Wednesday, 11 August 2021
Treasury Laws Amendment (2021 Measures No. 2) Bill 2021; Second Reading
That this bill be now read a second time.
I seek leave to have the second reading speech incorporated in Hansard.
The speech read as follows—
This Bill makes a number of changes to tax laws to implement reforms to the administration and oversight of organisations with deductible gift recipient (DGR) status and also deliver on the Morrison Government's commitment to amend Australia's Offshore Banking Unit regime to address concerns raised by the OECD's Forum on Harmful Tax Practices in 2018.
Schedule 1 to the Bill amends the Income Tax Assessment Act 1997 (1997 tax law) to require non-government entities seeking endorsement as a DGR to be a charity registered with the Australian Charities and Not-for-profits Commission or be operated by a registered charity. Ancillary funds and specifically listed entities will be exempt from this requirement.
The requirement to be a charity already applies to the majority of the general DGR categories in Subdivision 30-B of the 1997 tax law. This measure will amend the special conditions applying to the remaining general DGR categories, requiring non-government entities to maintain charity registration in order to retain their eligibility for DGR endorsement.
The amendments include a 12 month transition period which will provide non-charity DGRs with the time to meet the requirements for charity registration without losing DGR status. Eligible DGRs may also have access to an additional three year transition period.
This measure will improve the consistency of regulation, governance and oversight of DGRs, in turn helping to support continued confidence in the sector and public support for DGR entities.
Schedule 2 to the Bill contains amendments to the Income Tax Assessment Act 1936 that remove the preferential tax treatment provided for Offshore Banking Units (OBUs) and provide transitional arrangements for existing OBUs.
The OBU regime is a concessional tax regime that can be used by the Australian financial services sector to provide banking services to offshore customers. The regime provides a concessional 10 per cent tax rate and an exemption from interest withholding tax for OBU activity.
In October 2018, the OECD's Forum on Harmful Tax Practices found that Australia's OBU regime contains harmful features. As a result, the Treasurer announced on 26 October 2018 that the Government would seek to address these concerns. The OBU regime has been closed to new entrants since the Treasurer's announcement.
Existing participants operating within the OBU regime will continue to access the concessional tax rate for a period of two years - up to the end of the 2022-23 income year.
The Government will use this time to consult with industry on alternative measures to support the industry and ensure activity remains in Australia once the two year grandfathering period ends.
Timely passage of this Bill will allow the OECD to confirm that Australia has amended the OBU regime to ensure that it is not a harmful tax practice.
Full details of the measure are contained in the Explanatory Memorandum.