Julian Leeser (Berowra, Liberal Party) Share this | Hansard source

It's always such a privilege to follow the member for Hinkler. The member for Hinkler represents his constituency incredibly well. He is a doughty advocate for them. He and I are neighbours in terms of our offices being next to each other. He also sits next to me in the joint party room. He provides lots of good pastoral care for new members like me. And, as people listening to this debate will have recognised, he is a tremendous voice for his community in Queensland—a community very different to mine in Berowra but whose values are very similar, and Berowra is a community that would be concerned, like his community, about ensuring people pay their fair share of tax in Australia.

Like the member for Hinkler, I have a bias in favour of foreign investment. Foreign investment has helped build this country. First we had British investment in Australia, and we had the Americans. In more recent times we've had the Japanese and now we have the Chinese and the Indians. We have a range of different foreign investors, and foreign investment is always a good thing for Australia because this country simply doesn't have enough capital to build the things that we need to build here.

But Australians, rightly, ask questions about foreign investment where they feel that the playing field is not level. The purpose of these laws, in this cognate debate, is to level the playing field to make sure that foreign investors are paying their fair share of tax here, to ensure that they're not hiding behind particular structures and getting particular advantages that they might not otherwise get and to ensure that markets are not distorted. This is a fundamental principle of what we're trying to do as a government.

The performance of the Australian economy has relied on foreign investment. When you think about Australia's economic performance over more than a quarter of a century now, we are the envy of so many countries for the duration of our economic growth—and the 1.2 million jobs that we've created in the five years since we've come into government. With a growth rate of 2.8 per cent, we are second only to the United States in terms of growth rates in the OECD. Our unemployment rate has fallen to 5.1 per cent, which is just extraordinary. Our levels of welfare dependency as a country have fallen to 14.3 per cent, the lowest rate of welfare dependency in 30 years. That's just extraordinary. This only occurs if you've got the economic settings, investment settings and tax settings correct and if you've got a government that's focused on these things. That's why I was so pleased to hear the Prime Minister announce his plan for 1.25 million new jobs.

So what role does this bill play in strengthening the Australian economy, levelling the playing field and ensuring that investment continues in an orderly and helpful way? In the second reading speech, the Assistant Treasurer made a number of key points, and I might just pull out a couple of those points about this bill which I think are very important. The bill implements measures that the government announced to protect the integrity of our corporate tax system. As we know, taxpayers in the main comply with Australia's tax rules and pay their fair share of tax here. I've sat on the House Standing Committee on Tax and Revenue for the duration of this term, and Australia has an interesting statistic, an interesting fact: more than 75 per cent of Australians use an accountant to comply with their tax obligations. That, I think, helps the quality and the level of compliance with our tax laws generally.

But we know some foreign investors have been using complex arrangements which are known as stapled structures and other tax concessions in order to get profits from Australian businesses basically at a tax-free level, and that just can't continue. The way they do this is by taking trading income and putting it into more tax-favourable passive income, and they do this in land-rich sectors like infrastructure. When you take that and you combine it with the existing concessions for foreign pension funds and sovereign wealth funds, some foreign investors can achieve tax rates well below 15 per cent on their Australian business income and in some cases are almost tax free. Hardworking Australian families who are paying their fair share of tax look askance at some of these arrangements, and they say: 'Well, I'm a citizen of this country. I'm a taxpayer of this country. I'm abiding by the rules. Why are these foreign companies able to get away with doing this sort of thing?' These tax benefits aren't available to Australians; they're only available to the foreign investors. So it places not only Australian individuals but also Australian businesses at a competitive disadvantage because these things are only available to foreign investors. What we end up with is a two-tiered tax system which effectively means that we get distorted investment decisions. It effectively says to people: 'Invest in land-rich things. Don't invest in companies. Don't invest in things that are actually growing the economy more broadly.'

Stapling and the broader tax concessions pose serious threats to the integrity of our corporate tax system, and use of staples has become quite widespread in infrastructure, in property, in renewable energy and in agriculture. Meanwhile, access to concessional withholding tax for foreign investors has spread much, much further than it was ever intended to, and this is particularly the case in the agriculture and residential housing sectors. We know how strongly Australians rightly feel about Australian ownership of agriculture, because agriculture is obviously an important industry for the country economically but it's also important culturally. Australia has always had a very strong agricultural sector. It's one of the things that we are best at in the world, it is one of our key economic strengths, and it's something that Australians feel deeply connected to even if they have no personal connection to farming and agriculture more generally. They want to have a sense that Australians will continue to own agricultural produce. I know that in my own electorate, where we've got some small semirural areas producing things in the horticultural sector, particularly large horticultural production, people feel very proud that there's such a strong sense of Australian ownership of the horticultural sector.

The other issue in relation to different tax structures, besides the fairness as between Australian companies and individuals and foreign companies, is large amounts of revenue forgone. There are estimates up to hundreds of millions of dollars, and it could be as much as billions of dollars that Australians are not getting as a result of these arrangements that the foreign investors make. This means that ultimately there are fewer opportunities for governments to spend more on infrastructure, to spend more on health and education, to spend more on our defence and securing our borders—all the key things that Australians want us as a government to spend money on. If we were able to pass this important legislation, we would have more money coming into revenue that is not being raised from Australians but being raised from foreign investors who heretofore have sought particular structures in order to minimise their tax.

We've got some of the strongest tax integrity rules in the world, and I think we should be very proud of them. We talked to the tax commissioner on the House Committee on Taxation and Revenue. This is a point that he regularly makes. It's important to note that this suite of legislation is part of a whole range of legislation that the government has already introduced, including multinational anti-avoidance laws, the diverted profits tax laws and country-by-country reporting, which has been very important in further bolstering the integrity of the tax laws in this country.

The measures in the bill build on the government's work in protecting the integrity of our corporate tax system. It is absolutely fundamental that we all pay our fair share of tax to ensure that the government is able to continue to provide the services that Australians want and that they deserve, whether it's schools and hospitals or whether it's infrastructure like NorthConnex in my electorate, a $3 billion road that connects the M1 to the M2. The federal government's contribution to that road is $412 million. But that money has to come from somewhere, and it comes from the taxation receipts of the Commonwealth. At the moment, the foreign investors haven't been paying their fair share of tax. These bills are designed to level the playing field to ensure that they can't take unfair advantages that are not available to Australians.

The bill neutralises the tax benefits delivered by staples by ensuring that active business income is taxed at the top corporate tax rate for foreign investors. The government's intention in introducing this package is so that active income that is converted to passive income shouldn't have access to concessional rates. The Australian Taxation Office will continue to closely monitor this area to ensure that that is actually happening and will take strong action. I know Commissioner Jordan and will take that action if it's necessary. Consistent with the Australian Taxation Office's taxpayer alert, the government expects that our anti-avoidance tax laws—known as part IVA of the tax legislation—are well understood and a litigated part of the tax law. It's fair to say they will continue to apply to egregious tax-driven arrangements such as royalty staples. This is very important. This bill delivers on our promise as a government to protect Australia's corporate tax integrity. That's what we have to do to ensure that taxpayer dollars are spent prudently.

One of the things that I note in the amendments that particularly pleased me is what is happening in relation to student income. The amendments to schedule 1 of the bill remove provisions of the bill that meant all tertiary student accommodation—for example, a purpose-built student accommodation development—would have been subject to the 30 per cent managed investment trust withholding tax. This amendment has been in response to some key views that were raised by some stakeholders at the Senate Economics Legislation Committee that looked into the parliamentary minutes to the Treasury Laws Amendment (Making Sure Foreign Investors Pay Their Fair Share of Tax in Australia and Other Measures) Bill.

Student accommodation is very important. Prior to my becoming a member of parliament, I spent four years working in the higher education sector. Student accommodation is particularly important at our universities right across the country because, without adequate student accommodation, we don't have adequate places for not only overseas students but also students from rural and regional parts of Australia. There is a great deal of importance in encouraging and enabling more students in rural and regional parts of Australia to enter the higher education market.

I note that the Minister for Education is the minister at the table. He represents a rural and regional constituency in Wannon. He has been doing a terrific job implementing the recommendations of Professor Halsey in his review and knows well the difficulty that regional and rural families face in getting and paying for student accommodation in universities that are outside the areas in which they live. That's such an important thing, so I was particularly pleased to see the government looking at this important question. I commend both the Assistant Treasurer and, importantly, the Minister for Education on the work they are doing. I'm proud to be the chair of his government members committee in that regard.

This bill is an important integrity bill. In order to ensure the bill's safe passage, there won't be specific rules for management investment trusts for tertiary student accommodation, and I think that's an important thing. Instead, consistent with all other premises, the application of the higher withholding tax rate treatment outlined in the bill will now depend on whether a tertiary student accommodation development is considered to be a residential dwelling asset, under the general definition considered in the bill. This amendment doesn't affect our clear intent that other residential property, such as houses, apartments and build-to-rent developments of which we see so many now, will be subjected to a managed investment trust withholding tax rate of 30 per cent. But it does acknowledge that student accommodation is in a completely different class and that there is a public good as a result of that student accommodation.

The amendments also provide that premises used primarily for the provision of disability accommodation under NDIS or regulations yet to be made can receive concessional managed investment trust taxation treatment, despite being residential premises. I note that the minister at the table had responsibility for the NDIS before he became Minister for Education, so he will understand these issues of disability accommodation very well. People with disability are often at a real disadvantage, in terms of finding quality accommodation, and so the provision of more accommodation—and more accommodation that is fit for purpose for their needs—is absolutely vital. The amendments also don't change the requirement that a managed investment trust investing in land must invest for the primary purpose of deriving rent, and that seems to be a fair and reasonable integrity measure.

I think the government's bill here is good. Some of the amendments it's brought forward are very useful, and I encourage all members to support the government's program, in making sure foreign investors pay their fair share of tax.

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