Glenn Sterle (WA, Australian Labor Party, Shadow Assistant Minister for Road Safety) Share this | Link to this | Hansard source

The Treasury Laws Amendment (2019 Tax Integrity and Other Measures No. 1) Bill 2019 contains seven separate measures dealing with various Treasury laws and tax activities. Schedule 1 prevents certain tax deductions from arising when a newly privatised entity repays a concessional loan. Schedule 2 amends the tax law to prevent small-business CGT concessions from being available for assignments of the income of a partner and other rights or interests in the income or capital of a partnership that are not a membership interest in the partnership. Schedule 3 limits deductions for losses or outgoings incurred that relate to holding vacant land under certain circumstances. This would essentially end negative gearing in relation to vacant land.

Labor supports action to improve the integrity of our tax and superannuation system. We support the intentions of this bill. Over the course of the Senate inquiry into this bill, however, it became clear the government has mishandled the drafting of this legislation. The government has, on occasion, used its numbers on legislation committees to prevent a committee from taking the time needed to properly consider a bill, either by frustrating proposals to hold public hearings or by forcing compressed timetables that make it difficult for stakeholders to engage. The inquiry into this bill shows why that is very poor practice. The inquiry has revealed a number of problems in the drafting of the bill. Labor will be moving or supporting amendments that remedy these. The inquiry process played an important role in surfacing those issues.

I want to go to schedule 3 and vacant land. The committee inquiry shone a light on just how poorly this bill was drafted. Where schedule 3 of the bill intends to address the application of tax concessions on property tax—that is, vacant land—the drafting leaves much to the imagination. The definition of vacant land is ambiguous and could leave the door open to problematic consequences. For instance, the Chartered Accountants Australia and New Zealand highlighted that newly-constructed apartments that were impacted by structural defects could be classed as vacant land. In their submission to the inquiry they state:

In light of the recent problems in Sydney with newly constructed apartments impacted by structural defects (e.g. Opal Towers and Mascot Towers), it has been brought to our attention that these buildings could be inadvertently caught by these provisions as they are no longer lawfully able to be occupied due to the structural defects.

Coalition senators agreed with Labor in recommending that the bill be fixed to deal with this botched definition of vacant land in the schedule 3.

There are concerns with schedule 5 of the bill. Submissions to the Senate inquiry raised concerns around the adequacy of resourcing in regard to the Inspector-General of Taxation and Taxation Ombudsman. For the IGTO to become an effective organisation, they require the appropriate powers and resources. Labor supports recommendation 2 of the committee report, which could see the ATO engage with the IGTO to address concerns around potential privacy implications, notification time frames, disclosure time frames and the potential risk to businesses from disclosure errors made by credit reporting bureaus or the ATO. Labor agrees with the committee on this matter but also wants to see the bill go further to fix the drafting problems. Firstly, we want to see an extension to the notice period, currently at 21 days. The ATO's ordinary service expectation of 15 business days or 21 calendar days would not allow a sufficient period for affected taxpayers to dodge—not dodge, sorry; how did that slip out!—to lodge a complaint to the IGTO within the 21 day notice period. The government has rushed the drafting of this bill and missed glaring gaps in the practical application of the bill. Labor will be moving amendments recommended by the Inspector-General of Taxation to improve the ability of small business to deal with the ATO. Yoo-hoo!

Schedule 7 of this bill relates to salary sacrifice super contributions. Schedule 7 of this bill would prevent employers from underpaying superannuation when an employee chooses of their own volition to salary sacrifice into superannuation. This is a loophole that is well past due being closed. Compulsory superannuation is a central pillar to our retirement system. It affords every working Australian the ability to save for their retirement. Another pillar of our retirement system is the ability for workers to build their superannuation balance by making additional contributions to their super account outside of the mandated superannuation guarantee. Employers who seek to use workers' additional contributions to top up their own obligations are in effect taking money from their workers, and this bill will finally close the loophole that makes it possible for them to do so.

Industry Super Australia gave evidence at the Senate inquiry on the impact that closing this loophole will have on the retirement savings of Australians. They suggest that by fixing salary sacrificing arrangements about 370,000 workers will be paid more than $1.5 billion in entitlements that they are owed. This is based on 2016-17 figures alone. That warms the cockles of my heart, I can tell you! Given the scale of this problem, it is surprising that the government hasn't acted sooner, but that is what happens when you have a government that is asleep at the wheel.

This loophole amounts to around 16.6 per cent of the unpaid super problem. This is an important measure to ensure that wage theft and superannuation theft is stamped out. But more needs to be done. The problem of unpaid super has increased by 25 per cent in the last three years. My God, that's alarming! Action needs to be taken now to end the ingrained practice of wage theft. Labor will be supporting amendments that achieve this outcome. Workers impacted by wage theft are already falling behind. By missing out on entitled contributions, they are also missing the compound interest that would have been applied to those lost contributions. When it comes to superannuation, every additional year has a noticeable impact at retirement. Superannuation theft is costing Australians nearly $6 billion a year, and the government cannot delay getting entitled super back to workers.

Labor wants to ensure that there is integrity in the tax system and will ensure tax integrity bills brought before this parliament are the best bills they can possibly be. This means engaging with the substance of legislation, as we have done through the committee inquiry into this bill. The matters addressed in this bill are important. That is why Labor is happy to support it. Let's be very clear: it falls short of being part of a real plan for our tax and transfer system, let alone a plan for our economy.

We are still waiting to hear from the government what their plan is to grow the Australian economy. Didn't we just have something leak out about how they had some plan? That's right; it was a joke! As I said, we're still waiting to hear what they're going to do. Maybe you might be able to help us, Senator Brockman. We want to diversify our industry to secure Australian jobs and living standards. What's your plan? The reality is the coalition is in their third term of government with absolutely no plan. Australia cannot afford to continue coasting. Oh my, we need a Prime Minister who has more than a sales pitch; we need a government with a plan.

Rex Patrick (SA, Centre Alliance) Share this | Link to this | Hansard source

Centre Alliance supports the intent of the bill and proposes a number of improvements to the Treasury Laws Amendment (2019 Tax Integrity and Other Measures No. 1) Bill 2019. Importantly, we are pleased to see the government has addressed recommendation No. 1 made during the recent Senate Economics Legislation Committee inquiry into the bill. The committee recommended that Treasury and the ATO address the unintended consequences for property owners where their property is unusable for reasons outside their control. The government amendment will provide small relief for those owners of apartments in the Opal and Mascot buildings as they will be able to make tax offsets on their mortgage payments and expenses through negative gearing while they patiently wait for the state government to remedy the situation.

However, the government has failed to take on board the committee's second recommendation by failing to address the concerns raised by the Inspector-General of Taxation. During the committee inquiry, it became apparent that the bill lacked consideration of how it will operate in the real world and was deficient in reasonable checks and balances. As foreshadowed, due to the significant possible impact of schedule 5, Centre Alliance has proposed amendments that will address the Inspector-General of Taxation's concerns now rather than at some time in the future. The amendments proposed to schedule 5 reflect the intent and spirit of the recommendations of the Inspector-General of Taxation. We have a situation where the committee, during its inquiry, found that Treasury had not really consulted with the Inspector-General of Taxation during the development of this legislation.

The consultation was very limited, and that's problematic in terms of process. The government should sit up and listen to the recommendations of the committee, which basically say that the government needs to go back and talk to the IGT and address their concerns. We're not talking about some lobby group that has concerns; we're talking about the Inspector-General of Taxation, the watchdog that sits over the Taxation Office that has to deal with the problems that are created by some of the decisions of the tax office. We need to put protections in place that make sure people are not put in positions of great disadvantage. In the case of schedule 5, you can have the situation where a credit agency is notified of a tax debt that may be erroneous for some reason, and will stay on the record, albeit transitorily, and affect that business's reputation and could have severe consequences. It could immediately stop any attempts to deal with any financial issues that they may have. It could be quite harmful. The point is, Treasury simply didn't consult with the Inspector-General of Taxation.

The question was asked during the committee: what happens if this legislation passes unamended? The response was, 'Well, without resources, we're in a bit of trouble.' So the government, by not following the recommendations of the committee, or in fact by not going back to the IGT, is not looking at what the IGT—once again, the IGT is the protector of small businesses—has said about the tax office and when it does something that's not quite right. The IGT has stepped in and said, 'This is how you make this fairer,' but it has gone unrecognised by the government. So, Centre Alliance will be moving amendments and, just to make it very clear to everyone, those amendments are simply reflecting what the IGT recommended.

By creating safeguards, the amendments will impose protections for taxpayers who may be at risk of having their taxation debts disclosed to a credit-reporting bureau. They will ensure that, before the ATO authorise the disclosure of a taxpayer's taxation debts to credit-reporting bureaus, they must consult with the Inspector-General of Taxation and they must take into consideration what the IGT has to say. They must notify taxpayers' accountants or bookkeepers. Right now you have a situation where a notification might go to the taxpayer—they're not experts in tax; they normally rely on a tax agent. There were concerns expressed about disclosing the tax affairs of a client, of a business, but in actual fact the accountants for a business will understand the taxation situation of a company better than anyone. So that's a concern that is not warranted, and I would encourage the chamber to support our amendments to make that change.

The amendment also provides a clearer mechanism of how a notice is provided to the taxpayer. It increases the time the ATO must provide a taxpayer with before a decision on a notice can be made, and it requires the consultation on and consideration of any issues raised by the Inspector-General of Taxation before making a declaration to authorise the disclosure of a taxpayer's tax debt information to a credit-reporting bureau. These amendments are sensible amendments. They're amendments that were proposed by the Inspector-General of Taxation, and I would urge the Senate to support those amendments when we move them. Thank you.

Perin Davey (NSW, National Party) Share this | Link to this | Hansard source

I rise to make a brief contribution on the Treasury Laws Amendment (2019 Tax Integrity and Other Measures No. 1) Bill 2019. This bill contains a package of important measures that are designed to improve the integrity of Australia's tax system, save businesses time and money, through implementing an electronic invoicing framework, and protect workers' superannuation. My interest in this bill is specifically with the proposed changes to schedule 3 of the bill, which provides an integrity measure that will deny deductions, for some taxpayers, for expenses associated with holding vacant land. I want to specifically speak on government proposed amendments to schedule 3.

This is a classic case of the Senate doing its work and working well through the processes. As the bill first came into this chamber and we looked at it, we realised that there were potential implications for agricultural businesses and farmers owning primary production land that would have fallen to the definition of 'vacant land' in this instance. By working together, working through the committee processes, allowing stakeholders to raise their concerns and having an active Senate with senators in the chamber who have a specific regional focus, we were able to identify those unintended consequences, propose amendments that would ensure that the integrity of the bill is sustained and remove those unintended consequences that could have had significant negative impacts for farmers and primary producers throughout Australia.

Specifically, our proposed amendments to schedule 3 will make it clear that deductions may be available for entities that incur costs in holding land that becomes vacant due to a significant or unusual event—which often happens in regional Australia—such as bushfire, flood or other unforeseeable events. It also allows deductions while the land is carrying on a business of primary production or is being used by another entity to carry on a business. In essence, if a farmer holds a title of 'vacant land' with no permanent structure and, for their own business reasons, they decide to lease that to another farmer or business, as long as that person is carrying out a lawful business they can claim the deductions.

The amendments will also allow for succession planning. A lot of farmers make arrangements through their family units to allow for succession planning so that mum and dad can enter retirement with dignity. They can move off the farm and the children can take over, or the parents might stay in the residence on the farm but children might take over the management of what would be vacant land to carry out farming practices. Because that is an ongoing lawful business, that will be allowed and the parents will be allowed to claim deductions. This is a really important issue that was raised by several stakeholders both personally to me and through the other processes. It is a major concern for farmers throughout regional Australia and particularly those farmers who are looking to transition into retirement.

Agricultural land is often unique. One farm may be made up of multiple titles, and businesses will ascertain what is best for their business unit. Some of those titles might be vacant insofar as they don't have permanent structures, but they're certainly not vacant insofar as they're a business enterprise. The capacity for farmers to manage their businesses and tax purposes is fundamental to their ongoing viability. It may change from year to year, so they need the flexibility to carry on their business, manage their titles and their blocks and manage their succession planning so that they can have all the tax benefits that are enabled to them through a legitimate lease arrangement for the vacant land.

I commend the government. I have worked directly with the assistant minister Michael Sukkar's office to make sure that these amendments have been proposed. I certainly commend the government amendments to the chamber. I hope that people see the reasons for them and understand the reasons for them, because this will enable legitimate business to be ongoing while people can claim legitimate deductions. This does in no way undermine the integrity of the bill or the purpose of schedule 3, which is to prevent land banking or withholding land from reasonable development; in agricultural enterprises, such residential developments are unlikely to occur on a lot of the vacant land that's out there. As I said earlier, this is a classic case of the Senate doing its job, doing what it was designed to do: review legislation and make sure that we identify unintended consequences to ensure there is no negative impact on legitimate businesses that may otherwise have been caught up in the red tape. So I commend the government amendments to the Senate. I thank you for your time.

Malcolm Roberts (Queensland, Pauline Hanson's One Nation Party) Share this | Link to this | Hansard source

As a servant to the people of Queensland and Australia, I rise to speak about the Treasury Laws Amendment (2019 Tax Integrity and Other Measures No. 1) Bill 2019 now before the Senate. After all, the Senate is a house of review, and the change we have achieved together today is a clear example of the Senate delivering on its core purpose of review.

I speak to One Nation's achievements in standing up again for the people of Australia—particularly for those people from rural and regional Australia who would have been belted by the effects of this bill had we not stood up for them and changed the bill. I would also like to acknowledge the cooperation and valuable support of our crossbenchers, including Centre Alliance, who supported our stand when we raised this matter with them. Their change to schedule 5, after discussions with us, has achieved a win over big government for hardworking Australians so that we are not dobbed into credit reporting agencies by the Australian Taxation Office. Senator Patrick, I acknowledge your office's working with our office. I commend the Senate for adopting this.

The inclusion of our real checks and balances will protect the rights of individual Australians from government and from tax office interference with our basic property rights. It was unfortunate, to say the least, that this bill, in its original form, had not adequately considered the consequences of such onerous provisions to everyday Australians. We identified the obvious problems with schedule 3, which would have denied the farmers the right to claim for expenses associated with their land. Our primary producers should not be disadvantaged just because their land is not earning income every year. If it weren't for One Nation and the support we got from the crossbenchers, this would not have happened.

I remind the Senate that farmers have financial obligations and costs, such as land and weed management, that continue even when a property is vacant and not earning income. The government disallowing a claim for legitimate expenses does not recognise the long-term approach that farmers take in agriculture. As a digression, let me mention again United Nations Agenda 21, where farmers are prevented from using parts of their land that they've portioned off, yet they still have to maintain that land and still have the costs of maintaining that land. We need to not just talk about the assets the farmers have; we need to talk about the costs that government imposes arbitrarily on them as part of an international dictate.

Let's get back to this bill. It is also important to consider the potential impact to everyday Australians outside the city, outside the farming areas, such as the unit owners in capital cities, like those of Opal Tower, who may have been caught in this bill's net had we not acted. Months after hundreds of people were evacuated from the Opal Tower in Sydney's west, residents still fear that they won't be able to return home until late this year. It seems only fair that Australians such as these should be able to claim for legitimate deductions while their investment property is not habitable.

We all have a role to play in protecting the productive capacity of our agricultural land, our rural businesses, and our homes. Our primary producers, in particular, contribute so much to our lifestyle and to our unique Australian culture. Just like this bill, the government has talked about recent dam refurbishment projects as though they were solving all of our problems. The truth is they are not. The people of Australia would prefer to see that the government stop tinkering around the edges and that they get on and invested in new water storage capacity. This will go a lot further towards ensuring water security for our farms and farmers. The facts are that the government has announced two dam refurbishments, not new dams, and this is just a drop in the ocean compared to what we really need to drought-proof rural Australia. Government sees the need to distort the message, to look good, whereas what we are about is doing good.

On 17 September 2019 Minister Littleproud stated that water storage in Queensland had dropped from 2.75 to 1.75 megalitres per person and said that there has been no water storage planning or thinking. What the hell is going on in this country? We consider the problems we have encountered with this amendment bill on tax, and I ask the question on behalf of our farmers and regional communities: where are your visionary water storage projects, what funds have been allocated to each and what stage are they at today?

The same can be said of our tax laws as a whole. It is time for real tax reform. Everyday Australians do not want more tax amendments and a pile of complex tax laws. They deserve a better, simpler system. It is time for the government to stop just trying to look good and to focus on doing good. One Nation would not wish such onerous conditions as were contemplated in this original bill on anyone and we would not want people to be disadvantaged further through the unintended consequences of this bill as it originally was. I acknowledge the work of the skilled and professional team in my office, who are the ones who identified the risks in the proposed amendment bill and who were able to clearly see the unintended consequences for hardworking everyday Australians.

In conclusion, we in One Nation will continue to deliver on the core purpose of the Senate as a house of review. This amendment bill is a clear example of the Senate achieving that core purpose. We and the other crossbenchers are doing our best to review legislation and to work with the government to protect the lifestyle, jobs, property rights and assets of hardworking everyday Australians.

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) Share this | Link to this | Hansard source

Firstly, I would like to thank those senators who have contributed to this debate on the Treasury Laws Amendment (2019 Tax Integrity and Other Measures No. 1) Bill 2019. I would also specifically like to acknowledge the report of the Senate Economics Legislation Committee on this bill. Senators Sterle, Patrick, Davey and Roberts are absolutely correct: the Senate is a house of review. The committee did the job that it was tasked with, and the government has responded appropriately. The bill, as amended, will address the recommendations made by the committee and the opposition's additional comments from that committee.

This bill contains a number of measures designed to improve the integrity of Australia's tax and superannuation systems and save businesses time and money through implementing an electronic invoicing framework. Schedule 1 to the bill improves the integrity of the tax treatment of concessional loans made to a tax-exempt entity that is privatised, by removing inappropriate tax deductions which arise on the repayment of loan principal for certain privatised entities. Schedule 2 to the bill will ensure that partners and partnerships cannot inappropriately access the small-business capital gains tax concessions when they alienate future income from the partnership. Partners will now only be eligible for the concessions when such rights make the assignee a partner in the partnership.

Schedule 3 to the bill amends the Income Tax Assessment Act 1997 to deny deductions for some taxpayers for expenses associated with holding vacant land. The amendments that will be presented today will improve the integrity of the tax system by tightening the link between claiming deductions for holding vacant land and earning assessable income. In response, however, to the Senate Economics Legislation Committee's recommendation regarding schedule 3, the government is ensuring that this measure will not apply to taxpayers affected by defective buildings and other exceptional and unforeseen circumstances. People in these situations are dealing with enough stress, and the government does not want taxpayers in these unfortunate situations to face any uncertainty regarding the tax treatment of land that has become vacant due to events outside their control.

The government's amendments will allow taxpayers affected by unforeseen and uncontrollable circumstances to continue claiming deductions on vacant land. To be eligible for that exemption, taxpayers would need to have held the land when it was previously not vacant for tax purposes. The exemption will apply for three years from the date of the exceptional circumstance, with an option for taxpayers to request an extension from the Commissioner of Taxation. The government's amendments also ensure that taxpayers carrying on primary production businesses, such as farming, and taxpayers who rent vacant land to businesses are not affected by the measure. Overall, the amendments provide greater certainty and clarity to taxpayers on the scope of this measure, while also ensuring that the measure improves the integrity of the tax system through targeting those taxpayers who improperly claim deductions when the land is not genuinely held for the purpose of earning income.

Schedule 4 of this bill will extend to family trusts a specific anti-avoidance rule that applies to other closely held trusts that engage in circular trust distributions. This will better enable the ATO to pursue family trusts that engage in these arrangements.

Schedule 5 to the bill amends the Taxation Administration Act 1953 to allow the ATO to disclose to credit reporting bureaus the tax debt information of businesses that have owed the ATO at least $100,000 for more than 90 days and, during that period, have not effectively engaged with the ATO to manage their debt. This measure will encourage businesses to engage with the ATO and repay their debt in a timelier manner. In response to the recommendation of the Senate Economics Legislation Committee concerning schedule 5, I would note that the ATO and the Inspector-General of Taxation are working closely together to address the concerns that the inspector-general raised in her submission on schedule 5.

In response to the opposition's comments in the committee report regarding schedule 5, the government has agreed to the amendment proposed by Senator McAllister, on behalf of the opposition, amending the notice period under schedule 5 from 21 days to 28 days. The government also notes the opposition's comments with respect to tax practitioner representatives being provided notification of a proposed disclosure to a credit reporting bureau, under schedule 5, and I'm advised that the ATO will provide notifications to the individual taxpayer's preferred address for contact. In many cases where the taxpayer has elected their tax practitioner to be their preferred address, the tax practitioner will receive that notification. However, not all taxpayers with a tax practitioner will have the tax practitioner's address as their preferred address. It's important to respect each taxpayer's choice of preferred address. The government therefore will not be supporting Centre Alliance's amendments, but thanks Senator Patrick for his input into this bill.

Schedule 6 to the bill amends the Taxation Administration Act 1953 to allow the ATO to implement an electronic invoicing framework, known as e-invoicing, in Australia.

Schedule 7 to the bill protects hardworking Australians' superannuation by closing a legal loophole which has been used by some unscrupulous employers to short-change employees who make salary sacrifice contributions. These changes will prevent employers from using a salary sacrificed contribution to satisfy the employer's superannuation guarantee obligations and prevent employers from reducing the base on which they calculate the superannuation guarantee obligations by the amount of the salary sacrifice contributions. In response to the opposition's comments in the committee report regarding schedule 7, the government has agreed to the amendment proposed by Senator McAllister, on behalf of the opposition, to change the implementation date from 1 July 2020 to 1 January 2020.

I commend this bill to the Senate.

Question agreed to.

Bill read a second time.