Julie Owens (Parramatta, Australian Labor Party) Share this | Hansard source

On behalf of the Standing Committee on Economics I present the committee's report entitled Advisory report on the Tax Laws Amendment (2011 Measures No. 8) Bill 2011 and the Pay As You Go Withholding Non-compliance Tax Bill 2011, incorporating a dissenting report, together with the minutes of proceedings.

I ask leave of the House to make a short statement in connection with the report.

Leave granted.

The Tax Laws Amendment (2011 Measures No. 8) Bill 2011 and the Pay As You Go Withholding Non-compliance Tax Bill 2011 propose four sets of changes to the tax laws. Two of these changes generated stakeholder interest and were pursued by the committee in the inquiry. The first item of interest was the changes to the petroleum resource rent tax, which has been the subject of dispute between Exxon Mobil and the Australian Taxation Office. The dispute revolves around the definition of a marketable petroleum commodity, which affects where the taxing point occurs. The later the taxing point, the more valuable the commodity being taxed.

Since the petroleum resource rent tax is a tax on profits, a later taxing point involves more tax. The issue about these amendments is that they apply back to 1990-91, which raises the question of whether this retrospectivity is warranted. Parliaments do legislate retrospectively from time to time. The important point is that retrospective legislation should be fair and provide certainty. In this case, the committee is confident that this applies. The bills implement the original policy intent, which applied 20 years ago, and reflect how the PRRT has operated since that time, including how Exxon Mobil has lodged its tax returns and paid tax. Further, Treasury provided the committee with a time line of the dispute, which demonstrates that successive governments have consistently interpreted the legislation in this way.

The second aspect to the bills was the changes to tax penalties for company directors for the superannuation guarantee charge, which had been motivated by the activities of phoenix operators. These companies build up debt, become insolvent, liquidate their debts and then continue the business through a new company that will eventually go through the same process. The problem addressed in these bills is that the companies are insolvent partly because they are carrying debts for their staff entitlements, including superannuation. Millions of dollars of employees' superannuation is lost every year through this practice. The ATO is on the record stating that it has insufficient legal powers to enforce the superannuation guarantee charge. Recovering the amounts is also difficult in practice because of the long delay in the ATO becoming aware of the nonpayment.

Phoenix operators enjoy an unfair competitive advantage over their competitors who do the right thing. The crude nature of this business model is reminiscent of the bottom-of-the-harbour schemes of the early 1980s. Broadly, the bills make company directors liable for their company's superannuation guarantee debt. The bills also remove the requirement for the ATO to issue a 21-day director penalty notice before commencing legal action on a company director. The 21-day period is problematic because phoenix operators promptly cause their company to go into voluntary administration shortly after receiving their notice, which prevents the ATO taking further action against them. In general the committee supports these provisions because they take penalties that already successfully apply to the PAYG system and extend them to superannuation. Employers' obligations in relation to super remain the same; what will change is that these obligations will now be more rigorously enforced.

However, at the hearing, business groups expressed concerns about the provisions because they wanted to ensure that honest company directors would not be caught up in them by accident. The committee accepts that directors who act in good faith should have some comfort that they will not be subject to the provisions. The committee recommended that the government investigate whether the Tax Laws Amendment (2011 Measures No. 8) Bill 2011 should specifically better target phoenix operators and whether the defences in the bill should be expanded. Because of the work involved in this the committee has recommended that schedule 3 of the Tax Laws Amendment (2011 Measures No. 8) Bill 2011, which contains the phoenixing provisions, should be deleted so that the remainder of the bill may pass and that the Pay As You Go Withholding Non-compliance Tax Bill 2011 should remain pending while the government completes its investigations.

I thank the organisations which assisted the committee during the inquiry through submissions or participating in the hearing in Canberra. I thank the secretariat, who did some extraordinary work under very short timeframes. I also thank my colleagues on the committee for their contribution to the report.

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