Matt Thistlethwaite (Kingsford Smith, Australian Labor Party, Shadow Assistant Minister for Treasury) Share this | Link to this | Hansard source

The Treasury Laws Amendment (Tax Integrity and Other Measures) Bill 2018 contains four tax integrity measures. Schedule 1 goes to toughening the multinational anti-avoidance law; schedule 2 goes to improving the integrity of small business capital gains tax concessions; schedule 3 is about fintech and venture capital amendments; and, finally, schedule 4 goes to tax exemption for payments made under the Defence Force Ombudsman Scheme. Labor supports schedules 1 and 4.

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 notes the Coalition Government's failure to ensure tax integrity by improving tax haven transparency".

Kevin Hogan (Page, National Party) Share this | Link to this | Hansard source

Is the amendment seconded?

Lisa Chesters (Bendigo, Australian Labor Party, Shadow Assistant Minister for Workplace Relations) Share this | Link to this | Hansard source

I second the amendment and reserve my right to speak.

Matt Thistlethwaite (Kingsford Smith, Australian Labor Party, Shadow Assistant Minister for Treasury) Share this | Link to this | Hansard source

In terms of schedule 1, regarding toughening the multinational anti-avoidance law, the bill amends the Income Tax Assessment Act to ensure that the multinational anti-avoidance law applies appropriately to artificial and contrived arrangements involving trusts and partnerships entered into by multinational entities to avoid the taxation of business profits in Australia. We note that the schedule implements a technical integrity measure underpinning the multinational anti-avoidance law.

The Turnbull government has regularly made much of statements that Labor voted against the multinational anti-avoidance law, but this is simply not true. In this House, Labor supported that bill and, in the Senate, Labor voted against a government-Greens amendment. Yes, that's right: the government teamed up with the Greens to water down the tax transparency law and reporting requirements for large companies. The effect of that amendment—which was ultimately successful through the Greens and the coalition government—was to reduce the number of Australian companies who were required to report their tax arrangements each year. Some of those big companies were raking in revenue close to $16 billion but were paying no tax. The government wanted to reduce the number of those companies that were required to report every year, and guess what? The Greens teamed up with them and allowed that to occur. Labor ultimately facilitated the passage of the multinational anti-avoidance law in both houses, but we did that over protestations about reducing the exposure and the scrutiny that was allowed by that law by reducing the number of companies subject to it.

The fact is that the Turnbull government have been a light touch and have had a hands-off approach when it comes to big business and those at the top end of town, and we've seen this over the past couple of years with their approach to the banking industry. The fact is that for 600 days they avoided and actively opposed a royal commission into the banking sector in Australia. Labor's been proven right, once again, in the evidence that's come out of that inquiry—there was systemic and substantial rorting by this industry, undermining Australians' finances, and it needed to be looked at, and that's what's occurring at the moment. We welcome the fact that the commissioner's doing a fantastic job, and we await the outcomes of his interim report in September and ultimately a final report in February next year. This is a reflection of this government's ideological emphasis: checks and balances on government power but no consideration given to the checks and balances on the power of big businesses and the wealthy to avoid their community obligations, particularly when it comes to paying their fair share of tax.

The fact is that the Turnbull government, from the top down, including the extreme free-market fringe, are more concerned with so-called red tape and the banks' cost of doing business than with appropriately regulating them. They see tax and the collection of tax revenue as the biggest cost of doing business. They call it a tax grab. But we know, of course, that one in five of Australia's biggest companies have paid no tax for at least the past three years. That's no taxation revenue that could have been used for funding important social resources like health, education and infrastructure. Over a series of decades what we've seen is a number of these corporations being very adept at using accounting practices to make loans to subsidiaries in other countries, to transfer funds to subsidiaries in other countries where there is a lower corporate tax rate, and to avoid paying their fair share of tax in Australia. It was only when Labor began to highlight this—and, indeed, when these practices were highlighted through international bodies such as the International Monetary Fund and the OECD—that we began to get action from this government. This is despite tax transparency laws that show just how much the people of Australia are losing through this light-touch approach to collecting their fair share of taxation. Yet the Prime Minister and the Treasurer have still given priority to big business over reining in some of that taxation revenue to ensure we have a fairer budget balance from the corporate sector. We all know that, in the budget that was released just a couple of days ago, there remains the $80 billion tax cut for the biggest businesses in this country. Don't worry about actually getting what's owed to the Australian people. This government, as part of the trickle-down economics philosophy, is more intent on providing a tax cut to the big end of town.

Over the course of the past week some very interesting research has been released in the United States about the effect of the first round of corporate tax cuts in America, and—surprise, surprise!—what that research has uncovered is where that first round of corporate tax cuts went. Guess where the benefits of those corporate tax cuts went? Well, they didn't go into the pay packets of the workers of those corporations, I can tell you that; they went into profits and to the shareholders through increased dividends. It's clear, based on studies like that and a litany of others throughout the world, that this trickle-down approach to economics of cutting taxes for corporations in the wish and the hope that they will pass them on to their workers and employ more people is complete rubbish. It doesn't happen. These studies that have been released in the United States prove that. Cutting penalty rates for workers who work on weekends in the hospitality industry only makes things worse. These are the reasons why people's real incomes have not been increasing in Australia over the last decade, why families are feeling the pinch and why workers are feeling the pinch and feeling left behind by this government.

Many of these matters involve deliberate tax evasion, often through the use of overseas tax havens or complex corporate structures to avoid detection and recovery. Tax havens have been estimated to hold $7.5 trillion of the world's financial wealth, costing the global economy $200 billion in lost taxes every year. The strategy of choice used by those deliberately evading their fair share of tax is a clear and present threat to Australia's taxation base. When tax revenue gets lost to tax havens, Australians ultimately have to pay higher taxes or suffer cuts to those vital services and shared social resources that I referred to earlier, particularly health, education and infrastructure.

In 2017, Labor announced a comprehensive tax haven transparency package. The policy includes tax domicile disclosure for government procurement tenders, whistleblower protections and even rewards for reporting of tax haven exposure to shareholders, and public reporting of just how much tax is paid in jurisdictions where these firms operate. Yet this light-touch, hands-off government has been backtracking on a beneficial ownership registry—another Labor policy that we announced in 2017. This registry would help identify the ultimate owners that sit behind some of these shell companies. It's about improving the transparency that is there with regard to the operation of these companies and, ultimately, being able to hold someone accountable when they do use these tricky taxation and accounting measures to transfer profits overseas to avoid paying tax.

This government also commissioned an unrelated secret Board of Taxation review on the 2016-17 budget measures and the OECD proposals for mandatory disclosure of taxation information. Of course, we only know that because of Senate estimates. The report was released only days ago because Senators Ketter and McAllister were able to get that via the Senate estimates process. The government didn't even want to release this report and what was actually going on in terms of some of the taxation transparency measures in the Australian economy.

The fact is that the Treasurer doesn't want to close a lot of these loopholes. Of course, we heard absolutely nothing from him about cracking down on tax havens in this budget. We know that the introduction of public reporting of country-by-country reports, as suggested by Labor, could help stem the flow of missing money that should be flowing to the Australian people. Corporate profits are soaring and, while Australia's company tax rate places us in the middle of the G20 pack in terms of competitiveness and the actual rate of taxation for corporations, the only policy that this government has had in this area is to cut corporate taxes and to give those companies a big advantage.

Labor knows what needs to be done—and, if we're elected, we're willing to do it—to crack down on multinational tax avoidance. We have announced a plan to close those loopholes and attack the deliberate use of tax havens, first, by tightening debt deduction loopholes used by multinational companies to improve their budget by billions over the medium term.

The second element of our plan is introducing the public reporting of country-by-country reports. We need to see the high-level tax information about where and how much tax was paid by large corporations.

Third is providing protection for whistleblowers who report on those entities evading tax to the Australian Taxation Office. Where a whistleblower's information results in more tax being paid, we should allow them to collect a share of the tax penalty with a reward of up to $250,000.

Fourth is introducing a publicly accessible registry of the beneficial ownership of Australian listed companies and trusts. This approach will allow the public to find out just who really owns companies and who is behind these corporate and accounting practices of setting up different shell companies to avoid the scrutiny of the public. It's clear that shareholders shouldn't be able to use complex structures and sham ownership arrangements to avoid complying with corporate transparency rules.

Fifth is introducing mandatory shareholder reporting of tax haven exposure. Companies must disclose to their shareholders, as a material tax risk, if the company is doing business in some of these tax havens. Unfortunately, that is not occurring at the moment.

Sixth is appointing a community sector representative to boards of taxation to ensure the community sector's voice is heard in tax design and review processes.

Seventh is introducing public reporting of Australian Transaction Reports and Analysis Centre, or AUSTRAC, data and requiring the annual public release of international cash flow data.

Eighth is requiring government tenders to disclose their country of tax domicile.

Ninth is developing guidelines for investment by superannuation funds. This should be done by the Australian Taxation Office in collaboration with the Australian Securities and Investments Commission and the Australian Prudential Regulation Authority.

The final element of our plan requires the Australian tax office's annual report to provide information on the number and size of tax settlements.

I want to make some comments in respect of schedule 2 of the bill, which goes to improving the integrity of small-business capital gains tax concessions. These changes include additional conditions that must be satisfied to apply the small-business CGT concessions to capital gains. The amendments implement the measure announced in the 2017-18 budget as 'Tax integrity package—improving small business capital gains tax concessions' and apply to CGT events that occur on or after 1 July 2017.

However, we note that the original 2017-18 budget proposal is vague in its details. Many tax professionals and stakeholders have said that it would not be until the release of the exposure draft legislation that those affected would become aware of just how they were going to be affected by this legislation. These stakeholders make the reasonable claim that, due to a lack of detail, taxpayers who have conducted their tax affairs in good faith could be caught by changes that go beyond what was flagged in the previous budget. They argue that, to help prevent adverse consequences for taxpayers who have been acting in good faith but couldn't reasonably be expected to foresee the detailed amendments finally unveiled in the exposure draft, the implementation date should be changed from 1 July 2017, as per the original budget announcement, to 8 February 2018. That's the exposure draft release date. In light of those stakeholder concerns, Labor supports the start date being 8 February 2018, as proposed by the tax professionals community.

In terms of schedule 3, which goes to fin-tech and venture capital amendments, these amendments in income tax law and the Venture Capital Act ensure that venture capital tax concessions are available for investments in fin-tech businesses. This schedule partially implements a 2016-17 budget measure, the National Innovation and Science Agenda, as it expands the new arrangements for venture capital limited partnerships.

Labor notes that the main observation following consultation with key stakeholders was the timing of the concessions proposed in this measure. They still leave some uncertainty about the long-term eligibility for concessions in the commercialisation process. This has led to some uncertainty about whether investment decisions will actually be improved. Labor, again, has requested that the minister instigate a look at the impact of investment on the venture capital concession provisions overall, including the measures in this bill, to ensure that they are operating as intended. To provide an added layer of certainty, the amendments should allow Innovation and Science Australia to make public and private findings on assessments.

In conclusion, once again, Labor support the tax integrity measures in this bill, but we are somewhat sceptical about and somewhat dismayed by this government's light-handed approach when it comes to tackling tax avoidance in Australia. This particular coalition government has been very sloppy in its approach to key stakeholders on important tax matters—namely, those that go to the notions of transparency and accountability by corporations when it comes to taxation, how much they're paying and where they're paying it. Labor have laid out a clear plan of improved measures that would bring greater transparency and accountability to this industry. We commend that approach to the government and we hope that it sincerely looks at adopting some of those amendments.

Jason Falinski (Mackellar, Liberal Party) Share this | Link to this | Hansard source

I rise today to speak on the Treasury Laws Amendment (Tax Integrity and Other Measures) Bill 2018. As I am Chair of the House Committee on Tax and Revenue, this bill is close to my heart. Yes, there is a beating heart at the core of all good tax legislation. This bill fulfils the Turnbull government's commitment to ensure Australians can have confidence in a fair and equitable tax system whereby everyone plays by the same set of rules and pays their fair share of tax. This government, more than any other government in the past, has legislated tough laws to crack down on tax avoidance across the entire tax system and across all sectors of the economy.

This bill makes a number of key changes across four schedules that all work to make our tax system fairer, more cost-effective and efficient and to ensure that everyone plays by the same rules. Firstly, schedule 1, better known as MAAL, makes technical amendments to ensure that the government's multinational tax avoidance law operates as intended. As a result of this amendment, multinationals will no longer be able to use corporate structures with foreign trusts and partnerships to avoid the application of the MAAL. These changes were announced in last year's budget as part of the government's commitment to ensuring that multinational entities pay their fair share of tax.

The OECD has estimated that, globally, between US$100 billion and US$240 billion of corporate tax revenue is lost annually due to base erosion and profit-shifting strategies developed by tax lawyers in new tax jurisdictions, like Liechtenstein and the Bahamas. As part of the global effort to combat multinational tax avoidance, the OECD G20 base erosion and profit-shifting project has delivered a number of recommendations to strengthen countries' tax integrity rules and ensure that the international tax system works as intended. Since 2015, Australia has implemented a range of such actions. The government has also taken additional action on multinational tax avoidance beyond the OECD recommendations, including implementing the multinational anti-avoidance law and the diverted profits tax, both of which discourage large multinationals from artificially diverting profits offshore.

The MAAL, which took effect from 1 January 2016, prevents multinationals from escaping Australian tax by using artificial or contrived arrangements to avoid having a taxable presence in Australia. The ATO has observed a significant change in how multinational companies are approaching their Australian tax obligations as a result of the tough new anti-avoidance laws put in place by this government. The ATO estimates that more than $7 billion in sales revenue annually is already being added to the Australian tax base as a result of the government's MAAL. Already we have seen 38 multinational entities changing, or they are in the process of changing, their tax affairs to bring their Australian sourced sales back onshore in compliance with the MAAL, including Google and Facebook. This is also competitively neutral, putting foreign multinationals on the same level as Australian owned and run businesses.

Secondly, schedule 2 of the bill improves the integrity of the small business capital gains tax concessions, in line with the measures announced in the 2017-18 budget to improve integrity and ensure that small business CGT concessions are appropriately targeted. Currently, some taxpayers are able to access the small business CGT concessions for assets that are unrelated to their small businesses. The proposed amendment applies to CGT events that occur on or after 1 July 2017. This application is consistent with the 2017-18 budget announcements to ensure that small business CGT concessions can only be accessed in relation to assets used in a small business or ownership interests in a small business—for instance, by arranging their affairs so that their ownership interests in larger businesses do not count towards the test for determining eligibility of the concessions. The proposed amendments are needed to improve the integrity of the concessions and ensure that they are appropriately targeted for the benefit of genuine small businesses. The small business CGT concessions provide taxpayers with full or partial relief from taxation on capital gains on the disposal of assets related to their business.

There are four existing small business CGT concessions. The first is retirement exemption—lifetime limit exempting $500,000 of capital gains from disposing of active assets on retirement. If the taxpayer is under 55 years of age, money from the disposal of the asset must be paid into a complying superannuation fund or a retirement savings account. There is a 50 per cent active asset reduction—a 50 per cent reduction in the capital gains made from the disposal of an asset used in a business. There is a 15-year exemption—a 100 per cent exemption for active assets owned for at least 15 years where the taxpayer is over the age of 55 and is retiring or permanently incapacitated. And there is the rollover deferral of all or part of a capital gain for two years or longer if the taxpayer requires a replacement asset or incurs expenditure on making capital improvements to an existing asset. These concessions help small businesses grow and reinvest their profits as well as contribute to their retirement savings through the sale of their business. This is about ensuring that these concessions continue to benefit those who need them most—hardworking small business owners.

The proposed amendment will mean that small business CGT concessions can only be accessed in relation to assets used in small business, or ownership interests in a small business. As a result of the consultation process, amendments to the exposure draft were made to streamline the operation of the integrity rules surrounding the use of cash and financial instruments as part of the business. The requirement for cash and financial instruments to be inherently connected with the business will continue to apply. An additional integrity rule is also being introduced to ensure that there is no incentive for taxpayers to enter into artificial arrangements for the purpose of meeting this test.

For the purpose of testing the size of an enterprise or company or trust being disposed of, an entity is treated as controlling another entity if its interest in that entity is 20 per cent or more. This means that more entities will be considered to be connected with each other and will need to include their assets or turnover for the purpose of this test. The lowering of this threshold to 20 per cent is a necessary tightening to ensure the concessions can only be accessed in relation to genuine small businesses. Importantly, these tests apply on an entity-by-entity basis. The taxpayer at the top of a chain of companies or trusts may not qualify for the concession in respect of shares or interest it holds—for example, because that chain includes an indirect interest in a large business. However, another taxpayer in the same chain of companies or trusts may qualify for the concessions in respect of shares or interest it holds in a small business.

Let's take a tradesman in my electorate as an example—say, John the plumber. He started his plumbing business at the age of 25 after receiving all of his qualifications, building his business over 30 years to be a modestly successful entity, employing apprentices and becoming a local household name—in the area, of course. John, now in his mid-50s, can no longer do the arduous work he previously did over the past 30 years. John decides to sell his business and retire. This is what the Liberal Party has given John, a person who has risked going out on his own to start a business, has put his home on the line, has put his hand in his own pocket, has employed apprentices and has contributed to our community and the wider economy: he can now retire without having to pay capital gains tax, rebalancing the risk-for-reward equation.

The Turnbull government is committed to supporting small businesses through tax relief and initiatives such as the $20,000 instant asset write-off, which was extended for a further 12 months in Tuesday night's budget as outlined by the Treasurer. These small business CGT concessions assist owners of small businesses by providing relief from CGT on the disposal of assets related to their business, helping them to reinvest and grow, as well as contributing to their retirement savings through the sale of the business—but, above all, by encouraging entrepreneurship. The concessions themselves are not changing and will continue to be available to genuine small businesses and taxpayers with an aggregated turnover of less than $2 million or business assets of less than $6 million.

Key features of the new law include: limiting the size of the company or trust being disposed of, to ensure that it is a genuine small business; clarifying that a taxpayer is required to be a small business entity at the time they dispose of their interests in the company or trust, to ensure that taxpayers do not benefit from the concession where the relevant business activities are too remote; and modifying the active asset test so that it looks through shares in companies and interests in trusts to the activities and assets of the underlying entities, which will prevent the concessions from being available where most of the value of the company or trust is unrelated to the small business activities.

Additional integrity rules also apply to ensure that the new tests cannot be manipulated or avoided. Schedule 3 of this bill delivers on a key commitment in the government's fin-tech statement, removing ambiguity from the tax law and clarifying that early stage venture capital limited partnerships and venture capital limited partnerships can invest in innovative Australian fin-tech businesses. This bill builds on the government's $1.1 billion National Innovation and Science Agenda and highlights our commitment to support innovative—

Ed Husic (Chifley, Australian Labor Party, Shadow Minister for the Digital Economy) Share this | Link to this | Hansard source

All front; no form.

Jason Falinski (Mackellar, Liberal Party) Share this | Link to this | Hansard source

The member for Chifley seems surprised to hear these things. The bill highlights our commitment to support innovative businesses in Australia and to build a culture of entrepreneurship and risk taking. The member for Chifley should take advantage of these great new programs that we're introducing. This will improve access to venture capital for fin-tech start-ups and assist these businesses to start, innovate, grow and succeed.

I have many fin-tech companies within my community. Unifii, for example, is a company based in my area that has developed a digital transformation platform that enables large corporate and government enterprises to create and deploy powerful business applications that in hours or days completely eliminate paper processes. Unifii has developed all the intellectual property here in Australia, and every line of code has been written by Australian software developers based in Warriewood, in Sydney. With over two million users already on the platform, the company is delivering enormous economic benefit to Australian businesses and government agencies, and it is expanding internationally to major markets. Unifii is a great example of local talent delivering enormous value to the Australian economy, with very significant export potential.

Schedule 4 of this bill amends the Income Tax Assessment Act 1997 to continue to exempt from income tax the payments made as reparation to victims of abuse in the Australian Defence Force. Unlike compensation, a reparation payment represents an acknowledgement by Defence that the abuse suffered by the complainant was wrong, that it can have a lasting and serious impact and also that in the past Defence was not positioned appropriately to respond to abuse in many cases. The recipient of a reparation payment should receive the full benefit of that payment and, as such, the payment should be exempt from income tax.

Previous reparation payments made under the former Defence Abuse Response Taskforce were tax exempt. The task force concluded on 31 August 2016, and in the 2017-18 budget the government announced it was expanding the Defence Force Ombudsman's role to make recommendations on reparation payments in relation to complaints of abuse in Defence. The Defence Force Ombudsman may make recommendations in respect of historical cases of abuse occurring on or before 30 June 2014.

Tax systems at their best should be broad, even and fair to everyone. They should encourage entrepreneurship and allow it to be rewarding. They should recognise the great risk that people undertake, and with that great risk should come equivalent rewards. This bill does that, so I commend the bill to this House.

Matt Keogh (Burt, Australian Labor Party) Share this | Link to this | Hansard source

This Treasury Laws Amendment (Tax Integrity and Other Measures) Bill 2018, which deals with tax integrity and the euphemistic 'other measures', actually covers the great areas of tax havens and multinational tax. When I talk to members of my community, the taxation issue that they raise with me most after WA's distribution of the GST is the lack of a crackdown on multinationals who don't pay their tax. That is the No. 2 taxation issue that members of my community raise with me on a regular basis. I think that's a very useful point to make. It's a useful point to make because it points to the priorities of ordinary Australians. The reason they raise the need for us to ensure that multinational corporations pay tax and don't offshore tax or minimise tax is that they understand that, in order to ensure their access to the essential services they need from government, we need to be able to properly fund our education system, our health system, defence and everything else that the Commonwealth government does—as well as not giving away masses of money to the big banks—and part of that is making sure that there's some integrity to our tax system so that the money that should be paid in taxation is actually paid.

Tax havens threaten Australia's tax base. When our tax revenue gets lost to tax havens, Australians ultimately have to pay higher taxes or, as many constituents in the electorate of Burt realise, suffer cuts to vital services. For example, the Cayman Islands has been criticised by the OECD and by the tax commissioner for its excessive secrecy. There are more companies in the Cayman Islands than people. A single building in the Caymans, Ugland House, is apparently home to over 18,000 companies. The tax commissioner has said in a speech to The Tax Institute:

Many of these matters involve deliberate tax evasion, often using overseas tax havens or complex corporate structures to avoid detection and recovery.

The shock waves from the Panama Papers and similar scandals involving corporations and high-net-worth individuals aggressively minimising their tax are felt around the world. Other governments have been jolted into action on transparency measures since the public outcry over the Panama Papers. The Turnbull government, however—wait for it—has done virtually nothing.

With rising inequality and rising government debt, the time for acting on tax havens has not only come; it's almost gone. We need to get started on this. We need to make sure there's real action. Tax havens have been estimated to hold $7.5 trillion of the world's financial wealth, costing the global economy $200 billion in lost taxes every year. Labor announced, back in 2017, a comprehensive tax haven transparency package, including tax domicile disclosure for government procurement tenders; whistleblower protections and rewards; reporting of tax haven exposure to shareholders; and public reporting of how much tax is paid in jurisdictions that a firm operates in, along with related materials. Meanwhile, what's the government been doing? It's has been backtracking on a beneficial ownership register and it's commissioned an unreleased, secret Board of Taxation review into the 2016-17 budget measure on OECD proposals for mandatory disclosure of tax.

Why has it backtracked on these measures? One in five of Australia's biggest companies have paid no tax in at least the last three years, but the priority of the Prime Minister and the Treasurer is still to give over $80 billion in tax cuts to big business. We know that Australia is missing out on billions in tax revenue thanks to the loopholes that continue to exist in our taxation system and which the Turnbull government refuses to properly close, despite Labor saying that we will cooperate with them in this area. The introduction of public reporting of country-by-country reports, as suggested by Labor, could help stem the flow of this missing money. But the Treasurer doesn't want to close those loopholes. Despite soaring corporate profits and the fact that Australia's company tax rate places us in the middle of the G20 pack, the only policy this government seems to have is a big company tax cut.

Labor has a different plan, and I've outlined some of the parts of Labor's plan. The point here is that, unlike the many criticisms that we, on all sides, receive in politics that government and opposition can't work together, this is an area of law where we could be working together better to create better law to make sure we have more integrity in our tax system, instead of doing what the government is doing: continuing to bring forward piecemeal pieces of legislation so that it can say it's working on tax integrity and on closing down multinational tax loopholes—which it does frequently say—while in actual fact leaving loopholes open and not doing the full work, even some of the work it said it would do, to close these loopholes. These are the things that need to happen, but the government refuses to do them, which is really quite disappointing. As I said, this is the second biggest tax issue that people in my community raise with me. They know that if we don't get this fixed it results in cuts to their services.

There are other parts of what I referred to as the euphemistic use of 'other measures' in this bill. We see the improvement of tax integrity not only by looking at tax havens and other areas of multinational taxation but by looking at improving the integrity of the small-business CGT concessions. There are some amendments Labor thinks should be made in this area. One of the things that stuck out for me when I looked at this part of the bill was that, despite the fact that it was only on Tuesday—only two days ago—that the government handed down their 2018-19 budget, this is a measure from the 2017-18 budget. The government are really running the parliament well; we're still getting around to trying to deal with issues from the last budget measures, and they've just handed down the latest budget. Maybe we need to include other categories in the forward estimates: one saying, 'This is what we think we're going to do in the next financial year,' and another saying, 'These are the things we might get around to doing, but we don't really know if we'll include it, and hopefully we'll be able to work it through parliament.' These are the areas we actually want to agree with them on. These are areas we want to help them on.

It brings to mind other areas of legislation that are in this space—things like working with the fin-tech sector, which is the other part of schedule 3. Again, this is a measure that is from the last budget that we are only just now getting around to dealing with in the chamber of the House of Representatives.

Ed Husic (Chifley, Australian Labor Party, Shadow Minister for the Digital Economy) Share this | Link to this | Hansard source

It's from 2016-17.

Matt Keogh (Burt, Australian Labor Party) Share this | Link to this | Hansard source

Thank you. I refer to the member of Chifley's very eloquent point—this is from two budgets ago. I wasn't even in the parliament when they budgeted for this. I've had to come into the parliament—the people of Burt had to elect me—so we could get on with this. I thank the people of Burt for doing that. Imagine how far behind we'd be otherwise.

This is a bit like the NBN under this government. It almost goes backwards. It is amazing we have a fin-tech sector in this country, given the way the government goes around legislating for it. It's a bit like a sandbox it tried to create—despite the fact that we highlighted some of the issues that it would have with it—and realised that it doesn't actually work and now it has got to fix it again.

It's a bit like when we tried to create a better way for start-ups to raise capital online. That is another piece of legislation they put into parliament about which we said: 'This is great and we're happy to move on this. By the way, there are a few things you'd better fix up because we think it's probably not going to work the way you think it's going to work.' Then, 12 months later, they said: 'You're right about that. We'd better fix it up; we'll bring in legislation'. We are nearly 12 months past that point, and they haven't even gotten it through the parliament yet—in fact, they haven't even brought it on for debate in the Senate yet.

This really comes back to the point on the concerns we have about this piece of legislation. This is good legislation in theory, but there are things in schedules 3 and 4 in particular that we say need to be improved or fixed up. We are a party that wants to work with the government on making sure that our tax laws have integrity, that we capture multinational tax loss and that we provide an effective system of taxation and an effective regulatory environment for our fin-tech sector and start-up sector. We want to make sure we get it right. I don't want to find myself back here in six months time debating more legislation to fix this legislation, when it's taken two years to get around debating it in the first place.

Whilst overall we support this legislation and the intent of the legislation, as I said before, what it really highlights is that what we really need is Labor's plan to deal with multinational taxation to make sure we actually fix the issue of companies and high-net-wealth individuals being able to offshore their profits and their high incomes to avoid paying tax in Australia, which is where it's needed, so we can provide the services that ordinary Australians rely on. The Liberal government, when it comes to this area, are all light and mirrors. They make it look like they are doing something, and they say they are doing something, but in reality it's a half-baked approach.

It's a bit like their half-baked approach of looking at the financial sector and the big banks in this country. On one hand, they say, 'We're going to give you a big tax cut.' On the other hand, they say to the public—kicking and screaming, I might point out—'We'll hold a royal commission.' Then they look at some of the things that come out of that royal commission and say: 'Look at that bad behaviour! We'll throw the book at them. We'll make sure they get tough penalties. We'll make sure any criminal behaviour gets investigated and looked into.' Then, lo and behold, they hand down a budget, and when we go through the detail to see what's happening with ASIC, $20 million or $30 million is disappearing from ASIC, the agency that would be investigating and enforcing against the banks and our financial sector. Nearly $2 million was ripped out of the Commonwealth Director of Public Prosecutions, the agency that would be prosecuting them. What we see is a continuation of the protection rackets for the big banks and the financial sector in Australia. Here it is again. It's almost a protection racket. The government will say, 'We are fixing up multinational taxation,' but at the end of the day it's all smoke and mirrors.

Ed Husic (Chifley, Australian Labor Party, Shadow Minister for the Digital Economy) Share this | Link to this | Hansard source

I think you'd be aware, Deputy Speaker Goodenough, as many others would: in this place, you can't even scratch yourself without running into a 'parliamentary friends of' group. These groups are doing some really good work, but there are a lot of them that seem to pop up with a great degree of frequency. I have a recommendation for the coalition: given how much they talk about this sector, particularly the fin-tech sector, and their inability to get anything done, I think they need to create the 'faux friends of fin-tech'.

The coalition talk a lot about how close they are to the fin-tech community. They talk about all this legislation that they're putting forward. They're always there with the media release. They're always there with the announcement. They're always there to try to claim some credit and show that they've got a fin-tech community. The Treasurer brings together the fin-tech community in his little consultative group and says, 'We're going to be putting these things forward.' Then, when you match the words against reality, you find a massive gulf. This is definitely the case with elements in this bill.

I will restrict my comments to the venture capital component, but I think that it is telling, particularly with this section, which should be relatively straightforward—but then you realise the enormous gestation period, the time it took to get to this point, which reflects that, while the coalition talk a big game on fin-tech, they don't deliver. This schedule would give the appearance of being fairly straightforward when someone reads the explanatory memorandum and understands what's going on. It allows for early stage venture capital limited partnerships and VCLP arrangements to change the way in which they can, where they've been prohibited before, back investments in the banking, finance and insurance areas—all straightforward. But what I have been finding out when talking with stakeholders about this is how long it took to get to this point—how long it took for this straightforward move to happen.

FinTech Australia—and I went and checked this out—put out a policy paper on this very issue in February 2016. The government, in its 2016-17 budget—May of 2016—said: 'Yes, we're going to do this. We'll move ahead on this.' And it was not until October 2017 that the government, through Treasury, started to consult on amendments to allow this to happen. So from February and May 2016 we get to October 2017. Again, they make the big announcements, claim the credit and, when the hard work needs to be done, are nowhere to be seen—they drag it out. The sector and people in the sector have raised with me that they're not entirely happy with what's been put forward in this bill. Again, it's a straightforward measure, but they still don't think that it's picked up their concerns. For example—and I had highlighted to me—in 3.26 of the explanatory memorandum it states that a fin-tech may be eligible for the tax concession when developing its technology. However—and this is what has been raised with me—it then goes on to say that when a business is commercialising the technology it would no longer be eligible. As has been raised with me: 'This hardly seems like a certain, longer term platform for a venture capital firm to make an investment in a fin-tech, given that the VC is only making the investment because it's hoping the fin-tech will be able to commercialise and profit from the technology.' This is what they're raising with me, and I'm sure they have raised it with Treasury.

It's another bit of legislation after some of the other stuff that was being done in this space to reform the VCLP and ESVCLP arrangements that we've already—we haven't even debated the regulatory sandbox and the other measures that were contained in there as it pertains to venture capital. The government hasn't even bothered to bring that debate in here. We're still having those concerns, and that they're not being taken seriously, raised with us. We are going to be moving an amendment that this be reviewed so that we can see if it's actually successful, because here are some firms that simply, in the banking, finance and insurance space, if they develop their product, can provide a competitive alternative to existing arrangements. The banks are so fearful of things like opening up banking data not because of a new-found commitment to protecting certain consumers or a new-found love of privacy after some of the breaches we've seen in the last few weeks. What they're really scared witless of is the fact that the fin-tech community, particularly in Australia, will offer a very strong and competitive alternative to what people have had to cop from the banks and financial services sector in times past. We should be encouraging them. We back the government's commitment, but what we really back is concrete reform.

As I said, we have this legislation that we've already picked up stakeholder reticence about because it doesn't necessarily pick up all their concerns. They are concerned, for example, about going through with Innovation and Science Australia and expecting some of the rulings, even though admittedly this legislation is supposed to provide a bit more certainty through the public and private ruling mechanism. But there are people concerned that they can't get the green light from ISA to go ahead and then get the investment that's required. They are obviously going to be concerned in the longer term, when the broadening of the definition plays out, about how long it might take to see things happen there. So there are concerns with that.

We are not even debating the regulatory sandbox changes that need to happen. Again, the government said that this is really important, and it is important because they stuffed the first version. They had only four fin-techs go through their regulatory sandbox—less than half a dozen—and they need to fix that up now with a series of changes that still haven't been put to the parliament. The other thing that is just staggering for a government that says it is pro fin-tech—as I said, faux friends of fin-tech—how come they haven't had the wherewithal to bring in the final lot of changes through the Senate on equity crowdfunding?

Last year, when they rammed through this place the changes that we said would be overly bureaucratic, would not deliver the benefits they said would happen, and would not allow smaller firms to access the level of capital raising required to help those firms grow, they still put them through. At the time, I labelled it 'ScoMo's dodo', because we knew it was heading for one thing and one thing only—extinction—because it had to have a whole new set of changes put to it. That's what they did in September. They brought another round of legislation in to fix up the fatally flawed legislation that they had in March. They introduced it in this place in September last year and then it didn't go in through the Senate at the end of the year. We then waited for February for it to come in, and they didn't debate it then. Then we got to March and it still didn't get debated, and then we had the long break before the budget. Now it's come in, in the first week in May, and they haven't put it through the Senate. Mind you, this is after the opposition has offered every assurance that we will work with them. We want to see the time frame for the introduction shortened. We've said to the government continually that we will work with them on this—just bring the framework in. And they couldn't get it into the Senate this week. What does that mean for the fin-tech community or others in the early-stage innovation space? You now will not see this legislation debated until three-quarters of the way through June. The government has baked in a delay of six months from royal assent before the new regime takes place, which means it would be December of this year, notionally, before it comes in.

To their great credit, the government agreed with us to shorten that period of time. We wanted it even shorter. We wanted it introduced right from the start of the new financial year, but they still won't agree to it, because they're worried about ASIC, and ASIC is playing ping-pong, saying, 'It's up to the parliament to determine what happens.' They didn't even know at estimates that there was this six-month period.

But, again, ScoMo's dodo, now the 'go-slow by ScoMo', is going to create another dodo, because equity crowdfunding is now being overtaken by an alternative financing vehicle in the form of initial coin offerings, using cryptocurrency as a way to generate capital for early-stage innovators. So this is now just taking place on its own and it threatens to potentially outstrip what could be raised through equity crowdfunding anyway.

The bigger story in all this is that we've been debating this since May 2013. We made the reference to the Corporations and Markets Advisory Committee in May 2013 to set up the framework. The coalition government got the report in May 2014, but by 2018 we still don't have the actual framework in place. It has been five years—four under your coalition government, where you say that you're pro innovation, you say you're pro fin-tech sector, but you can't even get the reforms in. You drag it out so long that alternative vehicles for capital raisings emerge, which, I have to say, are less informative to investors and will require much more sophisticated investors to understand and interpret what's going on. It's been dragged out. You're either fair dinkum about encouraging fin-tech and the emergence of a stronger fin-tech sector in this country, or you're just fake friends of the sector, only wanting to be there for the click of the cameras and the writing of the stories. You're not there to actually put it through, and this is even when we're prepared to work with the coalition on this. It is a disgrace. This shouldn't happen. If you were pro business, if you were truly pro opening up alternative pathways for capital raising, you would have got it done, but you haven't.

It's just the same as the concerns we have with what's contained within schedule 3 of this legislation. Based on what we're hearing out of the fin-tech sector and what stakeholders are raising with us, you still haven't cleared it up. If the Treasurer's too busy, he has an assistant minister. Assign him to make sure this happens. He has enough space to be able to make this happen. I'm sure he wants to cut his teeth on this legislation—he'll do the summing-up in a few minutes time. So why don't they take the steps, task up the proper people, make this happen, get the legislation through and prove that they are more than words, that they are action, as opposed to what we're seeing right now?

Michael Sukkar (Deakin, Liberal Party, Assistant Minister to the Treasurer) Share this | Link to this | Hansard source

In summing up the Treasury Laws Amendment (Tax Integrity and Other Measures) Bill 2018, I will say that this further delivers on this government's agenda to address multinational tax avoidance, ensures that the small-business capital gains tax concessions are appropriately targeted, ensures that we have the policy settings in order to foster innovation and makes the taxation of Defence abuse repatriation payments fairer. Schedule 1 of this bill demonstrates again our ongoing commitment to tackling multinational tax avoidance by further preventing large multinationals from avoiding tax on their Australian business profits through artificially structuring their affairs, which ultimately amounts to taxable income not being captured in the Australian tax net. The amendments contained in schedule 1 ensure that the multilateral anti-tax-avoidance law, which targets these egregious practices, will continue to operate as intended and deliver on the government's commitment to improving the integrity of Australia's tax system, which ultimately benefits all Australians.

Schedule 2 of the bill amends the Income Tax Assessment Act 1997 to improve the integrity of the tax system and ensure that the small-business CGT concessions are appropriately targeted. These amendments give effect to the government's 2017-18 budget announcement that, from 1 July 2017, the concessions can only be accessed in relation to assets used in a small business or ownership interests in a small business. The key feature of the amendments is to test the size of the business being disposed of, to prevent inappropriate access to the concessions for assets unrelated to a small business. This ensures that these important concessions continue to benefit those who need them most, which are hardworking small businesses.

The government is committed to establishing Australia as a leading global fin-tech hub. When I spoke at the fin-tech futures forum in Melbourne last week, the government were certainly congratulated on the work and support that we're providing fin-techs. Therefore, schedule 3 of this bill builds on our work to ensure that we have the policy settings best in place to foster this sort of innovation. Accordingly, schedule 3 amends the early stage venture capital limited partnership, venture capital limited partnership and tax incentives for early stage investor regimes of the Income Tax Assessment Act 1997. This clarifies that early stage venture capital limited partnerships and venture capital limited partnerships can invest in innovative fintech businesses, removes ambiguity from the tax law, and provides certainty for venture capital investors. Again, we believe that this demonstrates the government's continuing commitment to promoting a culture of entrepreneurship and risk taking in Australia and will help ensure innovative Australian businesses have access to the capital and, importantly, the expertise that they need to grow and succeed in this very competitive area.

In the 2017-18 budget the government announced it would expand the role of the Defence Force Ombudsman to make recommendations for reparation payments. All complaints about abuse in the Defence Force made to the Defence Force Ombudsman will now include an assessment for a reparation payment. Similar reparation payments were previously administered by the Defence Abuse Response Taskforce, which concluded on 31 August 2016. Reparation payments made by the Defence Abuse Response Taskforce were specifically exempt from income tax. Schedule 4 of this bill therefore ensures that the new reparation payments recommended by the Defence Force Ombudsman are exempt from income tax. Reparation payments are not intended to be compensation, and complainants will not be required to release the Commonwealth from any liability. Schedule 4 ensures the recipient of a reparation payment receives the full benefit of the payment and, importantly, is free from the obligation to pay income tax on it. Therefore, I commend this bill to the House.

Ian Goodenough (Moore, Liberal Party) Share this | Link to this | Hansard source

The original question was that this bill be now read a second time. To this the honourable member for Kingsford Smith has moved as an amendment that all words after 'That' be omitted with a view to substituting other words. The immediate question is that the amendment be agreed to.

Question negatived.

Original question agreed to.

Bill read a second time.