Sam Dastyari (NSW, Australian Labor Party) Share this | Hansard source

I rise to speak on the Tax and Superannuation Laws Amendment (2015 Measures No. 6) Bill 2015. Labor will be supporting this bill. This bill seeks to enact two tax changes announced by the former Labor government, and Labor, as we have said throughout this entire process and for the past few years, are always supportive of sensible measures which tighten the country's tax net without harming vulnerable Australians.

In government Labor pursued significant changes to Australia's tax laws to reduce regulatory burden, ensure the tax system is keeping pace with the increasingly global nature of business and ensure that everyone pays their fair share. First we had the Abbott government, and now the Turnbull government—there has been a lot of talk around tax reform, there has been a lot of debate, there has been a lot of discussion, but there have not been any real concrete proposals for us to be able to debate and for us to be able to explore. What we have actually had in the space of a proper tax debate in this country has been a lot of rhetoric. Most recently, we saw a situation where the Treasurer, Scott Morrison, had everything on the table, but now, increasingly, things are being taken off the table. Where there was a lot of discussion around whether or not there was going to be some kind of GST or some kind of major piece of tax reform, that appears to not be happening. There was talk about the tax white paper—a whole lot of effort, a whole lot of work, a whole lot of money went into the production of that, and that is now off the table. Instead, when we talk about tax reform in this country we have the legacy of these bills that are measures that were discussed and raised by the last Labor government first.

There are two parts to this bill, and I want to touch on them very briefly. Schedule 1 amends the treatment of earnout rights associated with the sale of a business to allow the holder to defer their capital gains tax liability until the accurate financial value of those rights are known. Again, this measure was announced in the 2010-11 budget. An earnout arrangement is a sale or purchase of an asset where the consideration includes a right to future financial benefits linked to the performance of the asset. For example, a standard earnout may involve an upfront payment for the sale, with the seller having a right to future payments that are contingent on the business's performance. Earnout arrangements are a legitimate and efficient way of structuring the sale of a business or business assets to deal with uncertainty about its value.

Under the ATO's current administration of the law, each earnout right is a separate and distinct asset from the underlying business and its market value must be estimated for CGT purposes. The complexity involved in this system affects the ability of businesses to efficiently price their business assets. This bill will result in any payments made under the earnout right being added to the capital proceeds, or the cost base of the original sale, through amendments to the taxpayer's tax return at that time.

Schedule 2 introduces a new withholding tax requirement for those purchasing Australian property from foreign residents. Purchasers will be required to withhold 10 per cent of the purchase price and pay this to the Commissioner of Taxation to assist in meeting the foreign resident's capital gains tax obligation. Foreign residents are liable to pay tax on capital gains when they dispose of certain Australian assets—broadly direct and indirect interests in real property. The ATO has indicated that voluntary compliance with Australia's foreign resident CGT regime is poor.

Under this measure, from 1 July 2016, where the seller of certain Australian assets is a foreign resident, the buyer will be required to withhold and pay to the ATO 10 per cent of the purchase price. The amount collected is an estimate of the vendor's final income tax liability. The vendor is still required to lodge an income tax return and pay any outstanding debt. They may claim a credit for the amount of tax withheld in the income tax return at this time. In this way, the withholding measure also encourages participation and engagement by foreign residents with the ATO. To ensure that this measure is appropriately targeted at those areas where revenue is at greatest risk, and minimises the impact on other property transactions, the measure does not apply to direct real property transactions below $2 million.

As I said earlier, this is a piece of legislation that Labor intends to support. It relates to measures and budget measures that were raised and introduced and discussed by the previous government. I think it is disappointing that when it comes to tax reform and tax debate in this country, into the third year of the Abbott-Turnbull government, we are still only dealing with a handful of legacy items and tax reform proposals that were presented by the former Labor government. That being said, on its merits, this is a bill that warrants our support and Labor will be supporting it.