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

It is day No. 1 of the 2017 sittings year and the government have run out of business. Not only are they running out of senators; they are running out of business. With this bill, Labor will do the right thing and support the passage of the bill, despite the drama, despite the chaos, despite the dysfunction in this government. This bill contains five measures addressing a wide variety of issues: terrorism insurance, employee share schemes, deductible gift recipient status, fairer tax treatment of disaster payments for New Zealanders, and protecting client moneys. I shall not detain the House by going through the detail of each of these measures, but it is worth touching on each of them briefly.

Honourable Members:

Honourable members interjecting—

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

Well, maybe I shall.

Ed Husic (Chifley, Australian Labor Party, Shadow Parliamentary Secretary to the Shadow Treasurer) Share this | Link to this | Hansard source

You've got 29 minutes.

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

Twenty-nine minutes. The member for Chifley is keen for me to see out my full duration. The terrorism insurance scheme has received bipartisan support since its introduction in 2001. The act requires the scheme to be reviewed every three years at a minimum, with the minister preparing a report on the scheme's continued operation. Labor supports that process. The terrorism insurance scheme was established to minimise the wider economic impacts that flowed from the withdrawal of terrorism insurance in the wake of the September 11 attacks. The Terrorism Insurance Act 2003 ensured continued provision of terrorism insurance coverage for commercial property and associated business interruption, losses and public liability claims. As Abadie and Gardeazabal found in their European Economic Review paper, 'Terrorism and the World Economy,' terrorism can have profound economic effects beyond the immediate physical damage. Terrorism insurance is part of the way in which we ameliorate those effects should such atrocious acts happen in future. This bill carries the original intent of the scheme and ensures that losses resulting from chemical and biological terrorist attacks are unequivocally covered. The additional certainty that provides is welcomed by this side of the House.

Schedule 2 deals with the public availability of employee share scheme documents. Last November, I was pleased to announce Labor's reform commitments to grow worker owned firms and member owned firms. A range of economists, including Thomas Piketty and Joseph Stiglitz, have spoken on the importance of participatory governance and worker ownership. Employee share schemes are part of this. There are good moral arguments and good economic arguments in favour of worker ownership. Indeed, as the conservative British Prime Minister, Teresa May, has noted, success and solidarity should not be incompatible. From a productivity perspective, we know from work by Harvard's Richard Freeman that employees with ownership tend to be more productive and tend to have higher levels of workplace satisfaction. Labor supports start-ups and, naturally, we support removing unnecessary impediments for those start-ups to have employee share schemes.

We do at this stage put on record certain concerns about the way the government has approached this particular schedule. On its face, it is straightforward but deals with an issue that has not received widespread airplay. We have not seen a spate of stories in the press suggesting that the requirement to lodge disclosure documents with ASIC has discouraged start-ups from using employee share schemes in their formative stages. The government has apparently carried out consultation, but, as is its want, has not shared with the Australian people the result of that consultation. The member for Chifley—this House knows no greater champion of start-ups—will deal in his remarks with this particular issue. Labor wishes to have more detail from the government as to this particular schedule and the reason that the government has chosen to bring it forward at this stage.

Schedule 3 deals with deductible gift recipients. I would be remiss if I did not deal with this schedule and mention that, as shadow minister for charities and not-for-profits, I am the first person on either side of the House to hold that title. Labor has seen fit to have a shadow minister for charities and not-for-profits because we believe that this is a critical sector. Labor is committed to arresting the decline in social capital that has occurred in Australia over the past generation—the way in which Australians have become more disconnected and less likely to volunteer, to cast a valid vote, to give charitable donations and to join civic organisations, ranging from the Scouts and the Guides to Rotary clubs and Lions clubs. Labor is keen to foster a national conversation about the way in which charities can learn from one another to turn around that national problem. But we also need to ensure that the charities that need it get deductible gift recipient status.

This reform extends deductible gift recipient status to a range of different charities. It adds six organisations to those that have specific listing. As members know, there are two ways of getting deductible gift recipient status: either endorsement by the Australian Taxation Office or listing by name in taxation law. Labor extends a warm welcome to six organisations whose DGR status has bipartisan support: 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.

The coalition went to the 2013 election with an attack on charities in the form of wanting to scrap the charities commission. Labor welcomes the coalition's backflip. We welcome the fact that the government have gone from being public enemy No. 1 to the charities commission to wanting to work with the charities commission. I commend the government on their welcome backflip, ceasing their attack on the charities and not-for-profit sector and now looking for ways to work with the Australian Charities and Not-for-profits Commission in order to reduce the paperwork burden on Australian charities. ACNC head, Susan Pascoe, has done an outstanding job over recent years, during a period in which the government wanted to abolish her organisation. She had to contend with a quarter of her staff leaving every year—not unreasonably because they were concerned about the uncertainty that hung over their heads. That uncertainty has now been removed. The coalition needs to work harder to ensure that states and territories remove duplicate regulation and make the Australian Charities and Not-for-profits Commission a one-stop shop for charities, just as the corporate law reforms of the early 1990s made ASIC a one-stop shop for corporations regulation.

Schedule 4 of the bill deals with income tax relief to New Zealanders impacted by disasters. Labor welcomes the simplification regarding disaster payments for affected New Zealanders working in Australia. The Australian government makes certain payments to eligible people to assist when a major disaster happens, and these payments are exempt from income tax, or an income tax rebate is available.

This measure amends the Income Tax Assessment Act 1936 to provide a tax rebate for recipients of the income support allowance and amends the Income Tax Assessment Act 1997 to provide an income tax exemption for the disaster recovery payment—in both cases, for New Zealanders on the special category visa that allows them to reside, work and study indefinitely in Australia, as long as they remain New Zealand citizens.

Tax relief for those in need is a rare occasion for this government. Let's face it: it marks something very different for a government whose No. 1 tax priority these days seems to be to give a $50 billion tax cut to some of the biggest companies in Australia, of whom, as we heard last December, one in three pay no tax.

Schedule 5 deals with client money for over-the-counter derivatives. It is welcomed by those of us on this side of the House, who have long stood on the side of investors. This provides additional protections when an investor may not be fully able to assess the risks of their money being used by the financial service licensee to meet other obligations of the licensee. This is a measure which will protect consumers and it is a measure which is of a range of Labor pro-consumer reforms.

We introduced the Future of Financial Advice reforms, which the coalition voted against and then tried to scrap under the guise of repealing red tape. Only a Liberal would say that consumer protections against dodgy rip-offs like Storm or Trio is red tape. We are pleased that we managed to force the government to back down on scrapping FoFA.

The protection of consumers is why Labor went to the last election arguing for higher penalties under the Australian Consumer Law. We believe that penalties like the $1.1 million fines available to the judge in the Nurofen case were too low. We believe that these fines should be increased to $10 million, and we are still waiting for the government to follow what the Australian Competition and Consumer Commission and the Productivity Commission have said is the right course: to raise the penalties for ripping off consumers.

Supporting this pro-consumer measure is also a natural step for a Labor Party that has continued to fight for a royal commission into the banking and financial services sector. A royal commission is the only way in which victims' stories can be heard and in which systematic reforms can be developed. We on this side of the House support the bill, bearing in mind the reservations, which the member for Chifley will detail, relating to employee share ownership.

Ed Husic (Chifley, Australian Labor Party, Shadow Parliamentary Secretary to the Shadow Treasurer) Share this | Link to this | Hansard source

I am grateful for the opportunity to follow on from the shadow Assistant Treasurer in relation to the Treasury Laws Amendment (2016 Measures No. 1) Bill 2016. As indicated, the opposition is not opposed per se to those provisions of the bill that relate to changes that will be made to the employee share scheme and some things that the government has flagged in the second reading speech.

I note that the second reading speech makes reference to the fact that it is giving life to a commitment made in the National Innovation and Science Agenda that was released in December 2015. That commitment said it would look at whether or not disclosure documents used as part of the employee share scheme regime, documents that are used by early-stage innovators and start-ups, be made public. The government had said back in December 2015 it would look at it.

A second reading speech was made on 1 December last year, almost a year after the government made that commitment. What was interesting is that the Treasury consultation around this bill closed on 7 December. We had a second reading speech and legislation introduced on 1 December, saying that it had consulted with the start-up community on this, but then the consultations actually closed a week after this.

As the member for Fenner, the shadow Assistant Treasurer, indicated, there has been very little released as to what happened in those consultations and how that was managed and, importantly, how it was translated into this bill in terms of what we are discussing. The second reading speech makes reference to the fact that this could be a problem and says that it wants to avoid it.

The second reading speech indicates that it is a reflection of a commitment granted in the National Innovation and Science Agenda, but it does not actually highlight (1) what the problem is (2) if it has been validated within the sector and (3) what measures, as raised by the sector, by start-ups, have been picked up by the government and reflected in this bill. I will be interested to hear from the minister at the table how that has been managed, because there are some concerns. Again, I would ask the government to respond to these concerns.

It is usually the case that a start-up will hold a percentage of equity that is going to be divided amongst all employees so that individual shares may fluctuate between a team. The share registry, when it is put into the disclosure document and made public, will be quite transparent about the way the shares have been divided. What the government is saying is that some of the assumptions about the business and some sensitive business information will not be made public through the share registry. We totally understand that, because it may be the case for some early-stage innovators and start-ups, particularly at their point of development, that they do not want to reveal that information publicly. But bear in mind that when a disclosure document has been made public, employees will want the transparency of that to be made available. They will also want to know that any changes to the share arrangements will be updated in the disclosure document. How will those updated changes or supplementary documents be made available, as is provided for under the legislation—the Corporations Act 2001?

And what I will be interested to hear from the minister is: how will employees know (1) how any changes in the share arrangements will be reflected in the document and (2) that they will have access to them?

The other thing is: there will be employees in start-ups not necessarily covered off by the particular share arrangements of one start-up. Those employees will want to know how share arrangements are made in other start-ups. They will use them as a way of being able to negotiate for their share arrangements in other instances.

My other concern is that employees of start-ups may have their bargaining power limited by virtue of the fact that there is a lot less information made public. Again, on the face of it, you would think that what is being proposed is straightforward, and I certainly appreciate that. You do not want to necessarily provide a lot of business information in the public domain for some of those early-stage companies. But it is a problem (1) if it has an impact on employees' shares and the way that they are treated and updated and those changes are reflected, and (2) if it inhibits, by virtue of the fact that this information is no longer available to employees of start-ups, their negotiating power.

The other thing that I want to raise with the minister while we are here is this. You have got this set of changes that are being put forward now to the parliament in relation to employee share schemes and whether or not disclosure documents will be made public via the share registry anymore. So you will have disclosure documents that spell out what the business is, what it predicts future business or industry conditions will be, and how that will impact on earnings. What is being proposed here is that that type of detail no longer be made public. That is what is being proposed in this case.

But we are also debating an arrangement, elsewhere, in other legislation, that will make this quite evident, and that is in equity crowdfunding legislation where disclosure documents will have to be made public. There may be a case where some firms who have an ESS available to their employees may choose to raise capital through an equity crowdfunding campaign, but their document there will have to be made public. So what we are interested to find out from the government—and I hope that this can be addressed, Minister, in the summing up in response to the bill—is: how will the operation of these changes work in tandem with a situation where a firm that has got an ESS in place has then decided to seek an equity crowdfunding campaign to raise funds, but will also provide a disclosure document where there may be variations to those disclosure documents. I would be very interested to see how that will operate—that you will have one disclosure document that is not made public but another disclosure document that will need to be made public through the process of equity crowdfunding. I think these are serious issues that should be responded to. Again, I say to the minister: I am very interested to hear again where they intend to make public the type of feedback that is being provided by the start-up sector to the legislation that was proposed, bearing in mind that you tabled this legislation one week before you closed the consultation process off on 7 December—

Ms O'Dwyer interjecting—

Absolutely. And if there is confusion to this, I am certainly happy to stand corrected. But I am interested to know: what has been raised, and how the bill reflects what has been raised, in the consultation; and, importantly, how—quite separate to this—there might be situations where there is a conflict between one disclosure document regime being made private and another disclosure document regime, in terms of equity crowdfunding, being made public, and what happens in those circumstances. Again, we do not seek to oppose the bill on this basis, but I do think it is important that some of these matters be addressed and attended to, because I think it will give a lot more certainty in the broader public space, particularly for start-ups, about what might happen to them. I will just contain my remarks to that.

Craig Kelly (Hughes, Liberal Party) Share this | Link to this | Hansard source

I would just like to make a few comments on the Treasury Laws Amendment (2016 Measures No. 1) Bill 2016 in response to some of the comments from the member for Fenner during this debate where he complained about the government's enterprise tax scheme being a $50 billion giveaway. Firstly, the member for Fenner may be interested in the example of what happened in New Zealand, given his belief that it is a $50 billion tax giveaway when you reduce the corporate tax rate. In the 2010 New Zealand budget, the then Prime Minister, John Key, made an announcement that he was lowering company tax rates from 30 per cent to 28 per cent—very similar to what we in Australia are currently proposing. As they were lowering the company tax rate from 30 per cent to 28 per cent, a natural question for someone who really did not have any understanding of economics or business or how the economy works would have been: 'Well, how much is that going to cost? We're reducing the tax rate. Surely that is a handout to all New Zealand companies at the expense of the New Zealand budget.' Well, what happened is a very salient tale and is something we should learn about. In New Zealand in 2010, their corporate tax receipts at the 30 per cent rate were $6.3 billion; in the next year, 2011, where they were split between the 30 per cent tax rate and the 28 per cent tax rate, they were $6.4 billion. So, in 2012, when they had a 28 per cent tax rate—when they had reduced it—how much did the tax receipts go down? Well, they did not go down. They actually increased. They went up by 24.9 per cent. So they got 25 per cent more tax—got more government revenue being paid—at 20 per cent than they did at 30 per cent. The following year, again at that lower tax rate, they again got a six per cent increase; in 2015 an 11 per cent increase; and in 2016 a five per cent increase. In those five years from 2011 to 2016—

Debate interrupted.