Jane Hume (Victoria, Liberal Party) Share this | Hansard source

Yes, the dreaded whiteboards, Senator Cameron. The world's greatest experts would say, 'This particular tax structure works. Who are you at the ATO to challenge us?' So Mr Jordan, applying these new multinational anti-avoidance laws and also the diverted profits tax, made sure his officials weren't boxed into a corner by the technical analysis and the intellectual might and legal and financial power of these very large companies. He has done so particularly successfully because he is as committed as the coalition to these companies paying the right amount of tax on profits that are earned in Australia.

Schedule 1 of this particular legislation toughens those Multinational Anti-Avoidance Law that has been so successful over the term of this government. The first schedule of the bill amends the Income Tax Assessment Act to improve the integrity of the Multinational Anti-Avoidance Law, the MAAL. Currently large multinationals can avoid the operation of that Multinational Anti-Avoidance Law by putting certain kinds of partnerships and trusts between the global entity and the consumer. The kinds of partnerships that are used are those that have foreign resident partners or foreign resident trustees or beneficiaries or are foreign resident trusts that can temporarily have central management and control in Australia. You can see how complicated those sorts of spaghetti diagrams on a whiteboard would be, which is why it's so important to dethatch the complexities of the tax arrangements of these companies. The use of these sorts of structures contravenes the original policy intent of the Multinational Anti-Avoidance Law, so this particular bill that we have before us in the chamber today ensures that the Multinational Anti-Avoidance Law acts as it was originally intended.

You may recall that the original anti-avoidance laws were enacted in December 2017 to prevent those very large multinationals from avoiding the tax on their Australian business profits by artificially structuring their affairs in a way that results in them not having to have that taxable presence in Australia. As I said earlier, since that legislation was enacted on January 12016, it has been highly effective and highly beneficial. It has achieved a significant intake of tax to the ATO and therefore to the budget bottom line.

On 15 December 2016, the ATO published its concerns with certain restructures involving those foreign partnerships undertaken in response to the implementation of the multinational anti-avoidance legislation, so this was like a post-implementation review. It was entirely appropriate that the ATO, which implements this particular piece of legislation, should review its efficacy. And while the ATO said it is highly effective and will achieve its objectives, it does have some tweaking where there potentially are loopholes remaining.

This particular bill affects the large multinationals that fall within the scope of the multinational anti-avoidance legislation. In general those entities have a global income of more than $1 billion, so we're certainly not dealing with the small end of town here. As to the date of effect, the schedule will apply from 1 January 2016, which of courses is the original date of the effect of the multinational anti-avoidance legislation. There has been public consultation—a public consultation paper was released on 12 February 2018—and the Treasurer received a number of submissions from groups as diverse as Deloitte, the Tax Justice Network and the Australian Retailers Association. There was a general consensus of support for the proposed amendments to this bill, and Deloitte in fact also provided some minor technical amendments to the exposure draft legislation. The financial impact of this is estimated to be unquantifiable, but it will result in a gain to revenue over the period 2017-18 to 2020-21.

Schedule 2 is about improving the integrity of the small-business capital gains tax concessions. It gives effect to the 2017-18 budget announcement that the government would amend the small-business capital gains tax concessions to ensure that they could only be accessed in relation to assets used in a small business or ownership interests in a small business so that the capital gains tax concessions that are available are only used and accessed appropriately. The object of those small-business capital gains tax concessions is to provide relief from capital gains tax on the disposal of assets related to a small business. Currently the problem, of course, is that some taxpayers are able to access those concessions for assets which are entirely unrelated to their small business. For example, they can arrange their affairs so that their ownership interests in larger businesses do not count towards the tests for determining eligibility for these concessions. As of 1 July last year, additional basic conditions have to be satisfied to ensure that small-business capital gains tax concessions are only available to genuine small businesses. This includes testing the size of the company or the trust that is being disposed of to raise that capital gain.

The proposed amendments tighten the eligibility criteria for the small-business capital gains tax concessions and ensure that they are better targeted to those to whom it is relevant. The concessions themselves, it should be noted, are not changing; they will continue to be available to genuine small-business taxpayers with an aggregated turnover of less than $2 million or business assets of less than $6 million. The intention here is that the measure will apply retrospectively from 1 July 2017, and the application is consistent with the budget announcement on 9 May 2017 about ensuring that those concessions can only be accessed in relation to the assets used in a small business or ownership interests in a small business. As you can see, this is little more than an integrity measure to shore up measures that have already been put into place. There was public consultation on this particular legislation as well. The accompanying explanatory material was circulated in February this year, and feedback from the consultation has been incorporated into the final drafting of the bill. While it's hard to quantify the financial gain that will inevitably come from this particular measure, again, it will be over the forward estimates period.

There is a further schedule around fin-tech and venture capital amendments—schedule 3. This is a particularly important amendment for my home state of Victoria, where the fin-tech industry is booming. Schedule 3 of this bill amends the Income Tax Assessment Act to clarify that early-stage venture capital limited partnerships, also known as ESVCLPs—rather a mouthful—and venture capital limited partnerships, VCLPs, can make investments in fin-tech firms. This will ensure that fin-tech businesses have better access to the capital that they need to grow and succeed.

This is part of a suite of financing alternatives that the coalition government, the National-Liberal Morrison coalition government, have been putting together for some time. You will recall that last week we discussed crowdsourced funding arrangements. Not that long ago, we established the ASIC sandbox to allow fintechs to operate temporarily without a full financial licence to see whether their businesses are viable. This is all part of the suite of laws that allow fintechs the best chance of getting established, growing and thriving in this country. It is a new industry and a very exciting industry that's growing not just in Australia but worldwide. It's very important that we compete for the best and brightest minds in this space.

The government is clearly committed to encouraging innovation throughout the Australian economy. To this end the $1.1 billion National Innovation and Science Agenda, NISA, was announced, you will recall, in December 2015. It included enhanced tax concessions for these early-stage venture capital limited partnerships and also for venture capital limited partnerships. These particular programs encourage venture capital investment in Australian start-ups, providing these businesses with the funds that they need to grow and to prosper. This particular schedule will clarify that early-stage venture capital limited partnerships and also venture capital limited partnerships can invest in fintech businesses that are developing the new technology, including using technology in a novel way, such as through developing new products and services, by removing the ambiguity from the tax law and also providing certainty for venture capital investors. The amendments outlined in schedule 3 will impact both investors and participants in early-stage venture capital limited partnerships and also venture capital limited partnerships regimes.

The amendments are supported by stakeholders and will provide particular benefit to venture capital investors in fintech businesses, providing certainty that they can invest in fintech, and it will also benefit the fintech businesses themselves as they will have better access to improved venture capital funding as a result of these changes. The fintech amendment was announced as part of the Treasurer's fintech statement, which was released in March 2016. The Treasury conducted an initial public consultation into this particular bill, on the amendments in schedule 3, and received a number of responses from key stakeholders, including the Australian Private Equity and Venture Capital Association, some law firms, some accounting firms and Innovation and Science Australia. The consultation process started in October last year and concluded in November. Following that particular consultation process, the Treasury worked with the stakeholders, the Department of Industry, Innovation and Science, Innovation and Science Australia, AusIndustry and the ATO to refine the current bill to reflect a number of the suggestions made by stakeholders. I should mention that those stakeholders were broadly very supportive of the changes that were being made to fintechs. The financial impact of these changes is hard to quantify, but it's all about having the right policy settings to allow these particular firms, fintech firms—this growing industry—to grow, thrive and prosper.

There is another schedule to this particular legislation, schedule 4, which is about tax exemptions for payments made under the Defence Force Ombudsman scheme. This is to exempt from income tax payments the reparations to victims of abuse in the Australian Defence Force. That is very important. The government previously made similar payments to victims of abuse in the Australian Defence Force through the Defence Abuse Response Taskforce. The taskforce administered reparation payments of up to $50,000 through the Defence Abuse Reparation Scheme to complainants who likely suffered sexual and other abuse by a member of Defence. These payments were specifically exempted from income tax as there was a possibility that the payment could be seen to arise from employment with Defence and considered income in the hands of the recipient. The task force concluded on 31 August 2016 and assessed any abuse that occurred prior to 11 April 2011.

In the budget this year the government announced that it would continue the existing functions of the Defence Force Ombudsman and expand its role to include the ability to make recommendations for reparation payments. The government announced that it would provide $19.5 million over four years from 2017-18 for the reparation payments. The previous functions that were undertaken by the task force and the scheme are effectively being replicated and will now be executed by the Defence Force Ombudsman. It affects only the victims of abuse in the Australian Defence Force who receive reparation payments.

The Treasury Laws Amendment (Tax Integrity and Other Measures) Bill 2018 covers a number of quite diverse areas, all of which are important, and I commend this bill to the Senate.