensure companies are doing the right thing and paying their fair share. This, as other speakers on this side of the House have mentioned, is in line with other international approaches, with the United Kingdom having similar measures in place. Listed Australian companies will be required to disclose information on all of their subsidiaries within their annual financial statements, making things transparent, making them accountable. In practice, the disclosure of subsidiaries will mostly impact large multinational companies with complex corporate structures. Small Australian companies that do not have any subsidiaries would only have to disclose a nil statement, limiting any additional reporting burdens for many smaller companies.

Schedule 2 of this bill targets known tax planning arrangements by limiting multinational corporations' debt deductions, making sure that they are paying their fair share of tax in Australia. This legislation is a key step in creating a fairer Australian taxation system and follows the lead of other OECD nations. It builds on efforts to ensure large multinationals are paying their way, paying their fair share and doing the right thing. Schedule 2 follows on from what international jurisdictions, such as the United States, the United Kingdom and many countries within the European Union, have already implemented.

Like schedule 1, schedule 2 will help level the playing field for Australian businesses, including businesses in my electorate of Dobell on the Central Coast of New South Wales—contributing businesses, good corporate citizens. This will be done by limiting debt related deductions to 30 per cent of profits. This is a new earnings-based test, and it will replace the safe harbour test currently in place. The current safe harbour test allows companies to deduct debt up to a threshold of 60 per cent of assets. It is estimated that, by the end of 2025-26, schedule 2 will raise $720 million in revenue. This change will help improve tax integrity while continuing to make sure that Australia is an attractive place for investment. It is a priority for our government, the Albanese government, to make our tax system fairer for all Australians—for individuals and for Australian businesses.

Schedule 2 amends the already existing thin capitalisation rules. The amendment will not change the existing exclusions for smaller entities and entities with mostly Australian assets, which is important. This ultimately benefits small Australian businesses and helps limit the continuing tax avoidance of some multinational companies. Every Australian wants multinationals to pay their fair share, and now we're making them do it. This bill will help make the Australian taxation system fairer, levelling the playing field for Australian businesses—businesses that are doing the right thing and contributing, businesses in the outer suburbs, in the regions and right around Australia, including those on the Central Coast of New South Wales, the area which I represent.

I have the opportunity, day to day, to listen to local business people, to understand the challenges that they face, and to listen to the solutions that they suggest. Businesses in my community want to make sure that multinationals are paying their fair share. They want a level playing field so that, whether they're a start-up or a more mature business, they have a fair go and multinationals don't have an unfair advantage. This bill, at its heart, is about fairness. I know that the small businesses in Wyong, Toukley, the Entrance and many other areas of the coast don't have subsidiaries set up overseas to shift profits made in Australia. I know they pay their fair share, and I know they want to contribute to our local community and economy. They're good corporate citizens.

This morning I spoke to leaders from Central Coast Industry Connect. It's a not-for-profit limited organisation genuinely committed to developing a vibrant, connected and innovative manufacturing sector that provides strong employment in our region. I've had the chance to work with Central Coast Industry Connect since I was elected, and I had a good conversation with the leaders of the company this morning. They wanted to acknowledge that we've got some large multinational organisations on the coast that are doing the right thing—good corporate citizens that exercise sound corporate social responsibility—but they want to make sure that every large corporate does that. It's important that we strike the right balance. They told me that if those organisations are not paying appropriate tax or their fair share then it clearly disadvantages local manufacturers. The food and beverage industry is one of the biggest industries on the Central Coast. Whether it's Eastcoast Beverages, who are now available in the parliament, or companies who are just starting out, we want to make sure that small businesses, more-mature businesses—Australian businesses—have a fair go. That's a level playing field, and that's what this legislation intends to create.

Central Coast Industry Connect and other business leaders on the Central Coast who I have spoken to have told me that those organisations aren't paying their fair share. If they're not paying the appropriate tax then that's clearly a disadvantage for our local businesses and manufacturers. There are no two ways about it—it's simply not fair. That's why this bill is important to me as a local person and as a local MP whose first job was making coffees in her family's small business in what was then Wyong Plaza. This bill will level the playing field and benefit Australian companies right around the nation, in every town, suburb and city and on the Central Coast, which I represent. Our government is genuinely committed to making the tax system fairer for every Australian, wherever their business is run.

In the cost-of-living crisis, with many Australians doing it tough, including business owners, multinational corporations must be paying their fair share. This tax avoidance by multinational companies is not a victimless crime. When companies avoid tax through loopholes, the tax revenue that would be used to fund a range of critical investments in healthcare, education, infrastructure and aged care is short-changed. Making listed and unlisted companies within Australia disclose their subsidiaries and strengthening Australia's thin capitalisation rules will not only increase fairness, but benefit society as a whole. By requiring large multinationals to disclose all their subsidiaries, we can follow the lead of our international counterparts and deter multinationals from shifting profits made in Australia to overseas.

We know times are tough. Many Australians are doing it tough. I also know that these Australians will benefit from this bill.

5:12 pm

Photo of Meryl SwansonMeryl Swanson (Paterson, Australian Labor Party) Share this | | Hansard source

I'm very pleased to speak on the Treasury Laws Amendment (Making Multinationals Pay Their Fair Share—Integrity and Transparency) Bill 2023.

I want to start by talking about an average household in my electorate of Paterson. The husband works in the mines. He's a local, and he follows generations of men and now women who've worked in that industry. The work is hard and dirty, but he gets paid pretty well. He knows that there are risks, and he's conscious of getting home every day to his wife and kids. He works 12-hour shifts and occasional overtime to ramp up the income. The overtime makes a huge difference to their life. It's a good, secure job, thanks to him getting a permanent shirt now that the same job, same pay legislation introduced by the Albanese Labor government is coming through. And the conditions are good, thanks to his Mining and Energy Union membership. The overtime kits out the kids for local sport and their extracurricular activities to give them every opportunity. He can ensure that they have the technology and the gear that give them the best chance of doing well at school. He provides a safe and secure roof over their heads, and for that he's very proud. He's underground for half the day and asleep for an average of about six. After an hour's drive each way to the pit and a few chores, he probably spends about three or four hours of quality time a day with his family.

The wife is a nurse at the local GP practice and she too is working long hours, simply because there's a shortage of skilled medical workers in the region. She balances the workload and her family pretty well, but she probably feels, most of the time, that she's not there as much for her family as she'd like to be. She has an obligation to her employer and her community to work full time, and she knows that she's a valued member of both. She also knows that full-time work insures that her family have the means to live as well as possible.

She takes great pride in her home and family and is grateful that cheaper child care is available to her family. It ensures that her kids are well looked after, and they are getting the tutoring that will ensure that they are well adjusted and good social beings. I seek leave to continue my remarks later.

Leave granted; debate adjourned.