Tuesday, 20 June 2023
Treasury Laws Amendment (2022 Measures No. 4) Bill 2022; Second Reading
I rise to speak on the Treasury Laws Amendment (2022 Measures No. 4) Bill. This is a bill that, like so much of what we're seeing now, does look familiar. Much of the content of this bill contains the pro-growth, pro-small to medium-sized business agenda that typifies and typified the coalition's approach to the economy, and we strongly support those components. We strongly support initiatives such as the Digital Games Tax Offset, the Technology Investment Boost, the Skills and Training Boost and the initiatives to reduce red tape. This is a good thing—from tax incentives to support the digital economy to reducing red tape for large and small businesses, improving integrity around superannuation, supporting small and medium-sized businesses to digitise and train their staff.
However, we do have deep reservations about other parts of this bill. It is important to note that this bill could have sailed through this parliament with bipartisan support months ago. Instead, at exactly the same time we should be delivering certainty to business, this Labor government has stapled into this bill a number of politically contentious measures, classic wedge politics that do nothing to advance the interests of Australian businesses or consumers. This includes billions in spending for transmission projects that have not been recommended by the energy operator; a hidden $1 billion fund for the Department of Climate Change, Energy, the Environment and Water to circumvent the independent Clean Energy Finance Corporation processes; and legislative changes that remove safeguards for investment in the Clean Energy Finance Corporation.
Schedule 8 seeks to implement a change to remove the safeguards around spending through the Clean Energy Finance Corporation. It modifies the CFC Act to enable the Clean Energy Finance Corporation to receive additional funds to implement Rewiring the Nation, establishes the Powering Australia Technology Fund and streamlines the ability of the government to provide the CFC with additional funds in the future. This schedule also clarifies the Clean Energy Finance Corporation's governance arrangements in specifying its nominated minister. The explanatory memorandum of the bill clarifies that this is an $11 billion allocation of funding with an additional $1 billion going to the Department of Climate Change, Energy, the Environment and Water to fund projects that would not meet the Clean Energy Finance Corporation's criteria.
A remaining $8 billion will be credited to the Clean Energy Finance Corporation, at a later date, to meet the $20 billion election commitment. However, the government has not identified what these projects would be. Critically, the schedule amends several operational revisions of the Clean Energy Finance Corporation Act. The legislation seeks to remove the requirement for the government to legislate additional funding for the Clean Energy Finance Corporation, allowing them to great additional accounts within the Clean Energy Finance Corporation simply via general appropriations acts.
The coalition has concerns about this schedule. This means, in practice, that Minister Bowen, the Minister for Climate Change and Energy, will be able to sneak in changes without consulting parliament. At a time when businesses need certainty, this is a Labor government playing games, and businesses will pay the price for this. Therefore, while we support many of the schedules in this bill, the opposition will be moving amendments to remove schedule 8.
Where urge the crossbench and government to support this amendment, to ensure that this bill is bipartisan and can be progressed quickly to the benefit of all Australians.
On behalf of the Greens, I can indicate we support the Treasury Laws Amendment (2022 Measures No. 4) Bill 2022 but have specific concerns in relation to schedule 9, the taxation of military superannuation benefits, which deals with what has become known as the Douglas decision.
Acting Deputy President Walsh, as you'd be aware, veterans have made immense sacrifices for this country. Many have had their lives changed irreparably, and those who are impacted by this bill have sustained lifelong injuries from their service. That's what this schedule applies to, veterans who we know have permanent, lifelong injuries that are referable to their service. Those injuries often have widespread impacts on their lives and their families, and particularly impacts on their loved ones. We should be doing all we can to support what is, unquestionably, a vulnerable group of Australians.
Schedule 9 of the bill seeks to amend various taxation laws to, on one part, confirm the tax treatment of certain defined benefit pensions, following the full Federal Court decision in Douglas, but it goes beyond that. The schedule also provides a non-refundable tax offset for recipients of invalidity benefits paid in accordance with two of the schemes, the MSBS and the DFRDBS, to ensure that they do not pay additional income tax because of the Douglas decision. I note the minister's second reading speech, in which he stated:
Schedule 9 to the bill will ensure that veterans affected by the Full Federal Court decision in Commissioner of Taxation v Douglas will not face worse income tax outcomes as a result of the court's decision. The government's objective is that nobody is worse off. The legislation will preserve the preferable tax and outcomes for affected veterans as a result of the decision.
This bill introduces a new non-refundable tax offset for members of the Military Superannuation and Benefits Scheme and the Defence Force Retirement and Death Benefits Scheme. That ensures that those individuals who would face adverse tax outcomes, as a result of the court's decision, will not pay higher taxes on their superannuation invalidity benefit. That is good. This offset will also apply to spouse and children's pensions paid to a spouse or child following the death of a member if they had otherwise been affected by the Douglas decision. That too also good.
Schedule 9 provides that any benefits that the Douglas decision may apply to, beyond those two schemes, will continue to be taxed as superannuation income streams by amending the legislative definition of superannuation income streams. This is where concerns have been raised by veterans. The measures also includes a transitional provision to ensure that certain non-military invalidity benefits that received lump-sum status prior to that Douglas decision are not disturbed by the reversal.
Schedule 9 seeks to implement the government's commitment of their 25 July 2022 announcement that no veteran would be worse off as a result of the Federal Court decision in Douglas. Indeed, the government said, on introducing the bill, that that is the commitment for the government. I appreciate the government's efforts and the Greens appreciate the government's efforts to improve the taxation situation for veterans. I note the work of the minister recently in announcing a pathway to fix these convoluted, overlapping veterans entitlements schemes. That's vital work, and the Greens will continue to engage with the government to make life better for veterans—better, simpler, fairer.
With this in mind, I note, though, that there are two areas where there are significant concerns amongst the veteran community in relation to schedule 9 of the bill. They are, firstly, that schedule 9 will only apply to those whose invalidity payments commenced on or after 20 September 2007. It won't extend to members whose invalidity payments commenced before that date, so those veterans won't have access to the same tax benefits. That is an inequitable outcome. Secondly, the super schemes covered by schedule 9 are restricted to those referenced in the schedule—that is, to members of the Military Superannuation and Benefits Scheme and the Defence Force Retirement and Death Benefits Scheme. This means that newer members of the ADF will be unable to access this beneficial tax benefit treatment, again generating an inequitable outcome.
These unjust outcomes run counter to the government's commitment that no veteran will be worse off. I strongly urge the government to, over the coming months, review where they've landed so as to extend the beneficial effect of the Douglas decision to both of those classes of veterans: those whose invalidity payments commenced before 20 September 2007, as well as newer member of the ADF who are on the ADF cover.
I also note that there are significant concerns in the veteran community that this schedule may indeed leave some veterans facing worse outcomes. I've previously raised these concerns with the minister's office and note that in the last 48 hours we've had a more detailed response from the minister that addresses some of those concerns. I'll deal with that correspondence in a moment. I want to personally thank those veterans and organisations who have engaged with my office on this bill and on related issues. I give a particular shout-out to Peter Thornton; Stuart McCarthy; Pat McCabe, who is the President of the Australian Federation of Totally and Permanently Incapacitated Ex Servicemen and Women; Ian Lindgren; Bradley Campbell; John Pauley, the President of the Australia Council of Public Sector Retiree Organisations; and John Lowis, the President of the Defence Force Welfare Association in Queensland.
Given the evidence we've heard through the ongoing Royal Commission into Defence and Veteran Suicide, it's essential that these veterans' voices are heard when legislation like this comes through parliament. It's also essential that the government responds to it, because time after time governments have failed to properly support veterans—and we know that, tragically, those failures can end in lost lives.
The Greens will support the bill because, as the government has noted, it ensures that veterans affected by the Douglas decision—the great bulk of them—will not face worse income tax outcomes as a result of the court's decision. But it doesn't answer all of the concerns. I do note Minister Keogh's communication to my office after it raised these concerns. In responding, he stated, in part, this: 'The proposed amendments in the bill currently sitting before the Senate seek to ensure that veterans negatively impacted by the Douglas decision are not left worse off and that veterans who benefited from the decisions retain those outcomes. The Australian government, through its announcement of a proposed bill, has sought to respect the court's decision by leaving the beneficial change in tax treatment for veterans in place while maintaining the integrity of the rest of the superannuation system. As such, the proposed legislation retrospectively and prospectively ensures that all other schemes and benefits, other than those specifically changed by the court's decision, will continue to be taxed as income streams as was always previously intended and understood to be the case. The implementation of this legislation will be subject to passage of the bill.' It says further: 'This approach is consistent with the intent of the current superannuation tax law and reflects the longstanding policy of successive governments that most common-law pensions should be treated in this way. There is no intention for a broader change to the tax treatment of any common-law pensions beyond the court's decision.'
I place on record my office's gratitude for the engagement with the minister on this matter, but I finish my contribution by saying this: yes, this bill resolves many of the issues that arose under the decision in Commissioner of Taxation v Douglas, and it prevents a significant number of veterans being worse off as a result of that decision, but there remain those two classes of veterans who have not received an equitable benefit as a result of this decision. I again urge the minister and the government to review what's happened to ensure that all veterans have equal and equitable access to fair military pensions when they suffer injury in the course of their duty.
At the outset I should note that I share some of the concerns raised by Senator Shoebridge with respect to the schedule in the Treasury Laws Amendment (2022 Measures No. 4) Bill 2022 which is seeking to address the so-called Douglas decision. I would like to note that I also have received many representations, which I have passed on, from veteran groups in relation to their concern about equity in this regard.
In particular, Senator Shoebridge raised issues in two areas which are not supported by the legislation. I would like to quote from the submission from the Defence Force Welfare Association national office, dated 31 January 2023, to the Senate Economics Legislation Committee:
Areas which are not supported:
So there are real concerns in the veteran community in this regard, and I think the government, and senators of all political persuasions, need to reflect upon this. We should achieve an outcome, ultimately, where with the same service you get the same outcome and where there is equality of treatment across our veteran communities, notwithstanding when they may have enlisted or when their service was completed. The same service should result in the same outcome.
So I support many of the comments of my friend Senator Shoebridge in this regard. I commend the minister on his engagement with respect to this. I think this needs further engagement, further clarity and further simplification, and I think we need to do better than this. We need to do better than this for our veteran communities. Whilst I will support the bill, there does need to be some reflection on this, because I don't think it's entirely satisfactory, to be frank.
The second point I'd like to make in relation to the bill is to touch on some of the concerns raised by my good friend Senator McGrath in relation to the billions and billions of dollars in spending for transmission projects that have not been recommended by the Australian Energy Market Operator but which have made their way into schedule 8 of this bill—billions of dollars We also see a hidden $1 billion fund for the Department of Climate Change, Energy, the Environment and Water to circumvent the independent CEFC process. We need those independent processes to test the robustness of investment cases, and it is very disappointing to see a $1 billion fund introduced into this bill which is not subject to those independent processes.
I also note that there have been legislative changes that remove safeguards for investments in the Clean Energy Finance Corporation. Again, we need that independent rigour in this legislation, and we just don't see it. We actually see an undermining of it, and that is deeply concerning to the coalition opposition. There will be amendments, as I understand it, which will be moved in that regard.
It's an interesting phrase, to badly paraphrase one from a movie: a TLAB is like a box of chocolates; you never know what you're going to get! This is a little bit like that. We heard raised again—and the senator is agreeing with Senator Shoebridge way too often in this place!—the same representations made around Defence. I think the senator raised a good point, to look at a more equitable solution over the coming months and, potentially going back to the place where Senator Shoebridge came from, looking at New South Wales Police superannuation. They have disability payments made and it lowers their ability to conduct funds into their own superannuation. Maybe we could expand that to ensure that all our services are getting looked after in the right way.
This Treasury Laws Amendment (2022 Measures No. 4) Bill 2022 is fairly benign and has some very good things in it. I will speak about the digital gaming tax offset and how important that is. It's a long-forgotten industry that's worth billions and billions of dollars. It is as big as the film industry, and having an Australian presence in it is important. I note that the industry was waiting on this bill coming through; there are tax benefits kicking off for them on 1 July and it will give them the certainty to go out and start hiring. Importantly, they can get these projects on the books in Australia.
I had the great benefit of going with IGEA, the interactive gaming & entertainment association, to a number of software firms which are set up and waiting for this to come off. We saw Naresh Hirani from Riot Games, the maker of League of Legends and Valorant; my son tells me that Valorant is a very good game, but I haven't tried it. They have their offices set up and they're waiting to make commitments with staff. They're looking at the benefits this will bring, very similar to the film industry. They're modelling on the Canadian experiment, where Montreal and Quebec put some tax benefits in. They're called the 'Silicon Valley of the North', with thousands of people employed across that area. It's good.
We met with Edward Fong from Ubisoft on exactly the same point. Ubisoft is the maker of Assassin's Creed, Far Cry and For HonorFar Cry is a very entertaining game, for those who enjoy that. They're waiting on this, and this will give them certainty. I also met with James Lockrey and Nico King from Chaos Theory Games. They've been a software-for-service employer and maker, but they're about to launch one of their first bigger-budget games, Crab God: the Mother of the Tides, based on a crab on the reef keeping their patch healthy and raising their kids out of danger. This step will benefit them.
These are the good things in this box of chocolates; these are the hazelnut whirls to me! These are the things in this bill which are important. But, as Senator McGrath pointed out, the turkish delight is there as well: billions of dollars for infrastructure and transmission lines, and the billion-dollar fund for the Clean Energy Finance Corporation. All that is in there, and it's not right. This is a bill that, as Senator McGrath said, we will try to amend—to improve, we would say. As Senator Shoebridge said, there's scope to look at further things in schedule 9, and we would like to change schedule 8. This government has picked up the digital gaming tax offset bill of the previous government. It is needed, it is wanted and it will lead to massive investment and good employment. I commend the bill to the Senate.
or RICE () (): I rise to speak on the Treasury Laws Amendment (2022 Measures No. 4) Bill 2022, and I want to thank my colleague Senator McKim for his important work on this legislation and in the Treasury portfolio more broadly.
We could think that the TLAB is dry and dusty, and is just about economics and Treasury. But it's absolutely at the core of the decisions that the government makes, and absolutely core to the choices the government makes. And we want to see this government do more, using the powers and levers that it has to work towards economic justice. Sadly, although this government talks about not leaving people behind and talks about achieving justice, we have seen this government unwilling to take action on a whole range of fronts. That includes action on rent freezes, for example, and on other fronts.
I'm speaking on this bill because of the intersection of this TLAB with online gambling. I also want to thank Mr Wilkie from the other place for the work that he has done on this issue. The amendment I'm moving today is essentially the amendment that Mr Wilkie moved in the House, which would ensure that the digital games tax offset is not available to games that include a digital container of randomised virtual items that can be obtained, commonly known as a loot box. Loot boxes in online games set up someone, often at a very early age, to normalise gambling—that this is what you do; it is just part of life that you spend money on gambling and you lose money. We know that gambling is deliberately constructed for people to lose money. It is deliberately constructed so that the person loses out and the house always wins.
This amendment would address this issue at the very least. It is the very smallest of actions that we could take to address the problems of gambling harm in this country. At the very least we should not be facilitating and supporting games that include loot boxes, which as I said, are just normalising gambling. We know that we need to do more to address loot boxes.
The Australian Institute of Family Studies has found that 'loot box engagement, including viewing, opening and especially purchasing, was associated with problem gambling and internet gaming disorder'. In 2018 my colleague Senator Steele-John chaired an inquiry into gaming microtransactions for chance based items, and the first recommendation from that committee was that the government undertake a comprehensive review of loot boxes in video games. Sadly, it's a recommendation that the former government didn't take up. We're hoping that maybe this government might consider it. But, even without taking up that recommendation to do a comprehensive review, the very least you could be doing is making sure that this digital tax offset isn't available to games that include loot boxes.
Of course, when it comes to problem gambling and the harm form gambling, there's a lot more that needs to be done. The minister was receiving donations from the gambling lobby. Although we now have a commitment from the minister that she is not going to receive further donations from the gambling lobby, we haven't seen a commitment from the government to take the comprehensive action that could be taken and that is needed to address gambling harm.
The Greens want to see real action on gambling. The amendment that I'm going to be moving to this bill in the committee stage is one action. Another action we want to see is a national independent gambling regulator to take meaningful action and ensure there's a coordinated approach to tackling gambling harm so that companies can't exploit differences in frameworks between jurisdictions. We want to see the government regulate online gambling to reduce gambling harms, with mandatory precommitment and a universal exclusion scheme across all platforms. We want to see a ban on all gambling advertising, including television, radio and online. We want to see regulation—not just removing a tax offset—of gambling in videogames, and the prohibition of loot boxes being accessible by people under 18. We want to see the end of the grip of the gambling industry on politics, by banning political donations from the gambling industry and restricting politicians and public servants from working for the gambling industry.
This change is possible. There's nothing impossible in what we're pushing for. It is the government's choice. It's the Labor government's choice as to whether they take these actions—whether they choose to side with the gambling companies, who are making billions of dollars, or side with community members, who want to see gambling harm reduced and family members saved from the dangers of gambling.
I rise to speak on the Treasury Laws Amendment (2022 Measures No. 4) Bill 2022. I was just going to focus on one area, as I suspect many of us perhaps have been doing. Before I get started on that, though, I do think it's important to address some of the misconceptions and/or overreach that we are hearing in this debate about loot boxes. I will say that in my younger life I was a gamer, possibly the first or maybe the second generation of video gamers to ever exist. I know my way around a video game, though I'll leave that up to my kids these days. But the mere consideration of a random choice is a very low threshold to set for gambling. That would make a lucky dip gambling. That would make a lotto wheel, where you win a frozen chook at your pub, gambling. That's a very, very low bar. Just because it's in the digital realm, I'm not sure why merely having consideration for a random choice is gambling.
I'm a strong believer in parental controls, as people in this place know. I have three young kids, and I absolutely believe in parental controls, particularly on devices. I absolutely believe that parents should be able to control expenditure on devices and in games. I believe we should have age-appropriate games and that the classifications should reflect that. But this approach of tagging everything that is effectively randomised in an online environment as being gambling, I think, fundamentally misunderstands gaming. There is inevitably an element of randomisation in gaming. That is what makes games games. If games were on train tracks all the time and there were no randomisation, then they would stop being games.
I know, certainly, in my young life down at the farm we spent many, many hours playing card games—not for money, but they were gambling games. We played poker. We played rummy. We even played solitaire. Solitaire started off as a gambling game. And Monopoly—is Monopoly gambling? I mean, it's for money. When we were young, my sisters and I managed to somehow lose all the money out of the Monopoly set very early on. I'm not quite sure how that happened. I have no real memory of it; I just blame my sisters! But then we used 1c and 2c coins. Does that suddenly fall into the category of gambling because real money was involved?
I think we've got to be very careful not to enter the realm of demonising particular aspects of video gaming merely because they have some passing association with gambling or a random chance. I don't think that shows an understanding of the nature of video gaming. The industry must take a very responsible perspective on this. As I say, I am a strong believer in the importance of age-appropriate games, parents being given the tools by which they control both the amount and the types of games that children interact with and, if there is any financial aspect to those games, parents certainly having control over that.
I do wish to get to the bill, however. This is an omnibus bill, and I'm going to focus on one particular area. But it is important to note that this brings together a number of outstanding coalition commitments from the March 2022 budget, including the tech investment boost, the skills and training boost and the digital games tax offset. The coalition supports most of the measures in the bill, as they replicate the policy we took to the last election. I wish to just focus on one of those because it is important to know that it relates to a very important industry for Australia. It's a small but growing industry in my home state of Western Australia, and that is the digital games industry. Of course, I'm talking about schedule 1 of this bill, the digital games tax offset.
As part of the previous government's Digital Economy Strategy, in May 2021 the then government announced a 30 per cent refundable tax offset for eligible businesses that spend a minimum of $500,000 on qualifying Australian development expenditure from 1 July 2022. In the 2021-22 Mid-Year Economic and Fiscal Outlook, the coalition government provided an additional $19.6 million over two years, from 2023-24, to expand the digital games tax offset to include ongoing development work—known as live ops—on digital games following their public release. Draft legislation was released prior to the election, and a consultation period was held between March and April this year. These measures received widespread support from the Australian digital games industry when first announced by the coalition—support which remains today.
The measure also aligns with the coalition's continued policy focus on growing our technology and digital sectors in a very, very competitive global environment. The digital games sector continues to expand rapidly. Worth $240 billion globally in 2020, the market is set to reach $294 billion in 2024. Australia is home to a growing games industry. In 2021, the sector generated $226 million in revenue, an increase of 22 per cent on 2020, and 83 per cent of revenue is from overseas markets. So this is a big export earner for this country.
Using tax offsets is a proven method, which countries such as Canada and the UK have used to increase the size of their digital games industry. The Digital Games Tax Offset will help Australia become a global player in game development. The local industry has already seen investments worth more than $270 million since late 2020 and has the potential to grow into a billion-dollar industry within the next 10 years. In addition to direct economic benefit, games production can add a range of talent and skills that are transferable to other areas of the economy.
I'll give you an idea, again, of the scale of this industry in Australia. It is a small industry, and remember that we are growing off a very low base in Australia, but we did see, according to the industry association IGEA, $284.4 million of income generated by Australian game development studios in 2021-22. This increased by 26 per cent over the previous year, an extraordinary rate of increase. There are 2,100 full-time employees. That is small in terms of the overall economy, but these are high-paying tech jobs, which are obviously of great benefit across the economy in terms of skills transfer and development and keeping talented people in this country who may have, in previous decades, had to go overseas to find opportunities in this sector. So we see there an increase of 59 per cent of professionals in the industry over a one-year period.
We can see that this really is an area that could move into the future if we get the settings right, if we can encourage the talent and if we can encourage businesses to see Australia as being a good point to host their development work—we could really see this industry grow over the years ahead. Sixty-nine per cent of studios are planning to hire new staff in 2022-23. If that is reflected in reality, this would mean that we would see something like more than 300 new staff enter this industry. Again, it is from a low base, but these kinds of growth rates really do augur well for the future.
So 47 per cent of respondents in the survey of their members are projecting significant growth in income, and 27 per cent of respondents are projecting a growth in their income over the next year. Eighty-five per cent of respondents to the IGEA survey are developing their own IP within Australia. So here we have games companies actually owning the intellectual property rights to the material that is being developed in this country. Obviously, again, that offers great opportunity for export dollars if some of those particular IP developments end up being used elsewhere. Even if they're used with a larger company overseas who can perhaps get to a much larger audience, we can see those benefits flow back through those IP arrangements to the Australian industry. So that is very important.
And this is an export focused industry. I've stood up in this place a number of times and spoken about the export focused industries that are close to my heart—in terms of mining, oil, gas and agriculture—but this is an export focused industry as well. It's one where we look to massive overseas gaming markets for the material and the unique perspective that Australian games can bring to those markets. So this is an industry with a very bright future. As I say, I was one of those young blokes in, I think, 1982, who was pretty taken by the Commodore 64, and, yes, I spent far too many years, when I should've been studying at high school, in front of a computer screen. But it was a very enjoyable part of my life.