Kelly O'Dwyer (Higgins, Liberal Party, Minister for Revenue and Financial Services) Share this | Hansard source

Deputy Speaker Kelly, let me first thank members who have contributed to this debate. This bill, the Treasury Laws Amendment (2016 Measures No. 1) Bill 2016, contains amendments that relate to the regulation of Australia's terrorism insurance scheme, employee share schemes, Deductible Gift Recipient specific listings, the taxation of ex gratia disaster recovery payments, and retail client moneys. It is a bill that empowers Australians to participate in the economy with greater certainty.

Schedule 1 of this bill makes an important clarification to the Terrorism Insurance Act 2003 to ensure it operates as originally intended—that is, to provide insurance against declared terrorist incidents, including when carried out by chemical, biological or other similar means. Schedule 2 of this bill amends the disclosure requirements for eligible employee share schemes. You may recall, Deputy Speaker, that the government made changes to the taxation treatment of certain employee share schemes last year. We made those changes because we wanted to spur innovation and entrepreneurship in the economy, as well as help Australian businesses be more competitive in recruiting and retaining talent in the international labour market.

Following on from that, and as part of the National Innovation and Science Agenda, the government announced it would remove the requirement for disclosure documents given to employees under an ESS to be made public when they are lodged with the Australian Securities and Investments Commission, and would consult on making ESS more user-friendly. The exposure draft of this bill and a consultation paper containing various proposals to make ESS more user-friendly were released concurrently on 26 October 2016. Comments on the exposure draft were due on 2 November 2016, and the bill was introduced to the parliament on 1 December. Feedback on the bill was incorporated into the bill prior to its introduction in this House. Several industry bodies representing start-ups and their employees, such as AVCAL, Employee Ownership Australia and New Zealand, and the Business Council of Co-operatives and Mutuals, were strongly supportive of the disclosure measures contained in the bill. Consultation on proposals to make ESS more user-friendly closed on 7 December 2016. The government is seeking feedback on ways to improve ESS for all companies, including but not limited to start-ups. The government is still considering the submissions received on this important issue.

This bill ensures that ESS disclosure documents lodged by eligible companies will no longer need to be made public if all companies in the group are unlisted, have been incorporated for less than 10 years, and have an aggregated turnover of less than $50 million. This helps start-ups to track skilled employees at a time when companies might be cash-poor, because it ensures that their commercially sensitive information is not unnecessarily made public. However, this bill does not absolve any company from the requirement to provide disclosure of ESS documents to employees. Companies will still be required to comply with their disclosure obligations under the Corporations Act, including the obligation to provide updated information to employees where there is any material change to the terms of the ESS offer.

Under the measures in this bill, all comparable start-ups have the benefit of the same disclosure regime. Employees' remuneration arrangements will no longer be made publicly available merely because a company has offered an ESS. This was strongly supported by the major industry bodies representing both start-ups and their employees. Also, the measures in the bill are not designed to relieve start-up companies of the requirement to make appropriate public disclosure of an offer of securities to the public for the purpose of raising capital for the company. Different disclosure obligations for an equity-raising campaign versus an ESS are justified. A fundraising exercise is open to the public broadly, and potential retail investors must be provided with the information needed to make an informed investment decision. An ESS, on the other hand, is designed to facilitate start-up companies to attract and incentivise employees, at a time when the company seeking to establish itself and is cash-poor. An ESS forms part of an employee's remuneration arrangements.

The measures in this bill not only remove an impediment to entrepreneurialism but also create benefits for start-up companies and their potential employees and contractors. In response to the question from the member for Chifley, it is also important to note at this stage that—the arrangements as previously articulated in this House in relation to crowd-sourced equity funding—not all start-ups will look to raise funds from the public in relation to crowd-sourced equity funding arrangements, so these additional disclosure requirements under the crowd-sourced equity funding framework are only relevant in those circumstances.

Schedule 3 of this bill adds six entities to Deductible Gift Recipient specific listings in division 30 of the Income Tax Assessment Act 1997. These are: the Australasian College of Dermatologists; the College of Intensive Care Medicine of Australia and New Zealand; the Royal Australian and New Zealand College of Ophthalmologists; Australian Science Innovations Incorporated; The Ethics Centre Incorporated; and Cambridge Australia Scholarships Limited. Obtaining deductible gift recipient status will help these listed entities attract public financial support for their activities, as taxpayers can claim an income tax deduction for certain gifts to deductible gift recipients. Schedule 4 provides ongoing income tax relief to ex gratia disaster assistance payments made to eligible New Zealand Special Category Visa (subclass 444) holders. Providing ongoing tax relief to these payments may provide more money in hand for people affected by natural disasters, and provide recipients with certainty as they will be assured that their payments will be free from tax or that a tax rebate will be available. The proposed amendments will also align the tax treatment of these payments to the tax treatment of the equivalent payments made to Australians.

Finally, schedule 5 of this bill introduces amendments to the client money regime. In October 2015, the government announced its response to the Financial System Inquiry, which included a number of measures to improve consumer protections. This bill delivers on the government's commitment to protect consumers by better protecting client moneys in relation to over-the-counter derivatives and ensuring that an investor's money is adequately protected when held by intermediaries.

This bill also brings Australia into line with other developed countries with strong client protection regimes. Clients, especially retail clients, have a right to expect that their client money is used for purposes they reasonably anticipate. Because of our commitment, client money will no longer be vulnerable to the kinds of complex risks retail clients would not ordinarily expect. So, while still acknowledging that the ultimate consequences of investment decisions rest with clients, this bill provides clients with the protections to which they are entitled. The bill also gives ASIC the power to monitor the use of derivative client moneys. It does this by way of the client money reconciliation and reporting rules.

Schedule 1 to this bill will apply from 1 July 2017; schedule 2 will commence from the date of royal assent; schedule 3, on commencement; schedule 4 will apply on 1 January, 1 April, 1 July or 1 October, to occur after the day this act receives royal assent; and schedule 5 will apply 12 months and one day from the date of royal assent. I commend this bill to the House.

Question agreed to.

Bill read a second time.

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