Dean Smith (WA, Liberal Party, Shadow Assistant Minister for Competition, Charities and Treasury) Share this | Link to this | Hansard source

I rise to speak on the Treasury Laws Amendment (2023 Measures No. 1) Bill 2023. This is an omnibus bill presented in a series of schedules. Some of these the coalition will support. Others, particularly schedules 4 and 5, we strongly oppose. The coalition supports schedule 1, which amends the Corporations Act. It closes a loophole in the post-royal commission requirement for financial advisers to register with ASIC's Financial Advisers Register. These changes minimise the risk of inadvertent legal breaches and allow ASIC to streamline applications where a provider is authorised by more than one licensee to provide financial advice. The coalition also supports schedule 2. This gives the Australian Accounting Standards Board, the Auditing and Assurance Standards Board and the Financial Reporting Council the power to develop climate and sustainable standards. However, we will be watching closely the implementation of this particular schedule.

Schedule 3 implements five recommendations from the 2020 Tax Practitioners Board review, which the coalition supports. These are to update and modernise the objective clause of the TAS Act, which is contained in recommendation 2.1; create financial independence for the TPB from the ATO, which is contained in recommendation 3.1; require that tax practitioners do not employ or use a disqualified entity without the Tax Practitioners Board's approval or enter an arrangement with a disqualified entity, which is contained in recommendation 4.6; convert to an annual registration period, which is contained in recommendation 4.7; and, finally, enable the minister to supplement the existing code of professional conduct to ensure that emerging or existing practices by tax practitioners are properly addressed, which is contained in recommendation 5.1. Each of these are important changes.

Unfortunately, though, this is where the good policy and our support for the bill end. That is because the bill makes two significant changes to taxation law that are reminiscent of former Labor leader Bill Shorten's franking credit tax. Schedule 4 amends the Income Tax Assessment Act to limit the ability of listed companies to offer franking credits in off-market share buybacks. Schedule 5 amends the Income Tax Assessment Act to limit the ability of listed companies to offer franking credits on capital-raisings. These are a franking credits tax by stealth. These are some of the taxes the Treasurer said he was proud of and pleased with before he started saying that there would be no franking credits tax.

In fact, both the Prime Minister and the Treasurer ruled out changes to franking credits before the election. Let's revisit some of those comments, for the benefit of the chamber. On 1 January 2021 the West Australian newspaper reported that the now Prime Minister said, 'We will not be taking any changes to franking credits to the next election.' It's worth repeating. On 1 January 2021 the West Australian newspaper reported that the now Prime Minister said, 'We will not be taking any changes to franking credits to the next election.' Then on 30 March the now Prime Minister said, on ABC radio, 'We won't have any changes to the franking credits regime which is there.' Again, it is worth repeating. On 30 March, on ABC radio, the now Prime Minister said, 'We won't have any changes to the franking credits regime which is there.' Then, on 15 December 2021, the now Prime Minister told Tasmanians who were listening to Tasmania Talks, 'We've made it clear that on areas like franking credits and negative gearing we won't be taking those policies to the next election.' Again, it's worth repeating: on 15 December 2021, to Tasmanians, the now Prime Minister said, then as opposition leader, wanting to get into government, 'We've made it clear that on areas like franking credits and negative gearing we won't be taking those policies to the next election.' He said that on three separate occasions. They didn't take those policies to the election. They waited until after the election, and then they broke these important election promises.

And on 17 January 2022 the now Treasurer said, 'We won't be doing franking credits.' Yet here we are today, in the Senate chamber, dealing with the government's further broken promises, which we're going to be asked to support today but which the coalition will not be supporting and Labor senators, supported by some on the crossbench, are going to endorse. They are going to endorse the Treasurer's broken promise and the Prime Minister's broken promise by supporting this particular bill. Of course, we add to these particular broken promises a growing list—a shopping list, almost—of broken promises including a promise to have cheaper mortgages, a promise to reduce electricity bills by $275 and a promise that the cost of living in our country would come down and that there would be no changes to superannuation. It is a shopping list of broken promises, and in this Senate chamber today you'll see, with your own eyes, Australian Labor Party senators, perhaps supported by the crossbench, endorsing the government's broken promises.

It's outrageous that the government can break its commitment so quickly and so easily, showing that they have little regard for the Australian people, who trusted them. That is why I will move the second reading amendment circulated in the name of Senator Hume. The government's actions are shameful, and they must be called out. The coalition will move amendments to strike out these broken promises from the bill. By doing so, we can then in good faith support some of the sensible measures within it. So, to be clear, the coalition will move amendments to strike out the broken promises contained in this bill, leaving a bill that we can in good faith support. If the government doesn't accept the coalition's amendments, we will not be supporting the bill. And even if the government does intend to keep its promises, the coalition will at least continue to hold it to account.

In a cost-of-living crisis, which everyone now recognises that we have, one of Labor's principal priorities seems to continue to be to come after the money of ordinary Australians. And we're not talking about the richest Australians, either. Hitting franking credits will target retirees, mum-and-dad investors who have saved and invested to make themselves independent, to make themselves a little bit more financially secure. We are under no illusions about that. This will significantly inhibit the ability of those older Australians—retirees, mum-and-dad investors—to sustain themselves, let alone grow, as the Australian economy slows under Labor's economic mismanagement.

The coalition will, as I said before, move amendments to remove these two schedules, because we're here to support ordinary Australian taxpayers and we oppose the negative impact of Labor's taxes, and we commend those amendments to the chamber. I ask particularly those senators on the crossbench, who sit over here, to consider the words from the Prime Minister and the Treasurer that I've quoted, and their historical commitments not to make these changes to the law. I ask them to ask themselves, 'Can I allow this government to get away with such breathtaking trickery and political cynicism?' Imagine: a leader of the opposition, desperate to become Prime Minister, who on three occasions, two of them in my home state of Western Australia, said he would not change these laws; a Treasurer who said when he became the Treasurer he would not change these laws. Today in the Senate chamber the government is breaking those promises, in black and white. It has brought before the Senate a bill which breaks those promises. We will not allow it to break its promises. Breaking those promises will hurt ordinary Australians, retirees, and mum and dad investors.

Today, Mr Acting Deputy President, as we debate this bill, pay attention to that end of the chamber and see whether or not the crossbench will endorse the government's decision to break its own promises. We call on members of the crossbench to support the coalition's amendments in Committee of the Whole so that these disingenuous, toxic schedules can be removed from the bill and the sensible elements of the bill can progress through the parliament. I move:

Omit all words after "That", substitute:

"(a) the Senate notes that:

(i) the now Prime Minister said in May 2022: "We've said we have no intention to make any super changes.",

(ii) the now Treasurer said in April 2022: "We've made it very clear Kieran, that we don't have any proposals for tax increases...", and

(iii) since these statements the Prime Minister and the Treasurer have announced a doubling of taxes on superannuation; and

(b) further consideration of the bill be postponed until the Minister representing the Prime Minister tables a letter from the Prime Minister that includes the following elements:

(i) a commitment to dump his new doubling of super taxes,

(ii) a commitment to never tax unrealised capital gains, and

(iii) an apology for breaking his promises to the Australian people".

Barbara Pocock (SA, Australian Greens) Share this | Link to this | Hansard source

I rise to speak to the Treasury Laws Amendment (2023 Measures No. 1) Bill. This bill represents an opportunity to respond to the PwC tax scandal; to pick up and respond to the public's and the Senate's outrage about what PwC has done and make sure it never happens again.

In recent months, the government have made their anger at the actions of PwC clear and foreshadowed their ambition to clean up consulting. In August, the Labor government announced it would oversee 'the biggest crackdown on tax adviser misconduct in Australian history'. Some steps are underway to break down the secrecy that stands in the way of a really good investigation and to increase penalties for tax misdemeanours. However, we need much more, and this is a start. We need to see stronger action across a broader range of measures.

We've worked with the government to ensure that this bill, with our amendment, will take the first legislative step towards reining in the power of the big firms and shaping our tax advisory structures in Australia to serve our purposes better. It takes a first and significant step to remove the vested interests of big consulting firms from the very board, the Tax Practitioners Board, that regulates their tax business. Our amendment will prohibit members with financial interests in big tax firms from being on the TPB. Once this amendment passes, board appointments to the Tax Practitioners Board can no longer be current partners or previous partners who are receiving payments from a partnership in bigger firms with more than a hundred employees. Without this amendment, regulators can have direct vested interests in those entities they're meant to be regulating. That doesn't pass the pub test and, unsurprisingly, it doesn't work. It's astonishing that it's been allowed to go on for so long. This is a straightforward and much-needed change which will strengthen the impartiality of the TPB and its ability to regulate tax agents, without any perceived or actual conflicts of interest.

I'd like to thank the Assistant Treasurer and Minister for Financial Services, the Hon. Stephen Jones, and his staff for working constructively with us on this amendment and for working towards cracking down on the conflict of interest and improving the independence of the TPB. The Greens have pursued this issue because the public asked us to do it. People across the political spectrum are united in their horror of what they have learned about PwC and big consultants more broadly over the last year. I've had hundreds of emails and calls, none in support of PwC—not one. If my mailbox is any indication, this organisation has few friends, and Australians are angry. They want action, accountability and honesty.

The amendments we introduced to this bill are a first step, but rest assured there's more to come. The scale of the consulting scandal needs to be met with a commensurate scale of reform. The outrage of the Australian community deserves to be met with an ambitious response. We need to make sure that the unethical behaviour of big consultancies assisting multinational firms to avoid tax, and the extraordinary farming of the public dollar to line their pockets, cannot be allowed to continue. We must rebuild the public sector and put the interest of the public at the core of public spending.

The PwC scandal revealed the partners signed confidentiality agreements as they advised government and then went to work to aggressively and unlawfully sell information they harvested, earning at least $2.5 million in fees and growing their client list internationally. It's a scandal. Its origin and dimensions have come to light through the honesty and courage of insiders along with the work of smart, alert journalists and the efforts and persistence of this Senate, an active Senate. The PwC scandal unfolded over many years. Our regulatory machinery—the ATO, the Tax Practitioners Board, Treasury—did not have the tools and, some say, perhaps the vigour to catch unethical behaviour in a timely way. Our institutions, their regulation, their penalties, are not fit for purpose. The fox cleaned up the henhouse and took the profit home for years.

After hiding behind trumped-up legal professional privilege for years, the leadership of PwC failed to deal transparently with this scandal. At first they called it an administrative issue, and then they adopted what's widely perceived as a fall-guy strategy, seeing one of the partners, Mr Peter Collins, off as a sacrificial lamb when much evidence points to the sizeable number of PwC partners and personnel who shared confidential information and monetised it in Australia and globally. PwC have conducted multiple internal investigations, including the Switkowski review, the Linklaters review, the Allens review, the Mallesons review. Only one of those reviews has been made public; the rest remain a mystery. Self-regulation and secrecy remains their preference. PwC has relied on these reviews to give most of their partners in Australia and all of those in the rest of the world a clean bill of health regarding the tax leak scandal.

Nonetheless, the Senate, through its committees, has persisted. With the assistance of skilled journalists and whistleblowers and insiders from across the community—lawyers, big four staff and partners, contractors, consultants, employees, public servants—we have persisted with their assistance. We have persisted united across the parties in this place against the automatic, vigorous, protective, legalistic and administrative playbook reflexes of partners and CEOs in big consulting firms, those who find the power of Senate questions and of written questions on notice, protected as they are by parliamentary privilege, inconvenient. They contest and they resist them even as I speak today. However, the Australian people are watching. They will not see their Senate held in contempt. They will not tolerate their senators being picked off, pressured, briefed against, divided, intimidated or held in contempt. They will not tolerate the misleading of the Senate.

The protections provided by the parliament against threat and intimidation for witnesses and senators have been essential to our work to ensure we are protected from threat and intimidation and allowed to get on with the task that we have been elected to do—to investigate a massive failure in PwC affecting the public purse and so many individuals, not least thousands of employees and partners across the big consultancies, many of them innocent of any tax related confidentiality breach. Old habits in big entities die hard. They resist and push back. However, our work in the Senate is the only reason that this action is now being taken. Apologies and promises of making good and cooperation with the Senate take more than words. They are reflected in deeds and in the way you behave. Recourse to threat and intimidation, a failure to be transparent or honest, or a reflexive retreat into legal or administrative tactics to old habits are not evidence of good faith. They're not evidence of a changed culture.

And what of those who work for big consultants? We have seen powerful light shed on the conditions of working life within the big four through the Switkowski report on PwC and Elizabeth Broderick's meticulous review of life inside EY. The dominance of partnership structures driven by a focus on revenue and a whatever-it-takes approach to earning it have resulted in unsafe environments where unethical behaviour has fallen at the first hurdle and where speaking up has met with a punitive response too many times. The experiences of racism and sexual harassment and the impact of long hours documented in EY, for example, have cast a long shadow over many employees and their families. While big consultants like EY, PwC, Deloitte and KPMG have promised a new age of a speak-up culture and of ethical practice, I am concerned about what I'm hearing right now about some of the ways in which job losses are being experienced across the big four and the ways in which they're being implemented.

It is vital that any such job losses are implemented through proper processes using clear and transparent criteria, criteria that are open and fair and do not especially target, for example, those who speak up, those who have spoken up, people with health issues, those on parental leave or disproportionately hit those of diverse cultural backgrounds or women. How these decisions are being made is of interest to those of us in the Senate and more broadly in our community, who hold concerns about leadership promises made by big consultancies to the Senate, promises of new cultures, of fair, ethical leadership and management. It takes more than words. It's also what we do and how we do it.

Through these recent events, our tax regulatory system has shown itself inadequate in the face of wily, unethical players who chase money at any cost. The organisations responsible for raising this scandal and investigating it, the ATB and the TPB, did not communicate with each other effectively or alert other relevant agencies. Despite the ATO and TPB being aware of Peter Collins breaching a confidentiality agreement, Treasury continued to sign confidentiality agreements with him. We need to renovate these structures. After years in which this behaviour unfolded without penalty or action, finally the TPB investigated Peter Collins and PwC. However, their two-year suspension of Collin's tax licence and no penalty so far for PwC the entity or many others within PwC who shared confidential information was completely inadequate. When the ATO found serious wrongdoing on the part of PwC and their enormous use of professional legal privilege in an attempt to cover their tracks, the ATO negotiated a confidentiality agreement that cut the penalty to slightly more than half the original amount of $1.4 million, saving them a tidy $758,000. The TPB's response to PwC the entity represents no more than a slap on the wrist. The TPB should have done more. It should have investigated PwC more broadly, and we are awaiting further investigations as I speak.

When our regulators fail to properly uncover and condemn actions like we have seen and take action which is modest or halved in the case of fines, they send a message. They send a message to big players in the tax advisory business and consultancy that they have friends in high places, that they might escape with just a slap on the wrist. The Australian public know this is not good enough. That's why they're so angry and they're looking for stronger action. Our regulatory system has been ineffective because elements of it are captured and too often influenced by particular interests inside the big four, who exercise way too much effect. The fox has long been in the henhouse, setting its culture, convivially regulating itself and its cosy fraternity.

At the time of the PwC scandal, 43 per cent of members of the Tax Practitioners Board were current or former big four partners, including two former PwC partners who were receiving ongoing financial payments from PwC. When the scandal broke, these partners recused themselves from the specific board meetings that considered the PwC issue. However, their presence in the organisation gives rise to perceptions of conflicts of interest, and they should not have been at this table. The TPB is the board that's responsible for regulating tax agents and responsible for investigating elements of the PwC scandal. If you are responsible for regulating tax agents but have financial ties to those same tax agents, there is a significant and insurmountable conflict of interest. This is a text bookcase of regulatory capture. It should not be a feature of our tax system. It should not be a feature of any element of a robust democracy, and it must be eliminated in Australia.

Our amendments aim to address this issue and this particular problem. Through this work and this amendment, we've fixed the loophole that allows big consultants to regulate themselves, taking an important step in safeguarding tax revenue from the hungry profiteers of the big four consultancies. We thank the government and we thank Minister Jones and his staff for the work that has been undertaken to bring this to us today. We look forward to more work and more consultation into the future to fix the many other challenges. This amendment and some of the key steps in this bill will go some way, a short way of a longer distance we need to travel, to restore Australia's confidence in our tax regulatory system. We have plenty more miles to travel to fix other significant problems that continue to afflict the large consultancies in this country.

Jess Walsh (Victoria, Australian Labor Party) Share this | Link to this | Hansard source

It's great to see so much excitement from the opposition about the Treasury Laws Amendment (2023 Measures No. 1) Bill 2023. In general there should be more focus on our TLABs that make their way through the Senate Economics Committee. This is a pretty basic bill that's about some basic integrity measures—measures like schedule 5 on franked distributions funded by capital raisings, which those opposite announced in the 2016-17 MYEFO and then promptly did absolutely nothing about. This is a measure that's now made its way through a Treasury consultation, into legislation, through the House and across to the Senate Economics Committee. Now it's finally here, having gone through all the processes that those opposite never bothered to complete. On this side of the chamber, we are committed to integrity in our tax system: improving compliance, closing tax loopholes and enhancing transparency to ensure there's revenue for the essential services Australians need. That's exactly what this bill does—nothing more, nothing less. That's what everyday Australians expect to ensure that vital services can be funded.

Like any good TLAB that excites all of us on the Senate Economics Committee, this bill has a range of measures to improve our treasury laws. I chaired the inquiry into this bill earlier this year. We heard evidence from a number of stakeholders and individual Australians on these reforms. I take this opportunity to thank everyone who took the opportunity to submit their feedback. We heard why these changes are much needed, how they modernise Australia and how they increase integrity and transparency and hold our tax professionals to account. During the inquiry process we also heard about opportunities for better targeting of some of the measure. On schedules 1 and 2, the Australian Shareholders Association told us of their support for ensuring that Australia is in line with best international reporting standards. Chartered Accountants Australia and New Zealand and Certified Practising Accountants Australia consider these schedules to be an important milestone in Australia's progress to align with international advancements in consistent sustainability reporting. As has been noted in this debate, schedule 3 will help ensure that high standards of conduct are followed in the tax industry. The need for these reforms has been made very clear by the excellent work of both Senator Pocock, who spoke earlier, and Senator O'Neill, on the Senate Economics Committee. It's crucial that issues like these don't go unpunished or undetected. These reforms will empower the Tax Practitioners Board to better deal with misconduct, and they've been welcomed by industry. We welcome amendments which further strengthen the Tax Practitioners Board, as foreshadowed by Senator Pocock.

Schedule 4 adds greater integrity to our dividend imputation system. It ensures that some of the biggest and most profitable corporations in Australia can't exploit tax loopholes and use the taxpayer to partly subsidise their share buybacks. It is simply about aligning tax arrangements so that off-market and on-market share buybacks receive the same treatment. It's common sense. It shuts down an exploitative practice that risks government revenue, and it enhances the integrity of the tax system and ensures that shareholders are treated fairly and equitably. The Institute of Public Accountants have been advocating for these reforms since 2016, and they described the issue at hand neatly, saying:

Franking credits belong to all shareholders, and streaming credits to a particular shareholder class is usually prohibited as it is inequitable and inconsistent with the fundamental principles of our imputation system.

Professors Brown and Davis told the committee:

We believe that the changes proposed are well founded based on economic logic, principles of fair and equitable treatment of shareholders, ease and consistency of regulatory implementation, and strongly support the proposed measures. This is good legislation.

This bill tackles a range of important issues across Treasury laws. Schedule 5 is an example of needed reforms to continue to deter bad behaviour and ensure that it cannot resume. It will ensure that companies cannot raise capital purely for the purpose of making franked distributions, which is bad for consumers, bad for the budget, and bad for shareholders. There needs to be an economic purpose to capital-raising and we all agree on that. The work of the ATO has meant that this dodgy practice has dried up, but this bill is critical to rule it out conclusively. Our amendments, informed by the Senate inquiry in the usual process, will further target the measure to the mischief that we all agree needs to be addressed.

These reforms will go a long way to improving integrity, modernising Australia and treating shareholders fairly, so naturally, they're being opposed and attacked in part by those opposite. Now, this is a coalition, we must all remember, that doesn't even have a shadow financial services minister to speak on the issues at hand. I know Mr Robert, the former member for Fadden, has been gone for almost six months. There are many people who would be very well qualified to take up such a position in the Senate. There are a few of them sitting opposite me right now but we know that those opposite don't have anyone. We know that's because they're so divided they can't even agree to replace someone who's been gone for six months but they want to come in here and tell us how to handle a portfolio that they don't even have a spokesperson for.

We know, because they lack a shadow minister, the Senate is the only place to have a go at a basic integrity bill to audition for the role that should be filled, that needs to be filled. We know that if you took this seriously—

Helen Polley (Tasmania, Australian Labor Party) Share this | Link to this | Hansard source

Senator Walsh, please resume your seat. Senator Smith, on a point of order?

Dean Smith (WA, Liberal Party, Shadow Assistant Minister for Competition, Charities and Treasury) Share this | Link to this | Hansard source

I'm hoping that Senator Walsh might fast-forward to why the Prime Minister thought it necessary to break his promise.

Helen Polley (Tasmania, Australian Labor Party) Share this | Link to this | Hansard source

There was no point of order, as you well knew, but I will remind senators that when senators are speaking in the chamber, they deserve the respect of being heard in silence. Senator Walsh, please continue.

Jess Walsh (Victoria, Australian Labor Party) Share this | Link to this | Hansard source

Yes, I repeat: it was left up to the Labor government many years later to implement your commitment in 2016-17 MYEFO to actually implement what we have done with schedule 5 on franked distributions funded by capital raisings, and we are proud to do so to add integrity and transparency to our tax system and to the way that those measures operate. It is extraordinary that we are going to have so much opposition to, as I understand it, schedule 4 and schedule 5, again, when the opposition does not even have a person who is empowered to speak on these issues, does not have a shadow minister. We know that they're all here auditioning for the role. We look forward to all of the contributions to audition for the role which has been left vacant for six months while you show your complete disregard for integrity in our financial system by refusing that position.

But what we have in front of us is actually a straightforward TLAB bill. It is a straightforward bill that's gone through the usual processes. It's been consulted a lot. It's gone through the Senate committee. Perspectives have been sought. Amendments are being put. This bill gets the balance right. We are not wasting any time, unlike those opposite, delivering on transparency and integrity. Australians have voted for government that will deliver transparency and integrity, and that is exactly what we are doing with this bill. I commend it to the Senate.

Andrew Bragg (NSW, Liberal Party) Share this | Link to this | Hansard source

It's a real pleasure to be able to rise to speak about the Treasury Laws Amendment (2023 Measures No. 1) Bill 2023. I will be talking about franking credits today. That is, I think, the most important part of this bill. The context here, of course, is that the Prime Minister said—

Helen Polley (Tasmania, Australian Labor Party) Share this | Link to this | Hansard source

Senator, I remind you to stop interjecting and to allow the speaker to continue on. Senator Bragg, you have the call.

Andrew Bragg (NSW, Liberal Party) Share this | Link to this | Hansard source

Righto. That's good. That's very nice. Thank you. The Prime Minister, Mr Albanese, said in the last parliament, before the last election, 'We won't have any changes to the franking credits regime.' That was a good commitment from the now Prime Minister. In addition, Mr Chalmers said, 'We won't be doing franking credits. I couldn't be clearer than that.' I guess that means that the Prime Minister and the Treasurer decided that it wasn't a good idea to tell the Australian people that they would be doing franking credits. Therefore, they would only do something to franking credits if they were to win the election, and then they would be able to do what they really wanted to do, which, of course, is what the Treasury department have recommended to them, which they have swallowed hook, line and sinker.

The whole basis of this schedule, schedule 7, is based on pretty dodgy data. It has no real basis, and it could actually disrupt the whole franking system. For Australian companies that seek to raise capital—which, of course, is every company, because I don't know any company which has a balance sheet of 100 per cent debt—when they go to the market to raise equity capital, they will find it difficult to pay franked dividends. That is what this is all about. Can a company go to the market—a small company or a large company; it doesn't matter—raise equity capital and pay a franked dividend? That's what this is all about. The judgement of the legal experts and the people that are in the markets is that this change puts this whole model at risk.

It may be obvious to others who are listening today that this is happening for a particular reason. The only reason I can diagnose here is that the government decided that it would need to capture some more revenue to pay for its spending. Of course, the issue with fiscal policy is that the government has been working against the Reserve Bank. Australian families have had to endure 12 interest rate rises, more than they should have, because the government's fiscal policy does not support monetary policy. That is the core problem that the Australian economy has today. The government in Canberra is spending money and inflating the federal budget when it should be deflating the federal budget. It should be running a contractionary fiscal stance. That is what the country needs to support the tightening policy of the Reserve Bank.

But what we have in Canberra is a government that is not able to say no to the rent-seekers and the bloodsuckers and all the vested interests which run the Labor Party, finance their campaigns, man their polling places and run their preselections. They can't say no to these people on money. We know that the Commonwealth public servant base is swelling by the day. It's getting bigger and bigger and bigger. So Labor can't say no on money, but they also can't say no on policy. What we have seen in these last 18 months is a cavalcade of rent-seekers and bloodsuckers running the policy agenda of this government, whether it is on industrial relations or whether it is in the Treasury portfolio. What we see is a parliament clogged up with bills to suit narrow vested interests, not the national interest.

In fact, the first act of the minister responsible for taxation, the Assistant Treasurer, Mr Jones, in this parliament was to introduce a regulation that would strip transparency away from superannuation members so they would not be able to see if their super fund was paying a whole bunch of money to a union. He didn't want the Australian people to see that. I don't think you can find any better example of the warped agenda of 'the government for vested interests' than their first act, to remove transparency from the people to suit the super funds and the unions. So we shouldn't be surprised that the consequence of the government for vested interests running policy and the budget in favour of the rent-seekers is that we see a desire for new taxes—and that is effectively what we have here.

This is not a large improvement to the budget, but it is still a tax increase, which the government promised it wouldn't do. It promised that it wouldn't be doing anything to franking credits. It promised that. So we go back to 22 October last year and the government's first budget, and there it is in the budget papers—a proposal to disrupt franking credits, particularly in relation to capital raisings. The problem here is that it sets out an established practice test. That is a problem with this proposal. It may well work for you, if you're a large company that's been paying the same franked dividends for 10 years. You can probably keep doing that. But if you are a new company—and most new companies are small and disruptive—you haven't got an established practice test, so, therefore, you cannot pay a franked dividend. When you raise money—as all companies do because every company needs equity capital—as far as I can see, you won't be able to pay a franked dividend. That is the reality.

We did an inquiry through the Senate Standing Committee on Economics. I don't agree with everything that Senator Walsh said before, but I do think that she does a good job in chairing the Economics Legislation Committee. The inquiry looked into these issues, and the inquiry found, even in the government's own report, that there were problems with this section—that the drafting was bad and would put capital raisings at risk and would cause companies not to raise capital in Australia. Companies would seek to raise more debt and pay less tax, or they might look to establish a domicile offshore, or they might seek to raise foreign equity, where, of course, there are no franking credits paid. So that is the warped situation we have with this established practice test. It's very poorly drafted. Even the government said it was bad, and their proposed amendments do little to assist there.

The reality is that this measure is based on data from 2015-16, when the MYEFO costed this—if there were to be a measure like this—as a boost to the budget of $10 million. During the committee's inquiry into the bill, I asked the Treasury official, Ms Brown, 'How a big a problem is this in the Australian capital markets today?' By 'how big a problem', I'm talking about the problem the government say they're trying to solve, which is that companies are raising equity just to pay franked dividends. I think that's the proposition. It's actually not clear why this is happening, other than it's important to have more money to pay for the expenditure that we want to make, including hiring an endless group of new public servants in Canberra. Ms Brown said:

Currently, because of the early action by the ATO in issuing an alert and the announcement of the former government's intention to introduce legislation and subsequently the development of legislation, there aren't any cases of this.

So if there are no cases of this issue then why are we today debating this measure, which is going to have a significant impact on Australia's capital markets? That is the question, I think, for the chamber: why are we pursuing a measure—

Helen Polley (Tasmania, Australian Labor Party) Share this | Link to this | Hansard source

Senator, it being 1.30, the debate is interrupted. You will be in continuation when we go back to this. We will now move on to two-minute statements.