Doug Cameron (NSW, Australian Labor Party, Shadow Minister for Human Services) Share this | Link to this | Hansard source

  Labor supports the measures in the Treasury Laws Amendment (Tax Integrity and Other Measures) Bill 2018, although we will move two small but important amendments.    The bill contains four tax measures.    Schedule 1 to this bill amends the Income Tax Assessment Act 1936 to ensure that the Multinational Anti-Avoidance Law applies appropriately to artificial or contrived arrangements involving trusts and partnerships entered into by multinational entities to avoid the taxation of business profits in Australia.

This measure applies on or after 1 January 2016 in connection with a scheme, whether or not the scheme was entered into, or was commenced to be carried out, before that day. However, the measure does not apply in relation to tax benefits that a taxpayer derives before 1 January 2016. This is consistent with the date from which the Multinational Anti-Avoidance Law applied, and the purpose of the law.

In order for this extension to apply, the trust or partnership must have: a relationship with a foreign entity that means they are not independent of that entity at the time they make the relevant supply or supplies to their Australian customer; and a foreign entity participant at any time in an income year in which income is derived from the supply.

As noted in the explanatory memorandum, the schedule implements a technical integrity measure underpinning the Multinational Anti-Avoidance Law.    At this point, I just want to remind the Senate that the government regularly makes misleading statements that Labor voted against the Multinational Anti-Avoidance Law. This is untrue. In the House, Labor voted against government-Greens political party amendments that watered down tax transparency reporting requirements for large private companies. Labor, throughout debate, supported the MAAL.

I should also note that the Senate has now passed Labor's private senator's bill regarding tax transparency. This will allow proper scrutiny and help restore the trust in the integrity of the tax system that was brought about when the Gillard government passed tax transparency reforms in June 2013. The Senate has voted to lower the tax transparency threshold to $50 million for all firms—public and private.

The bill also removes a grandfathering exemption for certain financial reports for approximately 1500 large companies. Labor supported this when former Senator Ricky Muir moved it during the Multinational Anti-Avoidance Law debate in 2015, where it was opposed by the Liberals and the Greens. That private senator's bill stands alongside other Labor transparency measures, including disclosure of tax haven activity in government tenders, public reporting of country-by-country reports and protection for whistleblowers who uncover tax dodging by multinationals.

Schedule 2 to the bill amends the Income Tax Assessment Act 1997 to include additional conditions that must be satisfied to apply the small business CGT concessions to capital gains. The new conditions ensure that the small business CGT concessions in division 152 are only available for capital gains tax assets that are either used or held ready for use in the course of a small business or are an interest in a small business. These amendments implement the measure announced in the 2017-18 budget as 'Tax integrity package—improving the small business capital gains tax concessions' and apply to capital gains tax events that occur on or after 1 July 2017. That announcement followed issues raised with Treasury by the Australia Taxation Office that legislative loopholes were being exploited. The budget proposal was vague in its details. Numerous tax professionals and stakeholders have said it was not until the release of the exposure draft legislation that those affected would become aware of how they were affected. Stakeholders make the reasonable claim that, due to a lack of detail, taxpayers have conducted their tax affairs in good faith and will be caught by changes that go beyond what was flagged in the budget. In light of the stakeholder concerns, Labor is moving a detailed amendment to make the start date 8 February 2018, the date on which the exposure draft legislation was released, as proposed by the tax professional community. I will detail our amendment later in my remarks.

Schedule 3 of the bill amends the income tax law and the Venture Capital Act 2002 to ensure that the venture capital tax concessions are available for investments in fin-tech businesses. These amendments apply in relation to investments made on or after 1 July 2018. This schedule partially implements the National Innovation and Science Agenda measure, expanding the new arrangements for venture capital limited partnerships from the 2016-17 budget. In the light of feedback received in the course of our consultations, Labor will be moving an amendment to this schedule of the bill. This amendment will require the minister to instigate an impact assessment of the venture capital tax concession provisions overhaul, and include the measures in schedule 3 to this bill to ensure that they are operating as intended.

Schedule 4 to this bill amends the Income Tax Assessment Act 1997 to exempt from income tax the payments received from the Commonwealth as reparation for abuse by Australian Defence Force personnel. This measure applies to the 2017-18 income year and later income years, and implements the tax consequences from the 2017-18 budget of the Defence Force Ombudsman continuation and expansion measure. The Defence Abuse Response Taskforce was established on 10 April 2011 to assess and respond to individual cases of sexual and other abuse in the Australian Defence Force. The Defence Abuse Response Taskforce administered reparation payments through the Defence Reparation Scheme of up to $50,000 to complainants who likely suffered abuse in the Australian Defence Force. Reparation payments were not paid as compensation for loss or damage for any asserted, perceived or possible legal liability on behalf of the Commonwealth or for any injury, disease or impairment. The payments did not affect complainants' statutory common law or other legal rights. This measure amends the tax law to exempt from income tax the payments made in accordance with a recommendation of the Defence Force Ombudsman in relation to abuse by Australian Defence Force personnel. Labor supports this measure in schedule 4.

I now turn to the two amendments that Labor will move to this bill in relation to schedule 2 and schedule 3. Labor will move an amendment relating to the small-business capital gains tax concession measures in schedule 2. Stakeholders have informed Labor that the additional conditions for eligibility for the capital gains tax concessions are detailed in a way that make the changes more akin to a policy change rather than an integrity change, and, as such, capture taxpayers who engaged in good faith according to the intent of the concessions. Further, the active asset tests for eligibility interact with a longer run issue of tax office interpretation and application of the active test. This issue flared up when the ATO appeared to change its interpretation of 'act of business/asset' in a footnote to the draft taxation ruling TR2017/D2—a matter that has not been resolved. Chartered Accountants of Australia and New Zealand noted in language comparable to other stakeholders:

The proposed measure would deny "access to the concessions for assets which are unrelated to [a taxpayer's] small business, for instance through arranging their affairs so that their ownership interests in larger businesses do not count towards the tests for determining eligibility for the concessions". No further information was released until the publication of this exposure draft.

The measures contained in the exposure draft are extraordinarily complex. More importantly, in our view they go beyond what taxpayers could reasonably have expected from the Budget announcement designed to address "integrity" concerns. They reduce what many stakeholders would regard as the intended scope of the concessions.

… … …

… taxpayers have in good faith sold, or entered into agreements to sell, interests in entities on the basis that they qualified for the concessions but will not now do so.

The Tax Institute, Chartered Accountants of Australia and New Zealand, partners at large accounting firms and small businesses have all argued that, to prevent adverse consequences for taxpayers who have acted in good faith but could not reasonably have been expected to foresee the detailed amendments that were finally unveiled in the exposure draft, the implementation date should be changed from 1 July 2017, as per the budget announcement, to 8 February 2018, the date of the exposure draft release.

In light of the stakeholders' concerns, Labor is moving a detailed amendment to make the start date 8 February 2018. We flagged the need for this change when the bill was debated in the House. Labor will also move an amendment in relation to schedule 3. This amendment requires the minister to instigate an impact assessment of the venture capital tax concession provisions overall and to include the measures in this bill to ensure they are operating as intended. This impact assessment would be conducted by Treasury and Innovation and Science Australia.

For the benefit of the Senate, I want to note some comments by the member for Chifley in the other place when debate was underway on this bill. The member for Chifley said:

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.

The member for Chifley raised important concerns about the government's processes. This reflects why we believe it is important to have a review. We also note concerns about the government's process. The member for Chifley noted in the other place:

… 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.

I note that FinTech Australia put out a policy paper on this issue on in February 2016. The government announced this in their 2016-17 budget, but it was not until October 2017 that the government started to consult on amendments. It is concerning that this whole process has taken so long.

Labor's position strikes the right balance: we support this particular measure, but we will also be moving an amendment requiring the government to have a comprehensive and transparent review of the venture capital tax concession framework. In conclusion, Labor supports the measures in the Treasury Laws Amendment (Tax Integrity and Other Measures) Bill 2018. However, we will be moving sensible amendments to the bill, which we commend to the Senate.

Slade Brockman (WA, Liberal Party) Share this | Link to 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.

Tim Storer (SA, Independent) Share this | Link to this | Hansard source

The Australian economy needs entrepreneurs. The parliament should foster an entrepreneurial spirit and give a fair go to those who are weighing up the risks of starting a business. Entrepreneurs are prepared to take risks to be successful and drive the economy. Entrepreneurs and small businesses should be supported and given confidence to invest and grow—for example, in collaborative structures with other businesses. We should not punish those entrepreneurs who worked hard in small businesses and made substantial contributions to Australia's economy in the process. It is unfortunate that that will be a consequence of this bill as currently drafted. I will return to that in a moment.

The new rules would act as a disincentive to growth, hurting thousands of small businesses—the very people our Prime Minister says are the engine of economic growth and jobs. Whilst I agree with the intention of the bill—that big businesses and wealthy individuals should not be able to access tax concessions designed to help small businesses grow—the bill also unintentionally smuggles in policy by stealth. It's actually misleading to suggest that these changes are merely an integrity measure. No-one wants to see loopholes in the law erode the tax base, but this legislation does appear to have adverse consequences for some small-business people who deserve support to grow and be successful.

The fact is that there are genuine small-business people who will no longer be able to claim appropriate tax relief as a result of this bill. I've had numerous consultations with business groups, in particular with Business SA, on this issue. They have cited that many of their members now face capital gains tax of hundreds of thousands of dollars each when they sell their share in their businesses, which can often be their entire retirement nest egg. The amendment I will seek to have passed will remedy that concern by making the new restrictions only apply to taxpayers who have significant other wealth, not to genuine small-business people who have worked hard to grow a business and employ Australians along the way.

At the same time as we debate these issues, a review is taking place by the Board of Taxation that will provide recommendations into precisely the issues being put forward in the bill. That review will:

… identify ways to improve small business tax concessions to ensure they remain effective, easily accessible, and well-targeted. … including how the small business tax concessions complement retirement savings policy.

It makes no sense to me that we would rush this bill through the Senate before that analysis is made available next month. The Senate could make an informed decision.

The Prime Minister has declared, as the benchmark for his administration, that he will give 'a fair go to those prepared to have a go'. According to Business SA, there are thousands of people in South Australia alone who have demonstrably had a go, who are inadvertently affected by this bill as it currently stands. Through their enterprises they have built businesses, employed South Australians and contributed to the prosperity of the state. What they now face, should this legislation be passed as currently drafted, is anything but a fair go. I urge the Senate to support the amendment I will be proposing or, at the very least, to delay passage of the bill until proper consideration can be made and consultations with stakeholders are held, in particular in reference to the Board of Taxation recommendations, to ensure that people who have made a lifetime contribution to the economy do not suffer the unintended consequences of this legislation.

Amanda Stoker (Queensland, Liberal Party) Share this | Link to this | Hansard source

I rise to speak in support of the Treasury Laws Amendment (Tax Integrity and Other Measures) Bill 2018. We on this side of the chamber believe in lower taxes and in entrepreneurship. We believe in the hard work and aspiration of everyday Australians who want to get ahead. We know that lower taxes and more entrepreneurship are good for the economy, good for jobs and good for innovation. That's why this government has committed to and has delivered tax relief for small and medium-sized businesses, as well as for working families, through reductions in company and personal income tax.

This agenda of lowering taxes is working. Australia's unemployment rate is at 5.3 per cent, the lowest level since the peak of the mining boom. Well over one million jobs have been created since the coalition government was elected five years ago, and we have the strongest economic growth in the OECD. But, while we firmly believe that taxes should be low, we also believe that taxes must be paid. That's why this government has legislated a range of measures to combat multinational tax avoidance. They include a diverted profits tax; the establishment of a tax avoidance task force; strengthened international transfer pricing rules; increased penalties for multinationals who engage in profit shifting; and new whistleblower protections. The Australian Taxation Office expects that an additional $7 billion in sales revenue each year will be returned to the Australian tax base because of these reforms. The actions already taken by the government show its firm belief that while taxes should be low, they must also be paid.

This bill continues to deliver on the goal by further cracking down on multinational tax avoidance while, at the same time, providing tax relief for both innovative venture capital investors and Australian Defence Force personnel who receive reparations. For instance, schedule 4 amends the Income Tax Assessment Act to exempt payments made as reparation to victims of abuse in the Australian Defence Force. This will ensure that payments that are made as reparations to these victims will be exempt from income tax. The government previously made similar payments to victims of abuse in the ADF through the Defence Abuse Response Taskforce. The task force administered reparation payments of up to $50,000 to complainants who likely suffered sexual or other abuse by a member of Defence. These payments were specifically exempted from income tax because there was a possibility that the payments could be seen as arising from employment with Defence and understood, were it not for this legislation, to be income in the hands of the recipient.

The task force concluded on 31 August 2016. However, this bill will ensure that the important work it carried out is continued by expanding the role of the Defence Force Ombudsman to include the ability to make recommendations for reparation payments, which the government has already provided some $19.5 million to deal with. From now on, these reparation payments will be made on the recommendation of the Defence Force Ombudsman and will be exempt from income tax. This is because the government believes that the recipient of a payment of this kind should receive the full benefit of it, particularly the men and women who so honourably serve and protect our country in our Australian defence forces.

Furthermore, the government is committed to encouraging innovation and entrepreneurship through the Australian economy. Key to this is fostering competition. We know that greater competition leads to greater innovation, and that's what grows economies and creates jobs and wealth for their citizens.

While Australia has a sophisticated financial sector underpinned by a strong regulatory system, our financial services are at risk of becoming uncompetitive if they fail to keep pace with technological disruption and the global change in this field. That's why the government has already introduced new tax incentives for early-stage venture capital investors in relation to investments in financial technology, as a part of the $1.1 billion National Innovation and Science Agenda. This is an important step in ensuring the competitiveness of the fintech sector, as venture capital is a vital mechanism for financing new innovative enterprises at the start-up and early expansion stages of their commercialisation. Venture capitalists invest funds in such enterprises in return for an equity share or the equivalent of partial ownership. The funds provided to the enterprise are used to develop their ideas in the early stages of development and ensure early-stage commercial viability. These tax concessions support high-risk fintech businesses at the start-up and early expansion stages where it would otherwise be difficult to attract investment using normal commercial means.

The fintech sector is a largely new industry composed of companies that use technology to make financial services more efficient. These innovators are harnessing technology to deliver services in more relevant and convenient ways to Australian businesses and consumers. In a recent study, Fintech in Australia—trends, forecasts and analysis 2015–2020, research firm Frost & Sullivan says the Australian fintech sector is poised to contribute $3 billion of new revenue to the Australian financial services sector by 2020, while it is also estimated that fintech investment reached US$20 billion in 2015. It's clear that developing our fintech industry here will not only drive expansion and growth in our financial exports but will also deliver benefits to Australians through new services that will create value or bring efficiencies and convenience to the market. Indeed, with our financial services sector being the largest contributor to the financial economy, advancements in research and development represent a crucial opportunity for innovation in a key services sector of our growing economy.

However, current uncertainties about tax concessions have restricted the access of the fintech sector to venture capital investment, which could potentially create stagnation if it's not dealt with in this vital sector of the economy. So schedule 3 of this bill amends the Income Tax Assessment Act to ensure that the venture capital tax concessions are available for investments in fintech businesses. This clarification means that early-stage venture capital partnerships can receive tax concessions when they invest in new fintech businesses that are developing new technology, including using technology that might already exist but in a new and novel way. The removal of ambiguity from the tax law will help to foster a culture of entrepreneurship and encourage the necessary early-stage risk-taking while improving access to capital for Australian business to ensure that they grow and succeed. Innovation and Science Australia will be enabled to make public and private findings on the eligibility of investments, while banks that split their obligations in order to receive the benefits of the tax concessions, should they choose to take that path, will be excluded under anti-avoidance rules.

While Labor is promising a $200 billion tax increase across the Australian economy, the government is creating an environment to make Australia's fintech sector more internationally competitive through lower taxes. While we want lower taxes, as I said before, we're also serious about compliance. If taxes are due, they have to be paid, and that's why we're committed 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.

Some multinationals artificially structure their company to avoid Australian tax by booking revenue from Australian sales offshore. When that happens, they have an unfair advantage as against local businesses, families and small businesses, who have no choice about where they pay their tax and are inevitably left to shoulder more of the tax burden when those who are multinationals don't bear their share. Our already implemented multinational anti-avoidance laws allow the Commissioner of Taxation to treat the multinationals as though they have a taxable presence in Australia and were subject to Australian tax on their Australian income. As a result, 38 multinational corporations have changed or are in the process of changing their tax affairs to bring their Australian-sourced sales back onshore, including businesses like Google and Facebook.

However, the Australian Taxation Office has identified that certain partnership arrangements have been designed to avoid these laws. The bill will ensure that the original laws operate as intended. For example, schedule 1 of the bill toughens our multinational anti-avoidance laws by ensuring corporate structures involving foreign trusts and partnerships are subject to the law. This measure involves a technical amendment to prevent large multinationals from avoiding the application of the anti-avoidance laws by interposing partnerships that have foreign resident partners, trusts that have foreign resident trustees or beneficiaries, or foreign trusts that temporarily have their central management and control in Australia. This will continue to ensure fairness in this sector. Importantly, this measure will not negatively impact on investment by multinationals in Australia, as the measure is targeted towards those that attempt to avoid being subject to anti-avoidance laws by manipulating a certain target structure.

Furthermore, the government believe in and are committed to supporting small and family business. That's why we have consistently delivered support to small businesses through the life of this government. Whether that's initiatives such as the $20,000 instant asset write-off or company tax reductions for small and medium-sized businesses—which I believe the Labor Party have a policy to take away if they're successful at the next election—this government stands side by side with small businesses every day of the week. I'm glad to see that Prime Minister Scott Morrison has dedicated a minister for small and family business to his cabinet table.

Small businesses can also attract capital gains tax concessions to assist owners by providing relief from capital gains tax when they dispose of assets related to their business. This helps them to reinvest, to grow, to employ more Australians and to contribute to their own retirement savings. However, it is important to the integrity of our tax system that these capital gains tax concessions are appropriately targeted. We want to ensure that the concessions continue to benefit those who need them most—hardworking small and family businesses.

Unfortunately some taxpayers are currently able to access the small business capital gains concessions for assets that are unrelated to their small business. For example, it's possible to arrange one's affairs so that ownership interests in larger businesses don't count towards the tests for determining eligibility for the concession. So schedule 2 of the bill tries to deal with that, improving the integrity of these concessions. The concessions themselves aren't changing, and they'll continue to be available to genuine small business taxpayers. The proposed amendments will mean the small business capital gains tax concessions can only be accessed in relation to assets that are used in a small business or for ownership interests in a small business.

Key features of this new law will include a limitation on the size of the company or trust being disposed of to ensure that it is genuinely a small business in the Australian market, and clarifying that a taxpayer is required to be a small business entity at the time they dispose of their interest in the company or trust. This ensures taxpayers don't benefit from the concession where the relevant business activities are too remote. It will involve modifying the active asset test so that it looks through shares in companies or interests in trusts to the activities and assets of the underlying entities. This prevents concessions from being available where most of the value of the company or trust is in fact unrelated to small business activities.

This bill is just another example of how the Liberal-National government is taking action in a space where Labor failed to do so. While those on the other side love to talk about multinational corporations and tax integrity, it's been the Liberal-National government who has taken action to tackle multinational tax avoidance every day of the week. In doing so, it enables us to lower taxes for all Australians. I support this bill because it will ensure a more effective and targeted tax system while continuing our agenda of providing tax relief, equipping us to reduce more taxes for more Australians.

Jane Hume (Victoria, 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. It is, indeed, an honour and a privilege to be able to speak on yet another treasury laws amendment bill that has been introduced in this place, for this is an area in which the Morrison coalition government and both the Turnbull and Abbott governments before have given considerable thought and have taken action that has actually made a considerable difference to the budget bottom line.

Before I begin my remarks, I'd like to acknowledge the good work of the Commissioner of Taxation, Chris Jordan, who has, within nearly five years in the role, made a significant impact on the ATO, on its operations, on its personnel and also, particularly, on its approach to collecting tax revenue on behalf of the government. You would know, Acting Deputy President Marshall, that the Liberal-National coalition will always be a government of lower taxes. The Liberal Party in particular prides themselves on being a party that values lower taxes and that wants to keep more of what you earn in your pockets. But, at the same time, we are committed to ensuring that those who do earn income in Australia pay their fair share of tax in Australia.

Commissioner Chris Jordan is equally committed to that cause. He is certainly a man that does not take tax avoidance or tax evasion lightly. In fact, at the last Senate estimates he revealed that, particularly in the area of multinational tax avoidance, the new measures that this government have taken, whether it be through the diverted profits tax or the multinational anti-avoidance legislation, have already netted around $5 billion in additional revenue to the ATO and therefore to the budget bottom line. In fact, the ATO said that about 70 companies were being looked at very closely under that multinational anti-avoidance legislation because they were deemed to have a medium to high risk of avoiding a taxable presence in Australia and that 25 companies—I think this was nearly a year ago—had already started to restructure to fall in line with the multinational anti-avoidance legislation. That was because of the tough stance that Commissioner Jordan and the ATO had taken, backed by the federal government's multinational anti-avoidance law.

Microsoft, for example, had previously booked revenue for many of its sales in Australia in low-tax Singapore. But about 12 or so months ago it reached a settlement with the ATO under which it would book a much higher proportion of sales and therefore tax in Australia. Mr Jordan had said that this crackdown on foreign multinationals had very quickly achieved the desired results. As I said, in the 16 months until the end of October—and that was last year—it had flushed out retrospective tax liabilities of more than $5 billion from a swag of global giants operating in Australia. Nearly $1 billion of that was raised in four months alone. Of course, this came ahead of the imminent launches of companies like the retail giant Amazon in Australia, which would have walked into the Australian market with a completely different understanding of its obligations to pay tax in this country than if it had come into the market only 12 or 18 months beforehand. Google is another one of the companies that is targeted. In fact, the Multinational Anti-Avoidance Law and the diverted profits tax were dubbed the 'Google tax'. Facebook, of course, is the other one. It was particularly targeting those very large and quite opaque international companies. In fact, Mr Jordan said that they had an 'intellectual might' associated with them. And prior to this particular piece of legislation, those companies had attempted to intimidate the ATO to some extent to give them lower tax assessments. Mr Jordan noted that some of those multinationals attempted to bamboozle him and bamboozle ATO officials with financial fairytales and they tried to intellectually browbeat the ATO with great big piles of reports and spaghetti diagrams on white boards saying things like, 'Look, we have the greatest experts in the world.'

Doug Cameron (NSW, Australian Labor Party, Shadow Minister for Human Services) Share this | Link to this | Hansard source

Not the dreaded whiteboard!

Jane Hume (Victoria, Liberal Party) Share this | Link to 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.

Zed Seselja (ACT, Liberal Party, Assistant Minister for Treasury and Finance) Share this | Link to this | Hansard source

I want to very much thank senators for their contributions and for their support for what is a very, very important bill, the Treasury Laws Amendment (Tax Integrity and Other Measures) Bill 2018, as I think was so eloquently outlined by Senator Hume and others.

I want to go through a couple of the key elements of the bill before summing up. Schedule 1 of the bill strengthens the integrity of the Multinational Anti-Avoidance Law and ensures that it operates as intended. This amendment will further deliver on what has been a very tough stance from this Liberal-National government against multinational tax avoidance, as demonstrated by the successive measures implemented in recent years to ensure that multinationals pay their fair share of tax in Australia.

Unlike the opposition, the Labor Party, who have talked a big game in opposition on multinational tax avoidance, this is something that we deliver on in government. We deliver on it as a principled position for a number of reasons. We deliver on it because, by having everyone pay their fair share, by ensuring that large multinationals can't profit-shift offshore, by having them pay their fair share, Australian taxpayers—the hardworking men and women who are working hard every day and paying a lot of income tax or those who are building up their small and medium enterprises and paying their fair share of tax—can rely on services to be delivered by the Australian government. The way that we can do that, while growing the economy and putting the budget back into balance, is to have everyone pay their fair share. So, as a matter of principle, we have a stance that says multinationals must pay their fair share. Schedule 1, by strengthening the integrity of the Multinational Anti-Avoidance Law, ensures that we get fairness in the system.

If you look at the budget measures we have undertaken and the approach that the coalition has taken to economic policy, you see that these are always built on those pillars. We do everything we can to grow the economy. We grow the economy by lowering taxes, whether that's by getting rid of things like the mining tax and the carbon tax, whether that's by lowering people's electricity bills, whether that is by lowering income tax for hardworking taxpayers, whether that's by lowering taxes for small business so they can grow their business and employ more Australians, or whether that's by getting rid of red tape—as we have done every year since we came into government. All of that has helped Australians who are having a go to do better and has helped our economy to thrive.

We've put in place measures, such as our free trade agreements, which deliver more economic activity and more jobs into the Australian economy and help get spending under control. We have shown in every budget, successive budgets, that, by limiting the growth of spending, we will be able to get the budget back into balance next year—all the while cutting taxes for small business; all the while cutting taxes for low- and middle-income earners; and all the while being able to deliver record investment in really important areas such as defence, health, education, infrastructure and a range of other very important areas.

This has been our economic approach, and getting multinationals to pay their fair share is part of those integrity measures. We've had integrity measures in other parts of the system. We've moved a record number of people from welfare into work. We've had those people who have been rorting the welfare system taken off the welfare system so that those who need it because they're doing it tough for various reasons have access to it and so we can deliver on things like the NDIS. This has been at the heart of what we've done. We don't just talk about it; we get it done.

Schedule 2 of this bill amends the Income Tax Assessment Act 1997 to give effect to the government's 2017-18 budget announcement. It will improve integrity and better target the small-business capital gains tax concessions. Again, making sure there's integrity in the system ensures that we can continue to deliver tax relief for small businesses, as opposed to the Labor Party who wants to up taxes for small and medium enterprises. It allows us to deliver that income tax relief and it allows us to deliver the services that Australians expect and Australians want their government to be able to deliver.

These amendments are designed to ensure that the concessions can only be accessed in relation to assets used in a small business or ownership interests in a small business. Why is this important? It's because the amendments introduce a test on the size of the business being disposed of to prevent inappropriate access to the concessions for assets unrelated to a small business, so it brings them in. This ensures that these important concessions continue to benefit those who need them most—and that's hardworking small businesses. Any number of measures that we put in place to support small business is because we know that these are hardworking Australians and these are hardworking men and women who put their capital on the line, who often put their house on the line, who often work 50-, 60- or 70-hour weeks, and who often have a family business where everyone contributes. At every turn, the Liberal-National government seeks to make things a little bit easier for those hardworking men and women. It says to them, 'We'll lower your tax burden, we'll lower the amount of red tape, we'll work hard to lower your energy bills, we'll build a framework of a strong economy through free trade and other things, and we'll control our own spending so that you're not burdened with excessive taxes down the track and so we can deliver the infrastructure and the services that are necessary for you to thrive.'

The government is committed to establishing Australia as a leading global financial technology, or fintech, hub. This is a major area of potential growth. Schedule 3 of this bill builds on this work. It builds on the work of our government to ensure that we have the right policy settings in place to foster innovation. This has been a key focus of our government, and one of the reasons it's a key focus of our government is because we know that Australians have some of the best examples of innovation, invention, and research and development in the world. But, because of some of the challenges in getting capital, we haven't always been able to fully exploit and build on those great innovations and that great entrepreneurship that exists and is in the DNA of the Australian people. We see it as a partnership and a way of assisting businesses and entrepreneurs who come up with those amazing ideas to then be able to get the capital that they need so that they can then employ people, grow their businesses, have profitable businesses, reinvest in those businesses, employ more people, grow our economy and provide the opportunities that we want to see for Australian men and women as they come into the workforce and as they stay in the workforce.

Schedule 3, to that end, amends the early-stage venture capital limited partnership, the venture capital limited partnership and tax incentives for early-stage investor regimes of the Income Tax Assessment Act 1997. What this does is it 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.

As I said earlier, we've got extraordinary entrepreneurs. If you go to our universities and many of our small businesses, and if you meet our scientists who are coming up with the research and development, the ideas and the great technological breakthroughs, we invest so much. We've got a great record as a government in things like the Medical Research Future Fund. That is one area of extraordinary innovation that will see jobs grow and, just as importantly, will save lives. It will see Australians living longer and living healthier lives through medical research. We think there is a major economic advantage in that as well as people live longer lives and as we develop these products and sell them to the world.

We've got these extraordinary scientists and innovators, and we want to bring more capital behind them so that they can indeed have the opportunity to develop those products. Instead of people having to go offshore in order to fully develop their ideas and their products, as has unfortunately happened in many cases in the past, we want them developing here. We're seeing more of that. We're seeing that with collaborations in partnerships between our research organisations and our universities. We do it with things like CRCs. One of the innovations we have brought in is the CRCPs, which is a great addition to the cooperative research centres. The cooperative research centres are a way of bringing all those entities together. It is world-leading. The CRCPs are shorter-term and more focused. The industry response—I had responsibility in that area—has been very positive. We're able to do things again in a slightly quicker and a more innovative way, and do some of those shorter-term smaller projects which can still have absolutely substantial benefits.

As I said, this will clarify those early stage venture capital limited partnerships—and venture capital limited partnerships can invest in innovative fintech businesses—and it remove ambiguity from the tax law. That is important for attracting that investment. We want to see that investment continuing to come from Australian investors and also from foreign investors in some of our great ideas and backing our entrepreneurs.

This again demonstrates the government's continuing commitment to promoting a culture of entrepreneurship and risk-taking in Australia, and it will help ensure that innovative Australian businesses have access to the capital and expertise that they need to grow and succeed. It works hand in hand with those other aspects of policy that I have outlined. When you allow capital to come in, when you encourage entrepreneurship, when you have those industry partnerships, when you lower taxes for small and medium businesses, when you allow free trade to thrive and when you cut red tape and encourage Australians to get ahead and employ more people, then these things come together in a very positive way—as we are seeing with the record number of jobs that we have created. We very much believe in this.

Going back to the 2017-18 budget, the government announced, on another aspect of this bill, that it would expand the role of the Defence Force Ombudsman to make recommendations for reparation payments. All complains of abuse in Defence made to the Defence Force Ombudsman will now include an assessment for a reparation payment. Previously, similar reparation payments were administered by the Defence Abuse Response Taskforce, which concluded on 31 August 2016. The reparation payments made by the Defence Abuse Response Taskforce were specifically exempt from income tax. This is an important change, and it builds on some of this good work. It's another way of honouring the amazing work that our Defence Force personnel do.

We are committed not just to the defence of our nation but to the health and welfare of our Defence personnel. I think we have learnt a lot in recent years about where we have let them down from time to time as a nation. We have learnt where we can do better. We always strive to make sure that we look after the welfare of those men and women who put their lives on the line for the sake of our nation and our freedom.

In addition, schedule 4 of this bill responds to the government's expansion of the existing functions of the Defence Force Ombudsman. Similar reparation payments were previously administered by the Defence Abuse Response Taskforce, which concluded on 31 August 2016. Reparation payments made by the task force, as I said, were specifically exempt from income tax.

Schedule 4 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 liability. These amendments ensure the recipients get the full benefit of such a payment free from the obligation to pay income tax. For all of these reasons, all of those schedules come together for some important reforms. I've outlined a number of the reasons. They build on a number of earlier reforms that the Liberal-National government have been proud to deliver, and I look forward to the hopeful passage of this bill thorough the Senate. I commend this bill to the Senate.

Question agreed to.

Bill read a second time.