Steven Ciobo (Moncrieff, Liberal Party) Share this | Hansard source

I am indeed pleased to follow the member for Rankin in this debate on the Bankruptcy Legislation Amendment (Anti-avoidance) Bill 2005. I am pleased because I think it is about time there was an injection of some facts into this debate. I am pleased because I think it is about time there was an injection of some reality into this debate. And I am pleased because, once again, this is a bill that goes to the core of the Howard government delivering by ensuring we are providing revenue protection for government by cracking down on those who would do the wrong thing.

Before I focus my attention on the actual provisions of the bill, however, I would like to turn my mind to some of the comments the member for Rankin has made. I could not, of course, let slide many of the erroneous statements that he made, ranging from those that were completely absurd to those that were a little disingenuous. In particular, I have to comment on the Australian Labor Party saying, through the member for Rankin, that this government is the best friend that Saddam has ever had. Not only is that an outrageous assertion, but the reality is that if it were not for the Howard government and the coalition of the willing, if the Australian Labor Party had been in power, then Saddam Hussein would still be in power in Iraq today. People may ask: what does this have to do with the nature of the bill? I am interested in that question as well. The reality is that I am touching on that because the member for Rankin made a whole range of comments about it.

With respect to the Australian Wheat Board and the comment that taxpayers subsidised payments made by the AWB, we have already established that the Australian Labor Party is completely unable to draw any connection whatsoever between the knowledge of the government and the activities of the Australian Wheat Board. In fact, to the contrary, the government has clearly demonstrated on occasion after occasion that there was no knowledge of the activities of the Australian Wheat Board. Furthermore, the Australian Wheat Board’s claims of deductions under the Income Tax Assessment Act or related legislation clearly have shown that there is simply no provision under existing legislation for such bribes or payments to be allowable deductions at law. The simple reality is that if, with the passage of time, those payments are demonstrated to be kickbacks and bribes, then of course there is no safe harbour for AWB in claiming those deductions, and I am certain that they will feel the full force of the law.

With regard to the claim by the member for Rankin that the Howard government is seeking to ensure protection for tax avoiders and tax evaders, once again this is nothing but hot air from the member for Rankin. Like so much that he put forward, it is palpably wrong. What is very clear is that there are currently under legislation provisions that make it illegal for anyone to avoid or evade tax.

Despite all the rhetoric by the member for Rankin, it is simply not the case that people are able to avoid or evade their tax liabilities. That is not to say that they do not try. Of course there are many that attempt to evade and avoid tax, but those who do are generally caught. We have seen through Operation Wickenby the operations of the ATO and other agencies to crack down on those that may have avoided or evaded their tax liabilities. In the fullness of time, those that have avoided or evaded tax will feel the full force of the law and those that have claimed legitimate deductions will continue to enjoy using those legitimate deductions.

The greatest area of concern for me was when the member for Rankin said there was this monstrous tax called the GST which led to a monstrous compliance headache for small businesses around the country. There is one simple question to ask: if the member for Rankin was truly concerned about the GST and compliance, why did he, along with other members of his political party, not support the introduction of the GST as the coalition sought to have it from the outset?

The reality is that the compliance headache that is forced upon small businesses in this country is a direct consequence of Labor’s obstinacy when it came to the GST. If it were not for the fact that the Australian government was forced to negotiate with the Australian Democrats to get this much-needed reform through—a reform which, I might add, the Australian Labor Party supported in the late 1980s, and a tax which, for a while, the Australian Labor Party said they would roll back—there would not be three-quarters of the compliance headaches that Australian small businesses now face. Despite all the hot air and the rhetoric from the member for Rankin, compliance burdens are a consequence of the Australian Labor Party being unwilling or unable to face up to reality with respect to the compliance requirements of the GST.

I am also fascinated that the Australian Labor Party—the beneficiaries of the GST, through their various state and territory governments, to the tune of some $37 billion per annum—say that they are opposed to the GST. Queensland’s Premier Peter Beattie was one of the first people to sign up to the GST agreement. With his trademark cheesy grin on his face, he said, ‘Oh, woe is me to have to sign the GST agreement.’ Yet the Australian Labor Party, through the likes of premiers Peter Beattie, Steve Bracks and a host of other failed Labor premiers around this country, have ensured that the GST continues to flow like rivers of gold—similar to what the Australian Labor Party had with Centenary House—from the federal government directly into state government coffers.

The fascinating thing is that, despite the rhetoric from the member for Rankin and other members with respect to the GST, the Australian Labor Party still find a way to impose new taxes on people in their respective states. In Queensland, for example, despite some $10½ billion of GST and financial assistance grants flowing to the Queensland state government, the Beattie government introduced a new ambulance tax, despite over $10 billion of financial assistance from the Australian government. It is little wonder then that I and the people of Rankin, and the people of Australia more broadly, looked straight through the comments by the member for Rankin and other Labor Party members because they know that, despite the bluff and bluster, there is simply no substance to the arguments that the Australian Labor Party put forward.

I would like to touch on another point raised by the member for Rankin. He alleges that this government is the highest taxing government in Australia’s history and that the full weight of taxation is felt by Australian families. The reality is that Australian families are better off today than they have been at any point in our nation’s history. In particular, with the operation of family tax benefit, Australian families today have no net tax liability until they earn approximately $42,000 per annum. A family in Australia today can earn up to $42,000 and not incur any tax liability, thanks to the Howard government.

This is coupled with the fact that we have the lowest levels of unemployment this country has seen for decades, the lowest level of interest rates this country has seen for decades and super low levels of inflation—again in stark contrast to the history of the Australian Labor Party. Despite the rhetoric and despite the bluff and bluster by the member for Rankin and other Labor Party members, under the Australian Labor Party interest rates were at 18 per cent, not around six per cent; unemployment was at 11 per cent, with one million people unemployed, and not down at record lows; and the inflation rate was galloping away and not under control as it is now. The stark contrast is there for all to see. That is the reason why this government will continue delivering and the reason why I am hopeful that the Australian people will continue to support the Australian government and see straight through the sophistry of the Australian Labor Party and the arguments that the member for Rankin puts forward, which simply lack substance.

Turning my attention specifically to the bill before the chamber today, the amendments as they are proposed are intended to strengthen the Bankruptcy Act 1966. The amendments effectively allow trustees to recover property disposed of prior to bankruptcy or owned by a third person but acquired by that person using the bankrupt’s resources. Currently, bankrupts may deliberately avoid the provisions in a number of ways, including transferring assets to related entities in anticipation of insolvency, concealing records relating to the transfer of assets, transferring assets to a person who should reasonably be aware of the bankrupt’s intention to defeat creditors, or accumulating wealth in the lead-up to bankruptcy in the name of a person who will allow the bankrupt to continue to enjoy the asset despite the transfer and after the bankruptcy commences.

This bill embraces changes so that the amendments are based on the premise that gifts designed to dissipate assets, rendering them unavailable to creditors, are likely to be made to relatives and associates rather than to strangers. On this basis, the particular focus of the bill is to ensure that adequate scrutiny is placed upon those who would be beneficiaries, those who would assist those who would like to escape the clutches of creditors and those who would like to escape trustees trying to recover funds.

The amendments increase the time period from two to four years where property was transferred to a related entity during the period for less than market value consideration. Related entities would include, as I touched upon, business partners, parents, children, relatives and beneficiaries of trusts. It is also common for people to know that, because they are likely to be deemed bankrupt more than two years before the fact, you would see the structure and the execution of these kinds of arrangements. On this basis, the government has taken the view that people will readily and often know more than two years before they are actually declared bankrupt—hence the rationale for extending the time period from two years to four years.

In addition, the amendments in this bill will empower the court to make orders in relation to property or money of natural persons where, during a period of up to five years prior to bankruptcy, the person’s interest in particular property increases as a direct or indirect result of financial contributions and, additionally, the bankrupt used or derived a benefit from the property during that time. As a result of these amendments, a presumption will now exist. That presumption will operate and arise where the transferor was insolvent at the time of the transfer if a transferor had not kept books, accounts and records or they had failed to preserve them. This in effect removes the incentive to avoid making, hiding or destroying records that would demonstrate insolvency. We have often heard allegations that someone who has been declared bankrupt has carried out exactly these acts—that is, attempted to destroy books, accounts and records or ignored the accurate keeping of books, accounts and records, in the hope that they could escape the clutches of creditors.

The purpose of this bill is to overcome some of the difficulties faced by trustees when endeavouring to establish an intention on the bankrupt’s behalf to defeat the interests of creditors—which is, of course, the bar set by the current legislation. The amendments will also introduce standards of reasonableness in relation to the transferee’s knowledge of the transferor’s intention in conveying property. Currently, a transferee can be wilfully blind as to whether a transferor’s purpose is to defeat creditors. Now the test will be that notion of reasonableness so that the government is able to capture those who can argue that they were not wilfully blind or who in the past argued successfully that they were wilfully blind.

By introducing the standard of reasonableness, the government will be more able to capture this kind of activity and thereby ensure people’s tax liabilities are met. A transfer will only be protected from this provision if market value consideration is given by the transferee to the bankrupt. Again, this is often a common element of demonstrating those that would be considered—for lack of a better term—legitimate transactions versus those that would be considered illegitimate transactions and done for the purposes of avoiding the operation of bankruptcy legislation.

We have seen a number of professions—and, in particular, a number of barristers—who have sought to inappropriately use their knowledge of the law and the operation of bankruptcy legislation to exploit the operation of the legislation such that they could declare themselves bankrupt on occasion after occasion and thereby be in a situation where, in effect, they are able to comply with the strict letter of the law but certainly not the spirit of the law. I am pleased that these changes are going to be introduced, because they will ensure that those who may comply with the strict letter of the law but be in contravention of the spirit of the law will now be captured by the operation of these provisions.

In essence, it means that those who have exploited the system in the past will no longer be able to do so—or, at the very least, it would be the intention of the government to make it as hard as possible to exploit the legislation. Of course there may always be some entrepreneurial people seeking to utilise loopholes, but this legislation goes a long way to ensuring that we capture those who would misuse the legislation and thereby seek to avoid their requirements under bankruptcy legislation.

In summary, this is a welcome amendment. It is an amendment that sees the introduction of commonsense and makes it easier to trace or secure creditors’ assets, particularly with the introduction of the reasonableness threshold. I must say that I was disappointed that it appeared that the member for Rankin was so poorly briefed with respect to the operation of this act that he had to make such a wide-ranging argument, touching on the operation of the GST through to the Australian Wheat Board. But I know that the people of Rankin continue to see through those arguments that are put forward. I believe that my rebuttal at the beginning of my speech more than adequately canvassed the falsity contained in the arguments that the member for Rankin put forward. I commend the bill to the chamber.

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