Andrew Leigh (Fenner, Australian Labor Party, Shadow Assistant Treasurer) Share this | Hansard source

I move:

That all words after "That" be omitted with a view to substituting the following words:

"whilst not declining to give the bill a second reading, the House calls upon the Government to demonstrate it is completely committed to clamping down on phoenix activity by introducing legislation for a Directors Identification Number".

This bill deals with five relatively uncontroversial matters: an issue on regulatory reform allowing the tax commissioner to pay certain superannuation amounts to individuals with a terminal medical condition, extending tax relief for merging super funds, increasing the APRA levy to cover funding for SuperStream gateway governance, transferring responsibility for the early release of superannuation from the Department of Human Services to the Australian Taxation Office, and payment of GST on taxable supplies of certain real property. I will restrict my comments on this bill to two schedules: schedule 3 and schedule 5.

Schedule 3 will amend the APRA Act to enable the government to recover the ongoing cost of the governance of the superannuation transaction network, SuperStream, from the supervisory levy. It was Labor that first introduced SuperStream, following on from the 2010 Cooper review. SuperStream transmits money and information consistently across the superannuation system between employers, funds, service providers and the Australian Taxation Office. Before it existed, many transactions were processed manually, and the cost could be $5 or $10 a transaction. Nowadays, over 80 million transactions a year are processed in a standardised digital form, connecting around 800,000 employers, 200 APRA regulated funds and 350,000 self-managed superannuation funds. SuperStream allows employers to make all their contributions in a single electronic transaction, including to multiple superannuation funds. It allows contributions and rollovers to be processed faster, more efficiently and with fewer errors, and it allows people to be more reliably linked to superannuation, reducing lost superannuation accounts and unclaimed money.

The review conducted last year into SuperStream found that it had led to lower costs, ease of operation in the superannuation system and increased retirement savings. Members could now complete a rollover in three days, compared to an average of 45 to 60 days previously. There is greater ease in rolling over and consolidating member accounts, as account consolidations can now be performed online within minutes. There'd been a reduction in unnecessary accounts and a recovery of lost and unclaimed moneys, leading to a reduction in lost member accounts of around 90 per cent over the last six years, representing around five million accounts recovered. There have been stronger protections for members' retirement savings through reduced fees from consolidations and faster allocation of members' money into their account. It improved the employers' experience, saving around $400 million in ongoing efficiencies by simplifying the sending of communications. It improved a superannuation fund's experience through widespread automation—automation rates are now over 85 per cent in contributions and rollovers—and improved the quality of key data holdings and the simplification of data transfer between employers and the funds. These efficiencies have been estimated at about $400 million a year for employers, as I said, and another $400 million a year for funds, and the savings for members are at around $2.4 billion per annum. I acknowledge the work of the Australian Taxation Office and industry on the introduction of SuperStream and the benefits that it has brought to the community.

I turn now to schedule 5, which deals with phoenixing in development projects by amending the Taxation Administration Act 1953, the Income Tax Assessment Act 1997 and the GST act to require purchasers of new residential premises and new subdivisions of potential residential land to make a payment of part of the purchase price to the Australian Taxation Office.

Currently supplies of new residential premises are generally subject to GST, and the supplier remits the GST to the ATO in the next BAS. This can be up to three months after settlement. The withholding tax being collected in this manner fits with existing conveyancing processes. One of the main forms of noncompliance with these obligations involves developers selling properties for a purchase price that reflects the GST obligations but then dissolving their businesses before the next BAS lodgement to avoid remitting the GST. This is, of course, a form of phoenixing. Phoenixing to avoid paying GST has grown significantly over the last decade. As at November 2017, the Australian Taxation Office had identified 3,731 individuals actively involved in this activity over the last five years. These individuals controlled over 12,000 insolvent entities responsible for $1.8 billion in debt that has been written off. These insolvent entities also claimed $1.2 billion of input tax credits between 2013 and 2017. The cost of phoenixing was estimated in 2012 at $3.2 billion annually. This is probably an underestimate. The government has received updated costs of phoenixing as at 2015 but is yet to publicly release them.

As the second reading amendment makes clear, the government has been lax in its action on phoenix activity more generally. The member for Gorton and I announced in May last year that Labor would crack down on dodgy directors through putting in place, among other things, a director identification number. Despite the government announcing that it would introduce a director identification number, we are yet to see the government take action. We have had a suite of organisations from across the political spectrum calling on this government to act urgently on a director identification number. When the Australian Institute of Company Directors, the Australian Small Business and Family Enterprise Ombudsman, the Productivity Commission, the Tax Justice Network, the Australian Chamber of Commerce and Industry, Master Builders Australia, the Australian Council of Trade Unions, the Australian Restructuring and Turnaround Association, the Australian Institute of Credit Management and the Phoenix Project from the University of Melbourne's law school and Monash University's business school call upon the government to introduce a director identification number, you've got to wonder when they are finally going to act.

Australia needs action on phoenixing, not announcements. We need a government which is willing to step forward and put in place a director identification number. If the Turnbull government had acted on director identification numbers when we called on them to do so in May last year, they would be law already; and phoenix directors would no longer be engaged in the dodgy activity of burning their firms and hurting workers, taxpayers and honest small businesses. Cracking down on phoenixing is a pro small business measure because it is honest small businesses that are worst hurt. The estimates are that the cost of phoenixing puts the largest cost on honest businesses—those who supply the phoenix firms and don't get paid when the dodgy directors burn their companies.

While we support the government's measures on phoenixing by developers to avoid GST, we urge them to go further and crack down on phoenix inactivity, as the Australian community demands, and reduce the cost of this to the community and the heartache that it imposes on workers, taxpayers and honest businesses.

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