Jenny McAllister (NSW, Australian Labor Party, Shadow Cabinet Secretary) Share this | Hansard source

I rise to speak to the Treasury Laws Amendment (2019 Measures No. 3) Bill 2019. Labor will be supporting this bill. There are three schedules to the bill and in turn these address matters relating to testamentary trusts, deferral of education and training standards for existing advisers and making miscellaneous amendments as part of the routine process of updating provisions and correcting errors.

Schedule 1 to the bill implements a 2018-19 budget measure and closes a loophole that allows testamentary trusts of deceased estates to be used for tax evasion purposes. It is designed to ensure the tax concessions available to minors in relation to income from a testamentary trust only apply in respect of income generated from assets of the deceased estate that are transferred to the testamentary trust or the proceeds of the disposal or investment of those assets. In effect, the law as it stands means that testamentary trusts can be used as a vehicle to minimise tax because income other than that resulting from a diseased estate can be transferred into them. Under present circumstances, the income minors receive from testamentary trusts is taxed at adult marginal rates, which access the $18,200 tax-free threshold. Some taxpayers, therefore, are able to appropriately obtain the benefits of this lower tax rate by injecting assets unrelated to the deceased estate into the testamentary trust. The government wants to close the loophole, and we fully support it.

The effect of schedule 1 is that income from testamentary trusts will be limited to income derived from the assets that are transferred from deceased estates or the proceeds of the disposal or the investment of those assets, and this is appropriate. But nobody should be under any illusion that this is a substantial reform. As the 2018-19 budget said, 'The measure was estimated to have a small, unquantifiable gain to revenue over the forward estimates period.' We shouldn't count on this measure to direct rivers of gold into the Treasury any time soon. And if the government wants to be taken seriously, and this is a very big if, then it should bring serious proposals in relation to tax avoidance into this chamber.

Schedule 2 to the bill amends the Corporations Act to defer the transitional time frames for existing providers to comply with the education and training standards, requiring completion of an approved degree or equivalent qualification and the standard requiring the passing of an approved exam. The transitional time frame for the approved degree or equivalent qualification will be deferred by two years to 1 January 2026. The transitional time frame for the approved exam will be deferred by one year to 1 January 2022. These are unfortunate but necessary amendments. They arise from the government's mishandling of the professional standards for financial adviser reforms.

In March 2017 reforms were introduced into the Corporations Act by the Corporations Amendment (Professional Standards of Financial Advisers) Act to raise the education, training and ethical standards of financial advisers. These reforms passed the parliament with bipartisan support over three years ago. They set new standards for financial advisers. They were intended to progressively come into effect from 1 January 2019. However, the body appointed by the government, the Financial Adviser Standards and Ethics Authority, was extremely slow to set the standards. As a result, financial advisers have been placed in the very difficult position of being asked to comply with the standards and complete exams at incredibly short notice. The government's decision to defer the educational and exam requirements is now appropriate but it should have been entirely unnecessary. It is only the result, and exclusively the result, of the implementation failures of the government.

Regrettably, we are in a position where we support a deferral to the deadlines. We understand that it is necessary. But when the parliament passes legislation it has every expectation that it will be implemented by the executive within the time frames in the legislation. It is a terrible failing by this government, a failure that has placed impossible pressures on financial advisers to comply with the new standards and sees the Senate placed in this position.

Schedule 3 of the bill makes a number of minor and technical amendments to laws relating to taxation, superannuation, corporations and credit. These amendments correct typographical and numbering errors. They bring provisions into line with modern drafting conventions, they repeal inoperative divisions, they remove administrative inefficiencies, they address unintended outcomes and they update references. Essentially, they help Treasury laws improve to operate as intended. And they were recommended by the 2008 Tax Design Review Panel.

This legislation contains necessary changes. It implements a long delayed budget measure to close a small tax loophole. It defers a previously legislated time frame that has not been met and it makes minor revisions to various laws through a process recommended by the 2008 Tax Design Review Panel. All these things are necessary. Some of these things could have been avoided.

We will always support sensible legislation that assures the efficient and effective operation of our taxation, financial services and corporate law systems, but the changes made in this bill should have been made much sooner. We condemn the government for its tardiness, it lack of attention and its failures in implementation.

Before I conclude, I wish to advise the chamber about the amendments that Labor circulated to this bill in May. I inform the chamber that Labor will now withdraw these amendments on sheet 8891 and we will not be moving them in the committee of the whole.

In the House of Representatives, Labor proposed amendments to this bill to remove the legislative exemption from conflicted remuneration rules for financial advisers in relation to the selling of units or shares in listed investment trusts and listed investment companies. Labor first introduced a ban on conflicted remuneration in 2012. But in 2014 this government introduced a loophole for listed investment vehicles and that enabled billions of dollars' worth of shares in units to be sold on the basis of commissions, costing mum and dad investors millions. As the shadow minister for financial services, Mr Jones, has said, ordinary investors were left exposed to complex, opaque and underperforming products because of this dud legislation.

Labor has been putting pressure on the government to remove this loophole for nearly a year. We have proposed moving these same amendments in the Senate, but we acknowledge that the Treasurer has finally come to the table. The Treasurer has committed to remove the conflicted remuneration exemptions for listed investment and listed investment trusts. Last week, he issued draft regulations to that effect for consultation. So today we are withdrawing our amendments in good faith. But if the final regulations are not up to scratch, are not issued in a timely manner or don't adequately protect ordinary Australian investors then we will be returning to the parliament to address this issue again.

Labor gives credit to the government for acting on this important issue, but this is a commonsense decision and it should have been arrived at far earlier. I thank the Senate.