Kate Chaney (Curtin, Independent) Share this | Hansard source

The Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Bill 2024 is an omnibus bill, addressing a wide range of topics. I won't address all schedules, but I do want to draw attention to and speak to a few of the changes. I will start with schedule 1, build-to-rent developments. The Australian rental market is in one of the tightest periods of supply that we've ever experienced. The private rental market is already deeply unaffordable, with nearly 70 per cent of renters experiencing rental stress. Addressing our housing crisis will require a lot of different actions being taken, by governments of all levels. There is no silver bullet, and incentivising build-to-rent projects will not fix it, but every bit helps.

Build-to-rent projects are an important addition to our housing mix. Build-to-rent is as it sounds: a developer builds a multiunit building and then, rather than selling individual units, the developer retains ownership of the building, and the units are rented to tenants. Rents may be set at market rates or, in the case of affordable housing, may be discounted with appropriate government support. The figures are debated, but in Australia the build-to-rent sector is somewhere between only 0.2 per cent, according to the Property Council, and three per cent, according to REIWA, of the housing market. Interestingly, I discovered that Australia's first build-to-rent project was opened in 2019 in my electorate's suburb of Subiaco. It was built by an American real estate investment management firm. Since opening their first project, they have gone on to open two more apartment buildings, providing 264 one-, two- and three-bedroom build-to-rent apartments. These apartments have been at near 100 per cent capacity since opening, which goes to show we need more.

Schedule 1 of this bill will reduce the managed investment trusts withholding tax rate from 30 per cent to 15 per cent and increase the capital works deduction from 2.5 per cent to four per cent. It's using the tax system to create a more attractive investment environment for developers looking at buy to rent. That's going to make it more attractive to investors. Across the board, stakeholders are pretty supportive of this measure. I'm particularly supportive of the requirement for 10 per cent of dwellings in a build-to-rent development to be affordable housing. In 2022 the WA state government announced a 50 per cent exemption from land tax for up to 20 years for build-to-rent developments. Since then, the WA government has announced two projects that will go ahead, with three more projects progressing through a shortlist of offers.

Secondly, I'd like to address schedule 2, buy now, pay later. I also support the measures in this schedule, which regulate the buy-now pay-later industry to provide appropriate and proportionate protections to consumers who enter buy-now pay-later contracts as a type of low-cost credit contract. It requires providers of low-cost credit contracts to hold and maintain an Australian credit licence and comply with the relevant licensing requirements and licensee obligations. Buy now, pay later has slipped through the cracks until now, and I'm pleased to see it being regulated appropriately to protect people.

Financial regulations are particularly important when they affect people who are vulnerable. The catchphrase for buy now, pay later is that it's easy and accessible. Unfortunately, this includes being easy and accessible to people who are already in or at risk of financial hardship. Buy now, pay later is not marketed as credit, but with no affordability assessment it can easily get you into debt. The Review of the small amount credit contract laws final report, from a review which was established to consider and report on the effectiveness of these laws, was published in March 2016. Some of the recommendations have been implemented, and this legislation implements some more, including enhancing consumer protections for buy-now pay-later schemes and creating more robust anti-avoidance provisions so that all buy-now pay-later schemes are regulated equally.

Regulating this market will protect people like Alex and Ash in Perth, who've sought support from financial counsellors through the Financial Wellbeing Collective. Alex and Ash were 19 and 20 when they presented for financial counselling accompanied by their parents. At the initial appointment, a total of 12 buy-now pay-later accounts and four loans were disclosed, amounting to more than $20,000 between them. All loans were obtained online, with no financial assessment or proof of income required. The credit was accrued largely for retail items like clothes and shoes. These young people were employed, earning under $20,000 each per year, supplemented by Centrelink allowances. As their parents considered them financial dependants, they had paid to clear their previous debts. But, as this was a recurring issue, they sought help through financial counselling for advocacy and education.

All buy-now pay-later providers insisted on repayment arrangements, with some matters having to be escalated to internal dispute resolution. The financial counsellor revisited the budget based on the repayments. With the repayments, their expenses exceeded their fortnightly income. These young people were fortunate to be supported by their parents, who would cover the cost of food and housing. While this was just a learning experience for these young people, it's also an example of the consequences of easily accessible credit online.

That is just one of many stories. Data from the Financial Wellbeing Collective for the last 12 months in Perth shows that 47 per cent of buy-now pay-later users were on government benefits, 60 per cent of users were earning under $60,000, and 30 per cent were not in the labour force. Many of these clients presented for financial counselling as they were struggling to maintain their household budgets with the rising cost of living. They were on a low, restricted or inadequate income. Many were impacted by mental health as well.

Financial counsellors and financial coaches from the collective shared their concerns about buy-now pay-later. Buy-now pay-later services are used to supplement insufficient income. Many clients report purchasing gift cards from buy-now pay-later providers to purchase essential items, including food and petrol. For users on low incomes, a significant percentage of income goes towards meeting buy-now pay-later repayment obligations, impacting other financial obligations and leading to higher reliance on emergency relief as well as contributing to growing utility debt and rent arrears.

It's too simple to access buy-now pay-later, with no safeguards such as income, serviceability and/or credit checks by various providers. Financial coaches have observed the behavioural change in mindset as buy-now pay-later services have become more popular. This has prompted a potential decline of long-term savings habits as buy-now pay-later enables impulsive spending and overcommitment.

There's heavy advertising of buy-now pay-later in stores and online. Many clients reported having multiple accounts and do not view buy-now pay-later as credit. Clients are hesitant to seek hardship assistance for buy-now pay-later debts and generally prefer to prioritise these instalments and seek hardship for utilities and essentials. Buy-now pay-later is often shrewdly marketed as a budgeting tool. Clients view it as a contingency plan and don't want to risk losing access. The tightening of the regulations around accessing buy-now pay-later is long overdue, and this bill is definitely a welcome step in the right direction.

Thirdly, I have some brief comments to make on a schedule 4, multinational tax transparency. Transparency and disclosure of multinational tax information is essential, both for investment managers in making decisions about the companies in which they invest and in contributing to public debate on tax issues. For this reason, any data provided should also be comparable to disclosures in other significant jurisdictions. I support the introduction of new country-by-country reporting measures which align with the international EU directive. Stakeholders have told me they're pleased this schedule in the bill has been updated with amendments made after government consulted with interested parties. This is a good example of effective consultation resulting in a better piece of legislation.

Across the board, stakeholders are supportive in principle of this bill, but I note there are some unresolved issues that could be addressed either through delegated legislation or through ATO guidance. These include the following. CBC disclosure requirements should be consistent with both international and domestic rules. Commercially sensitive information that's released under reporting requirements should be protected. The materiality threshold should include a minimum dollar value and a proportionality test based on an entity's presence in Australia. Clarity is needed on the administrative aspects of this proposed measure regarding how to submit information to the commissioner and what constitutes a material error, and it requires proactive engagement from the ATO. I urge the government to consider these issues when they draft implementation regulations. I also recommend the government conduct a review of the legislation a year after implementation to address any operational issues if they arise.

Finally, I want to speak to schedule 7, the $20,000 instant asset write-off for small business entities. Small businesses serve as the engines of innovation and economic vitality in Australia. This schedule is welcome and is an additional temporary 12-month extension of the $20,000 instant asset write-off. Like the previous instant asset write-off, small businesses with aggregated annual turnover of less than $10 million will be able to immediately deduct the full cost of eligible assets costing less than $20,000 first used or installed ready for use between 1 July 2024 and 30 June 2025.

Australian businesses require consistency and certainty to plan and invest in the future. While the temporary extension is welcome, I urge the government to legislate a permanent increase in the instant asset write-off threshold rather than this bandaid approach of ever-changing temporary threshold increases. Similarly, it should apply to medium-sized businesses as well. Extending this instant asset write-off to business entities with aggregated turnover of between $10 million and $50 million—that is, all base rate entities—would incentivise further investment with a practical and reasonable threshold. I'd support an amendment to this effect.

I won't comment on the remaining schedules to this bill. I commend this bill to the House.

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