Slade Brockman (WA, Liberal Party) Share this | Hansard source

I rise to speak on the Treasury Laws Amendment (Tax Integrity and Other Measures) Bill 2018. I thank Senator Cameron for his contribution and the fact that those opposite will be supporting this bill, albeit they will be moving some amendments to it.

Why is tax integrity important? Tax integrity is vital because it gives people confidence in our economic system and it means that taxes can be maintained at as low a level as possible. If everyone is paying the amount of tax they are required to pay then taxpayers are not burdened. Those who do pay their tax, who follow the rules, are not burdened with unduly high taxes. So tax integrity is an essential measure of fairness in a modern economy.

This government has a strong track record of defending the integrity of the tax system, to make sure it collects the tax that is required to be paid—and no more than that—so that no-one in society is burdened with an unfair level of taxation because others are breaking the rules. The government has a strong track record of defending the integrity of the tax system not just in this bill but previously, and before I go into this bill in detail I'll just run through some of the things that this government has done.

Legislation passed includes such things as the Banking Executive Accountability Regime, the BEAR, ensuring that senior executives are accountable for the decisions they make. That was a very significant reform in Australia's financial services history. It imposed a higher standard of behaviour on banks and their senior executives and directors. It strengthened the leadership of financial system regulators through enabling ASIC and APRA each to have a second deputy chair position. That is the case at APRA, where John Lonsdale, a 30-year Treasury veteran, has been appointed. And Daniel Crennan QC has already started in his role at ASIC as a special prosecutor focusing on enforcement.

We have created a one-stop shop for dispute resolution with the establishment of the Australian Financial Complaints Authority, enabling more consumers to access fast and free dispute resolution. We have increased the powers of APRA in relation to crisis management and non-bank lenders to ensure the resilience and ongoing stability of the Australian financial system. We have capped commissions paid on life insurance products to prevent unnecessary churn. We have raised the professional education and ethical standards of financial advisers. We have put a ban on excessive credit card surcharges, to protect consumers from being granted excessive credit limits and building unsustainable debt across credit cards, and simplified how interest is calculated. We have implemented funds for Australian regional transport. We have moved to establish a crowdsourced equity funding regime to allow new businesses to get access to funding in new and innovative ways. We have introduced industry funding for ASIC through levies and fees for regulatory activities. We are also looking to strengthen protection for whistleblowers who expose corporate and tax misconduct. We have enhanced ASIC's ability to attract and retain the best staff by removing ASIC employees from the Public Service Act.

There is also the relaxation of the legislative 15 per cent ownership cap as well as establishing a streamlined approval path for recent entrants so as to reduce barriers to innovative new fin-techs in the banking sector. There is extending the crowdsourced equity funding regime to propriety companies to help smaller financial institutions to grow and become more significant players in the banking sector. We're improving superannuation accountability and member outcomes, including strengthening regulator powers, improving disclosure, removing restrictions on choice of funds and lifting governance standards.

We're also moving to protect individual superannuation savings from disproportionately high fees and insurance premiums and empowering the ATO to reunite people with their lost and inactive super. This is a strong track record of delivering positive outcomes in the financial services space particularly and, obviously, in tax integrity. Making sure that all parts of the economy pay the correct amount of tax through tax integrity measures is vitally important. We've already taken significant action on this, particularly as regards multinationals, and that is, in part, what the bill in front of us goes to.

Schedule 1 of this bill toughens the multinational anti-avoidance law—the MAAL law. This schedule makes technical amendments to ensure that the multinational anti-avoidance law operates as it was intended to. 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 multinational anti-avoidance law. These changes were announced in last year's budget. The government is committed to ensuring that multinational entities pay their fair share of tax. The OECD estimated that, globally, between $100 billion and $240 billion of corporate tax revenues is lost annually due to base erosion and profit-shifting strategies used by multinationals. 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 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 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 multinational anti-avoidance law took effect from 1 January 2016 and 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 more than $7 billion in sales revenue annually is already being added to the Australian tax base as a result of these changes. Thirty-eight multinational entities have changed, or are in the process of changing, their tax affairs to bring their Australian source sales back onshore in compliance with the multinational anti-avoidance law, including Google and Facebook. Obviously, taxing these large multinationals with innovative models of doing business—the way they're structured and the way their businesses operate—is different to what the tax system was used to dealing with. So it's important that, as the business environment changes, governments are responsive enough to change the tax environment with it to ensure that everyone does pay their fair share of tax.

Schedule 2 improves the integrity of the small-business capital gains tax concessions. In the 2017-18 budget the government announced that it would improve integrity and ensure that the small-business capital gains tax concessions are appropriately targeted. The goal was to ensure that the concessions continue to benefit those who need them most—hardworking small businesses. The proposed amendments will mean the small-business capital gains tax concessions can only be accessed in relation to assets used in a small business or ownership interests in a small business.

The government is committed to supporting small businesses through tax cuts and initiatives such as the $20,000 instant asset write-off, which was extended in last year's budget for a further 12 months to 30 June 2018. The small-business capital gains tax concessions assist owners of small businesses by providing relief from capital gains tax on the disposal of assets related to their business. This helps them to reinvest and grow as well as to contribute to their retirement savings through the sale of the business. The concessions themselves are not changing and will be available to genuine small-business taxpayers with an aggregated turnover of less than $2 million or business assets less than $6 million.

Key features of the new law include: a limitation on 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 to companies or interests in trusts to the activities and assets of the underlying entities. That prevents the concessions from being available when most of the value of the company or trust is unrelated to small-business activity. Additional integrity rules also apply to ensure that the new tests cannot be manipulated or avoided.

Schedule 3 of the bill covers amendments to the fin-tech and venture capital arrangements. This 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 can invest in 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 businesses in Australia and build a culture of entrepreneurship and risk-taking. It will improve access to venture capital for fin-tech start-ups and assist these businesses to grow and succeed. I certainly know that in my home state of WA we are seeing a lot of very exciting developments in these kinds of spaces where venture capital and financial tech firms are seeking to access and innovate based on new technologies—things like blockchain, which many of us have heard about and probably not very many of us understand. Giving these businesses the opportunity to invest, take a risk and build a business that hasn't existed in the past are things this government very much supports.

Schedule 4 covers the tax exemption for payments under the Defence Force Ombudsman scheme. This commends the Income Tax Assessment Act 1997 to continue to exempt from income tax payments made as reparations 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 complainants was wrong, that it can have a lasting a serious impact and that, in the past, Defence was not positioned appropriately to respond to that 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 reparations 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 role to make recommendations on reparation payments in relation to complaints of abuse in Defence. The Defence Force Ombudsman may make recommendations on historical cases of abuse occurring on or before 30 June 2014.

Obviously, just as we want those who should pay their correct amount of tax to do so, we don't want people who are receiving a payment from the government to have to pay tax where it is inappropriate for tax to be paid. A reparation payment of this sort to victims of abuse in the Australian Defence Force falls into that category. We want to collect tax from those who should pay it and we don't want to be taxing those who shouldn't. In that way, we'll be able to keep our tax system as fair as we can and only claim the minimal amount of tax we need to deliver those essential services that Australians want and need and not a penny more.

The government has also announced a number of other significant reforms in this area. Again, we see that this is a government getting on with the job of delivering for all Australians. It announced reforms including increasing the civil and criminal penalties for financial misconduct—the most significant increases for the maximum civil penalties in many cases in more than 20 years. These include criminal penalties for individuals of up to 10 years imprisonment and, for corporations, criminal penalties the larger of $9.45 million, three times the benefit or 10 per cent of annual turnover. So there are significant increases in the potential penalties that will be faced both by individuals and corporations. Other reforms announced include imposing design and distribution obligations to ensure products sold by financial institutions are designed for and marketed to an identified target market to minimise the likelihood of consumers purchasing unsuitable products. Also announced was a product intervention power for ASIC to enable the regulator to intervene where products could pose significant consumer harm. Obviously, we want a system where people understand what they are purchasing and purchase things that are appropriate for their financial circumstances. The more information we have in the marketplace about these products, the more informed decisions consumers can make.

We've announced a move to extend unfair contract term protections to insurance contracts. We've also announced further reforms to combat illegal phoenixing activity. Phoenixing is the activity where a business closes down and restarts pretty much on the same day and in the same premises. We've also allowed the early release of superannuation rules on compassionate grounds and financial hardship grounds. The government has also recently increased ASIC's funding by $70 million to equip it with the resources and powers it needs. We need to detect, deter and punish those who do the wrong thing. We need to ensure that all companies pay the correct amount of tax under the law. In that way, we can keep taxes as low as possible for everybody.