Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

I table a supplementary explanatory memorandum relating to the government amendments to be moved to this bill and seek leave to move amendments (1) to (16) on sheet ZB218 together.

Leave granted.

I move:

(1) Clause 2, page 2 (table item 5), omit the table item, substitute:

(2) Clause 2, page 2 (table item 6), omit the table item, substitute:

(3) Schedule 4, item 21, page 40 (lines 7 to 9), omit "after 7:30 pm, by legal time in the Australian Capital Territory, on 25 October 2022", substitute "on or after 18 November 2022".

(4) Schedule 4, item 21, page 40 (lines 14 and 15), omit "after 7:30 pm, by legal time in the Australian Capital Territory, on 25 October 2022", substitute "on or after 18 November 2022".

(5) Schedule 5, item 1, page 41 (line 7), after "a distribution", insert "or a part of a distribution".

(6) Schedule 5, item 2, page 41 (line 13), after "of a kind", insert ", or a part (the relevant part) of a distribution (also a relevant distribution) of a kind,".

(7) Schedule 5, item 2, page 41 (line 27), after "funding of", insert "a substantial part of".

(8) Schedule 5, item 2, page 41 (line 28), omit "part of the relevant distribution", substitute "the relevant part".

(9) Schedule 5, item 2, page 41 (line 32), after "funding", insert "a substantial part of".

(10) Schedule 5, item 2, page 41 (line 33), omit "part of the relevant distribution", substitute "the relevant part".

(11) Schedule 5, item 2, page 41 (line 33), at the end of subsection (1), add:

; (d) the issue of the equity interests was not a direct response in order to meet a requirement, direction or recommendation from *APRA or *ASIC.

(12) Schedule 5, item 2, page 42 (line 23), after "apply to", insert "all or any part of".

(13) Schedule 5, item 2, page 42 (line 25), after "funding", insert "all or part of".

(14) Schedule 5, item 2, page 42 (line 35), at the end of paragraph 207-159(4)(b), add "or the relevant part (as the case may be)".

(15) Schedule 5, item 3, page 44 (line 8), omit "15 September 2022", substitute "the commencement of this Schedule".

(16) Schedule 5, item 3, page 44 (line 12), omit "15 September 2022", substitute "the commencement of this Schedule".

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

The opposition will not be supporting these amendments moved by the government, which have only been circulated in recent times, despite having been recommended over five months ago. These amendments should not need to be moved, because the promise should not have been broken in the first place. As coalition senators have noted, the legislation before the committee includes a very, very significant broken promise on behalf of the government. On multiple occasions before the election, the Prime Minister promised that there would be no changes to the rules around franking credits. These amendments change those rules and constitute a broken promise on behalf of the government. The opposition will not support the Prime Minister breaking an election promise that impacts retirees, mum-and-dad investors and small businesses.

Glenn Sterle (WA, Australian Labor Party) Share this | Link to this | Hansard source

The question is that government amendments (1) to (16) on sheet ZB218, moved together by leave, be agreed to.

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

I move Pauline Hanson's One Nation's amendment (3) on sheet 2188:

(3) Schedule 2, page 14 (line 1) to page 20 (line 6), to be opposed.

Deborah O'Neill (NSW, Australian Labor Party) Share this | Link to this | Hansard source

The question is that schedule 2 stand as printed.

Deborah O'Neill (NSW, Australian Labor Party) Share this | Link to this | Hansard source

Just to clarify: having delivered that vote, the Senate now does not need to deal with amendments (1) and (2) on sheet 2188 from Pauline Hanson's One Nation; they are redundant.

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

by leave—I move Australian Greens amendments (1) and (2) on sheet 2161 together:

(1) Clause 2, page 2 (after table item 5), insert:

(2) Schedule 3, page 33 (after line 25), at the end of the Schedule, add:

Part 4 — Appointments to the Tax Practitioners Board

Tax Agent Services Act 2009

16 Paragraph 30-25(4)(a)

Repeal the paragraph, substitute:

(aa) Part 2 (Registration); and

(ab) Subdivision 30-C (Notifying a change of circumstances); and

(ac) Part 4 (Termination of registration); and

(ad) section 60-25 (Appointment of Tax Practitioner Board members); and

17 Section 60-1

Omit:

Comprising at least 7 Board members, the Board has functions and powers relating to the operation of this Act, including investigating your application for registration and conduct that may breach this Act. For the purposes of an investigation, the Board may oblige you to give it information.

substitute:

Comprising at least 7 Board members, the Board has functions and powers relating to the operation of this Act. Board members must be individuals who are representatives of the community rather than representatives of larger registered tax agents or BAS agents.

One of the Board's functions is to investigate your application for registration and conduct that may breach this Act. For the purposes of an investigation, the Board may oblige you to give it information.

18 At the end of subsection 60-10(1)

Add:

Note: Board members must be community representatives (see subsection 60-25(4)).

19 At the end of section 60-25

Add:

Community representatives

(4) In appointing an individual as a *Board member, the Minister must be satisfied that the individual is a *community representative.

(5) An individual is a community representative if the individual is not any of the following:

(a) a partner in a partnership that is a *prescribed tax agent;

(b) an *executive officer of a company that is a prescribed tax agent;

(c) a former partner in a partnership that is currently a prescribed tax agent, if the individual is receiving regular and ongoing benefits, or has within the last 6 months received a material benefit, from the partnership;

(d) a former executive officer of a company that is currently a prescribed tax agent if either of the following apply:

(i) the individual is receiving regular and ongoing benefits, or has within the last 6 months received a material benefit, from the company;

(ii) the individual holds *shares in the company.

(6) A prescribed tax agent means a company or partnership that:

(a) is a *registered tax agent or BAS agent; and

(b) has more than 100 employees.

Note: A company or partnership whose registration as a registered tax agent or registered BAS agent is suspended remains a registered tax agent or BAS agent for the purposes of this section (see subsection 30-25(4)).

(7) An executive officer of a company means a director, secretary or senior manager (within the meaning of the Corporations Act 2001) of the company.

20 Subsection 90-1(1)

Insert:

community representative has the meaning given by section 60-25.

executive officer has the meaning given by section 60-25.

prescribed tax agent has the meaning given by section 60-25.

21 Application of Board member appointment amendments

The amendments of the Tax Agent Services Act 2009 made by this Part apply in relation to any appointment of a Board member made after the commencement of this Part.

Part 5 — The Code of Professional Conduct

Tax Agent Services Act 2009

22 At the end of subsection 30-20(1)

Add:

; (d) requiring you to notify, in writing, all of your current clientsabout the findings of the Board's investigation specified in the order.

23 Subdivision 30-C (heading)

Omit "Notifying a change of circumstances", substitute "Other obligations".

24 After paragraphs 30-35(1)(b), (2)(b) and (3)(b)

Insert:

(ba) you have reasonable grounds to believe that:

(i) you have breached the *Code of Professional Conduct; and

(ii) the breach is a *significant breach of the Code; or

25 Subsection 30-35(4)

Repeal the subsection, substitute:

When notice must be given

(4) You must give the notice within 30 days of the day on which:

(a) you become, or ought to have become, aware that the event occurred (unless paragraph (1)(ba), (2)(ba) or (3)(ba) applies); or

(b) if paragraph (1)(ba), (2)(ba) or (3)(ba) applies—you first have, or ought to have, reasonable grounds to believe that you have breached the *Code of Professional Conduct, and that the breach is a *significant breach of the Code.

Note: A breach of this subsection is a breach of section 8C of the Taxation Administration Act 1953 and of subsection 30-10(2) of this Act.

26 At the end of Subdivision 30-C

Add:

30-40 Obligation to notify of significant breaches of the Code of Professional Conduct

(1) If you are a *registered tax agent or BAS agent, you must notify the Board, in writing, if you have reasonable grounds to believe that:

(a) another registered tax agent or BAS agent has breached the *Code of Professional Conduct; and

(b) the breach is a *significant breach of the Code.

(2) In addition, if at the time you have reasonable grounds to believe that other agent has breached the Code, and that the breach is a *significant breach of the Code:

(a) the other agent is a member of a professional association accredited by the Board under the regulations; and

(b) you are aware of that other agent's membership;

you must notify the association, in writing, of the breach.

When you must notify

(3) You must notify under subsection (1) or (2) within 30 days of the day on which you first have, or ought to have, reasonable grounds to believe that the other agent breached the Code, and that the breach is a *significant breach of the Code.

27 Subsection 90-1(1)

Insert:

significant breach of the Code means a breach of the *Code of Professional Conduct by a *registered tax agent or BAS agent if the breach:

(a) constitutes an indictable offence, or an offence involving dishonesty, under an *Australian law; or

(b) results, or is likely to result, in material loss or damage to another entity (including the Commonwealth); or

(c) is otherwise significant, including taking into account any one or more of the following:

(i) the number or frequency of similar breaches by the agent;

(ii) the impact of the breach on the agent's ability to provide *tax agent services;

(iii) the extent to which the breach indicates that the agent's arrangements to ensure compliance with the Code are inadequate; or

(d) is a breach of a kind prescribed by the regulations for the purposes of this paragraph.

28 Application of obligation amendments

(1) The amendments of section 30-35 of the Tax Agent Services Act 2009 made by this Part apply in relation to breaches that occur on or after the commencement of this Part.

(2) Section 30-40 of the Tax Agent Services Act 2009, as added by this Part, applies in relation to breaches that occur on or after the commencement of this Part.

This amendment is the first legislation to deal with some of important issues that have arisen since the PwC scandal broke. Since that scandal began to unfold, Australians have come to much better understand the power of big consultants and their literally incredible influence on our tax advice and consultancy sector, as well as their huge reach into our public sector, government decision-making and so many activities of government. The size and expansion of big consultants has introduced new risks to our tax administration system, which the PwC debacle has revealed. We've seen in too many places the capture and taming of regulatory machinery, with the voice of the big four too often dominating processes of decision-making, creating very significant conflicts of interest and hobbling regulation.

This amendment aims to begin the processes of unwinding that capture and those conflicts, to get those who are being regulated off the regulatory bodies. We Greens have secured government agreement to improve the system of tax administration and ensure its independence and its pursuit of the public interest to make sure it's not captive to big consultants. We need to remove both real conflicts of interest and the appearance of conflicts of interest. To that end, our amendments restrict membership of the Tax Practitioners Board to community members without vested interests.

Our amendment will ensure that partners from the big four are banned from sitting on the TPB. The TPB regulates the tax advisory industry and has the power to deregister tax advisers who engage in serious misconduct. The Greens amendment will ban any senior executives or partners currently working at a tax firm with more than 100 employees, or with ongoing financial links to large tax firms, from being members of the Tax Practitioners Board. Through this amendment, we're fixing the loophole that allows big consultants to regulate themselves. Through our amendment, the remaining former PwC partner on the TPB will not be able to be reappointed. We will have members of the Tax Practitioners Board who are not financially tied to those same large tax agents they are regulating.

The amendment also requires tax agents not only to report to the TPB if they've breached the code of professional conduct but also to report if another agent has breached the code. This is an important amendment to prevent partners protecting other partners and turning a blind eye to unethical behaviour. It widens the responsibility for unethical behaviour from the individual to others that are aware of their behaviour. This is what happened in the PwC tax scandal. If tax agents do not report such unethical behaviour, they can now be penalised. Hopefully, this means we will not be sitting here in the years ahead trying to unpick unethical tax behaviour, who did it, who was party to it, who knew about it and who did nothing to stop it. Hopefully, the whistle will be blown early, loudly and more often. Whenever someone does the wrong thing and others have witnessed it, it will be blown.

If we've learned anything from the PwC tax scandal, it's that we need to pay much closer attention to the regulation of the professional services sector in general and tax advisers in particular. The Australian public will no longer tolerate self-regulation and the capture of regulatory machinery. They want it to work fairly, ethically and in the public interest, with penalties for those who do the wrong thing.

We thank the Labor government and, in particular, the Assistant Treasurer and Minister for Financial Services, Stephen Jones, and his staff, for his willingness to reach agreement with us on these important changes. The minister has also agreed to use his new legislative powers to implement some important changes to the tax practitioners code of professional conduct, to make sure they properly capture and describe behaviour that assists an ethical and effective tax advisory system upheld by all who work in this field. I commend this amendment to the Senate. I'm confident it's a positive and powerful step in the right direction.

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

I would like to put on the record that the government supports this amendment and thanks Senator Pocock and the Greens for bringing forward this amendment.

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

I preface my questions to Senator Pocock by reiterating that the coalition endorses the excellent work that the Senate Finance and Public Administration References Committee has been doing in exposing this unethical behaviour, which everyone in this chamber would find unacceptable and which absolutely does not meet community standards and expectations. But, Senator Pocock, if I might just inquire about matters of consultation, can you share with the Senate chamber which industry stakeholders you have consulted on this amendment and their view or views?

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

Through our inquiry, there's been very wide discussion with a broad range of community representatives about the changes that are proposed here, and I've certainly had extensive correspondence in relation to this. I think there's a high level of support for responding to the specific issues that have arisen in relation to PwC, and there is strong endorsement of seeing elimination of perceived conflicts of interest and actual conflicts of interest. Certainly, in the evidence that our inquiry has taken from all of the big four, there is a strong commitment to seeing ethical practice, more transparency and governance that the Australian community can have confidence in.

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

Sticking with the specific matter of the amendment itself rather than the principle of the amendment, which community stakeholders have been engaged and what has been their view, and which industry stakeholders have been engaged and what is their view?

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

I don't have in front of me a list of the correspondence that I have received from particular agencies, but a number of community organisations and consultants have been in contact, including a number of smaller and mid-sized ones who want to see a more open and more representative group of people involved in these governance structures.

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

Thank you, Senator Pocock. Could you provide to the chamber the details of when this proposition was put to government? In your remarks you mentioned the minister, Mr Jones, and you congratulated him for his cooperation. Could you detail for the chamber when those discussions began and on what date a commitment was extended to you?

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

There's been a very extensive period of consultation between government and our offices, and I think it's up to the government to reveal those details in response to that. But you can be confident, Senator Smith, that there has been an extensive and detailed discussion about every element that's in our amendment.

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

Minister, could you provide to the chamber the details of the date on which Senator Pocock or others from the Australian Greens political party proposed this particular amendment to you and the nature of the discussions that happened in the government? On what date did you give the Australian Greens political party a commitment to support this particular amendment?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

My understanding is that there have been discussions over a number of weeks. I think it's been clear in my response to the second reading speeches just what has occurred in those, so perhaps you'd like to go back over Hansard and have a look at that. But we certainly do commend the Greens for having brought this forward.

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

The Hansard doesn't provide any information in terms of the date on which this particular amendment proposition was put before the government, the Hansard doesn't record the dates on which Treasury and others in government deliberated on the proposed commencement and the Hansard doesn't detail the date on which the government gave the Australian Greens a commitment that it would support this amendment.

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

As I said in my previous response, this has been going on for a number of weeks. I don't have a particular date for the senator, and I will leave it at that.

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

Are they matters that you or Treasury officials can take on notice and provide to the chamber?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

Absolutely. I can certainly take that on notice for you and provide it a later date.

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

Thank you. To Senator Pocock, just to be clear: in the amendment there is reference to obligations to notify of significant breaches of the code of professional conduct. With regard to that, can you confirm that a registered tax agent will not have to report a breach if they read about it in a newspaper or a news story?

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

My understanding is that it is when a partner, a senior official or anyone in that tax agency has knowledge of something which would be in breach of the code of conduct that they should give that advice to the relevant agency. I imagine that, if the matter is public, that is in a different category, because it would be widely known. When we look at the matter that evolved within PwC, we see that, clearly, a significant breach of ethics had occurred behind closed doors and was not available to public scrutiny.

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

Minister, given the government's support for Senator Pocock's amendment, can you confirm that a registered tax agent will not have to report a breach if they read about it in a newspaper or in a news story?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

The issues in the industry have been well canvassed through the media and through multiple Senate inquiries, and these amendments respond to the numerous stakeholder submissions that have called for change and action in this space. The amendments by the Greens will receive further scrutiny on how they are implemented. The Tax Practitioners Board will release draft guidance on the proposed disclosure requirements, and this guidance will be provided both publicly and directly to industry through TPB's governance and consultative forums. The TPB will consider the feedback before finalising the guidance.

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

Thank you for that, Minister. Can you provide further detail with regard to what further scrutiny will take place, the time frame and expectations around that additional scrutiny process?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

I'm advised that the TPB orders will consult, as is its current standard.

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

Excuse my ignorance, but what is the current standard?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

My understanding, and as I'm advised, is the TPB now makes its decisions based on the areas and the people that it consults with. Clearly, it already does that, and it will continue to do so.

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

So, despite the public outrage, despite the united view of this Senate chamber in its outrage to the unethical behaviour, the scrutiny process with regard to this proposal wouldn't be expediated?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

Firstly, I don't agree with the senator's assumption on any of those fronts. This was clearly a concern raised through our Senate process, Senator, and you know that. I think it's important to put on the record not only what the Greens have done but also what Senator O'Neill has done in terms of the inquiry that took place under the procedures of this house—that something had to change. This amendment has gone through the minister's office. It's gone through this Senate in terms of the second reading speech. If anything, I want to understand: are you not supporting this amendment? Is that what's happening here?

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

Normal practice is for us to come to a position at the conclusion of our inquiries through the committee stage, but it is true that we are interested to understand the consultation process.

Turning to Senator Pocock, if I may, was the Institute of Public Accountants, CPA Australia, Chartered Accountants Australia and New Zealand, the Tax Institute, the Law Council of Australia or the Australian Bookkeepers Association consulted on your particular amendment?

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

I refer you to my earlier answer about the general conversations and consultation that occurred.

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

Minister, did the government consult the Institute of Public Accountants, the CPA Australia, Chartered Accountants Australia and New Zealand, the Tax Institute, the Law Council of Australia or the Australian Bookkeepers Association?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

We will certainly take on notice the specific question you've raised and provide that for you.

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

Keeping that in mind, how do you explain then the comments of those organisations who are said to have said that it was a considerable surprise and concern that the first time the professional bodies became aware of the amendments was in various newspaper articles on 8 November?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

As Senator Pocock has said, there have been many discussions on the inquiry itself and the minister's role. I'll certainly put on the record that I'm happy to bring that back from the minister's office in terms of those organisations. But we are, on this side of the chamber, very satisfied that this amendment will make the appropriate adjustments that are required as per the process that we followed through the Senate inquiry.

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

Has the government identified any possible risks or unintended consequences with regard to this particular amendment?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

We are confident in this amendment. That's why we're supporting it. But we also understand that the TPB will need to do what it needs to do to follow up in terms of this amendment and the changes. But we are confident in this amendment.

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

So, the government is confident in the amendment, despite the fact that the scrutiny process has not actually started?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

I've answered that question.

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

In the event that any unintended consequences are identified, is the government prepared to bring back to the parliament necessary legislative changes to deal with any unintended consequences or unforeseen matters that might arise through the further scrutiny process?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

Please refer to my previous answer. Thank you.

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

Just to be clear: to what extent has the government itself, or the Treasury, explored and satisfied itself that this amendment is suitable?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

Well, I'm not sure how many ways I can answer it, but we are certain that this amendment is one that should be supported. I've already put on the record, through the response and the second reading speech, why that is the case. We're here, and we're just waiting for your response to it.

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

Given the comments of the Institute of Public Accountants, CPA Australia, Chartered Accountants Australia and New Zealand, the Tax Institute, the Law Council of Australia and the Bookkeepers Association, has the government engaged with them following their comment that the amendment came with particular surprise and concern?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

With the greatest of respect, this question has been put to me in a different way and I've already responded to that question by saying that we will take on notice the consultation that's occurred, and I have said that.

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

To be fair, I think it is an answer such that Treasury officials will be well aware of whether they have consulted with significant stakeholders like the ones I have mentioned. So, my question, again, is: has the government or has the Treasury consulted with these particular organisations or others since the release of this amendment?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

I am advised that we have responded to this question. I did say I would bring back further information to the parliament and have taken previous questions around this on notice. There's not much more I can say.

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

Did the government secure or offer to the Australian Greens political party any other matters in exchange for their support for this amendment?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

Well, I reject outright the insinuation by the senator here. This is a very good amendment that has been brought forward as a result of our Senate inquiries. We all sit on different Senate inquiries, and I think we're pretty proud of the work that is done in terms of research on those and the witnesses who come forward. So, I do caution you, Senator, in terms of the words you're using to imply that something else has taken place here. This is an important amendment. Your questions only show that perhaps you don't agree with this amendment and that perhaps you're not as outraged as we on the government side have been about the behaviour of PwC.

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

I just want to express my surprise. I have sat for the last eight months in collaborative outrage with Senator Colbeck, and we have on a number of occasions shared our concern, which is on Hansard, about the fact that the PwC scandal took eight years to come to the attention of the Australian public. There are many reasons why it took so long, and we have a bunch of other measures which are needed to deal with the secrecy that prevents open and proper discussion by the ATO with other agencies. The fines that are there for people who commit misdemeanours are clearly inadequate, and Senator Colbeck and members of your party have shared their outrage with me.

One of the key measures we need to take is to assure the Australian public that there is no potential conflict of interest on a regulatory body like the Tax Practitioners Board, which regulates tax agents. They need confidence that those who are regulated are not represented on that board. That is what this measure does. So I am surprised that you would not see merit in strengthening that regulatory provision and ensuring that very large tax organisations and their businesses are not supported by members. It's not just recusing themselves from meetings where they're actual agents and their behaviour is being discussed. It is actually ensuring that the practice, the culture and the general meetings that are held by the Tax Practitioners Board are seen to be above conflict and actually behave in ways that are above conflict. That is what this amendment does, and I'm surprised that you're questioning the specific measures that are being proposed in this amendment.

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

Thank you very much, Senator Pocock. There is no need for surprise. Good ideas that are poorly legislated are in no-one's interest. That is the first point. The second point is that coalition senators absolutely support the characterisation of Senator Colbeck's contribution in the committee work that you and Senator O'Neill and others have done. The discussion here is on a committee stage of a bill, which, to be fair to the Australian Greens, they utilise with great effect to interrogate particular policy positions and particular legislative amendments. That is what I am doing here, because in the short exchange we have had we have found that there could be very high risk that your very good and noble idea is poorly legislated or, worse, is not given the priority of the further scrutiny process. So, Senator Pocock, in all fairness, what the coalition is doing here is scrutinising what could be a good and noble idea to make sure that, when translated into legislation, it does what you expect it to do. That is the first point. The second is that, if the government had been able to come to the chamber and say to Senator Smith, 'We have consulted with this group, this group and this group; these were the dates and these were the outcomes,' then there would be a much higher level of confidence. They have not been able to do that.

The scrutiny process that I am engaging in is necessary, is proper and is quite separate and distinct from what we all know, what we've all seen and what we're all equally outraged by, in regard to the work of the Senate references committee on the PwC scandal. This is quite a separate matter. I do not apologise for one moment if the coalition wants to satisfy itself that this has been properly and thoroughly consulted on, because, if it hasn't been and there are unintended consequences through the further scrutiny process, the government will have to come back here. The other thing, if I could say this—

I see Senator McKim mocking. Well, the Australian Greens have had a pretty poor track record when it comes to dealing with the government and the government honouring its commitments to the Australian people.

Senator McKim, you'd have to agree with me on that point. But that's not the substantive matter. We want to satisfy ourselves—and it's a very fair request—that this has been more than a deal. We want to make sure it's been thoroughly canvassed and properly scrutinised and enjoys the support of stakeholders beyond this chamber. Thus far, I've not been able to satisfy myself that that's the case.

Louise Pratt (WA, Australian Labor Party) Share this | Link to this | Hansard source

As I participated in the inquiry, I wanted to see if I could be helpful to Senator Smith in highlighting that the work that Senator O'Neill has done, Senator Colbeck has done and Senator Pocock has done identified the problems and really highlighted the fact that the Tax Practitioners Board's powers and make-up and the obligations on tax and BAS agents to report suspected breaches of the code were all areas that needed to be improved. This amendment put forward by the Greens provides the framework for that. But, of course, the kind of consultation that you highlighted mentioning the stakeholders, such as the CPA and other professional bodies, will need to be looked at and consultation around the implementation of this new provision will need to take place to make sure we get it right. I have that confidence, based on the way these issues have been aired.

Nick McKim (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I'll make a couple of observations. I understand this is a little off brand for me in recent months, but I do genuinely want to acknowledge Minister Stephen Jones for the constructive approach that he has taken to discussions and negotiations with the Australian Greens and genuinely thank him and his staff for their engagement on this issue and ultimately for their agreement to these amendments. It is genuinely appreciated.

I also want to respond to a couple of matters that have arisen through Senator Smith's contributions. Firstly, when this question is put shortly, we will find out whether the Liberal and National parties in this place are going to go in to bat for the big consultants regulating themselves and the big corporations in the tax advisory sector actually regulating themselves, so the fox running amok in the henhouse. That's what we are about to find out. When Senator Smith says that the normal practice of the opposition is to form a position after inquiries at the committee stages, that is most emphatically not the case. In the overwhelming majority of situations, Senator Smith well knows that the opposition have formed a view well before they get into the committee stages of any particular piece of legislation. This will be the test, and it is coming up, I believe, in the next few minutes.

We know that the Australian Greens and the government are actually going to take the first legislative step in response to what has been a disgraceful scandal regarding the behaviour of one individual, but behaviour that is symptomatic of an entire sector, the big four consultants. This behaviour was exposed by this Senate. The business model of these consulting firms is based on things like conflicts of interest and effectively insider trading. We are about to find out whether the opposition is going to back in business as usual, which has appalled and shocked millions of Australians, as the revelations have rolled out through the inquiries of this Senate and through some very good public interest journalism in this regard. We're about to find out whether the opposition is going to back in good governance and significant steps towards abolishing not just perceived conflicts of interest but actual conflicts of interest. The test is coming up now, and this will be the key for the opposition. We're about to find out whose side they're on. Are they on the side of the Australian people and good governance or are they in the pockets of the big corporations?

Sarah Hanson-Young (SA, Australian Greens) Share this | Link to this | Hansard source

I ask that the question be put.

Hollie Hughes (NSW, Liberal Party, Shadow Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

If it assists the chamber, we are on sheet 2161, Greens amend ments (1) and (2). The question is that the question be put.

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

I seek leave to make a brief statement, of two minutes.

Leave not granted.

Hollie Hughes (NSW, Liberal Party, Shadow Assistant Minister for Climate Change and Energy) Share this | Link to this | Hansard source

The question now is that Greens amendments (1) and (2) on sheet 2161 be agreed to.

Question agreed to.

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

At the request of Senator Hume, I move opposition amendment (1) on sheet 2038:

(1) Schedule 4, page 34 (line 1) to page 40 (line 21), to be opposed.

In the final two amendments in the committee stage of this Treasury laws amendment bill the opposition will be seeking to repeal schedule 4, which is the subject of amendment on sheet 2038, and then seeking to repeal schedule 5, which is the subject of sheet 2043. In doing so we are trying to do a big favour—a very, very big favour—for the government, and that is to stop it from going down the path of breaking another promise. This is not an ordinary promise. It is a promise that was made by Mr Albanese, now the Prime Minister, when he was opposition leader and a promise that was made by Dr Chalmers as the Treasurer. Before we get to the broken promises that are the core of this Treasury laws amendment bill, I will remind you of two other promises.

In August 2022 Mr Albanese as Prime Minister made this promise. He said that the Australian people deserve accountability and transparency and not secrecy. Unfortunately, in the previous amendments, on sheet 2161, moved by Senator Barbara Pocock and agreed to by the government, we got a glimpse of some of that secrecy. The opposition did not oppose the principle of what was contained in Senator Pocock's amendment—not at all. In fact, we agree with the principle that sits behind the amendment. But what was demonstrated in that very, very brief committee stage was that Senator Pocock and the Australian Greens were not completely prepared to share with the Senate chamber what was the community stakeholder engagement and the industry stakeholder engagement around their proposition, and the government itself could not or would not share with the chamber whether or not it had consulted with peak industry associations on that amendment. What does that mean? That means it could go wrong. That means it could not be as perfect as Senator Pocock and others would like it to be. Why did we have some concerns about that consultation process and why did we want to draw it out in the committee stage? It was because the industry associations themselves had said that they were surprised about the amendment. It came as a surprise.

We have had and continue to have a thorough Senate references inquiry into the PwC scandal, which everyone in this chamber agrees is outrageous and everyone in the community agrees is outrageous. It is a committee process that is still ongoing—I am happy to stand corrected; Senator Colbeck is in the chamber. For those in this chamber who agree that the Senate process is one of the standout features of our parliamentary democracy, what we just saw was a group of people say: 'We'll just take this out of the process. We're not going to consult with anyone. We're going to drop it into the Senate and we're going to legislate it.' In further questions the government they couldn't even say whether the scrutiny process to give effect to this would be expedited. From Senator Pratt's contribution—reading between the lines—it could possibly go wrong. Really? We have a thorough Senate committee process. We have engagement with stakeholders on a broad range of issues, but on this particular issue some key stakeholders—the Institute of Public Accountants, CPA Australia, CPA New Zealand, the Tax Institute, the Law Council of Australia, the Bookkeepers Association—were not consulted. That does not bode well. The Prime Minister said to people in August 2022 that he believed that Australians deserve accountability and transparency, not secrecy—let me add to his quote—'on some matters'.

I turn to the matter that is before us, the Treasury Laws Amendment (2023 Measures No. 1) Bill 2023. On three separate occasions, the Prime Minister said there would be no changes of this kind brought to the parliament. In January 2021, the Prime Minister, when he was the opposition leader, promised not to make any changes to franking credits. Remember? He did that because he remembers all too well that Australians rejected the former opposition leader Bill Shorten and denied him the opportunity to govern this country in the 2019 election in large part because of Labor's plans on franking credits. So the Prime Minister, when he was the opposition leader, said, 'The best way to protect myself and the best way to protect my party is to give a commitment that we won't touch it.' And he gave that commitment in January 2021. Then, on 30 March in 2021, the Prime Minister, as opposition leader, thought: 'I better give it to the Australian electorate again. Let me give them that commitment again just in case they haven't heard me.' He said on ABC radio that Labor won't have any changes to the franking credits regime. In March 2022, Treasurer Chalmers was on ABC radio in Perth, in my home state of Western Australia, and listeners were told that Labor would not be touching franking credits—a broken promise on a litany of other broken promises in just 17 months of this government.

The coalition in the Senate is seeking to repeal schedules 4 and 5, to allow the government to make good and stay good on that election commitment that was given to Australian voters. Prime Minister Albanese, when he was the opposition leader, knew exactly what he was doing. This was not about tax. It was about raising taxes, but it wasn't about trying to give Australians a degree of comfort around tax issues and franking credits. It was a political ploy to remove one barnacle from their possible re-election—the issue of franking credits that had caused them so much harm in the 2019 election. He said: 'We'll fix this. We'll go out there not once, not twice but three times.' Then Dr Chalmers goes out there and says, 'We won't touch franking credits.' And many retirees and mum-and-dad investors thought: 'Great! What a relief. Labor has learnt the lessons from the 2019 election.' How wrong were Australian voters! How wrong were they to have trusted Anthony Albanese, opposition leader now Prime Minister, and Dr Chalmers, then shadow Treasurer now Treasurer. How wrong they were, unfortunately, to have trusted Labor because Labor has broken their promise.

What we are seeking to do here—what Labor, with the support of the Greens and unfortunately some of the crossbench, is seeking to do—is honour their broken election promise. How remarkable! If you read the excellent dissenting report that Senator Bragg wrote you will see page upon page of evidence from people saying that this will harm them, and it will harm them at a time when they're feeling most vulnerable with regard to their financial situation because of the cost-of-living crisis—because of interest rate rises and inflation. We think that every election commitment should be honoured, but, when I think about all of the election commitments that this government has broken in just 17 months, I would think that this is probably the election commitment that they should absolutely keep because it will take the financial pressure off retirees and mum-and-dad investors. If the Australian Greens and the crossbench let the government get away by legislating this broken promise, it will just give the government permission to break other promises or even to make promises and break them—if this Senate chamber is not going to stand up and say, 'We're not going to have it.' And the best way you hold Labor accountable is by supporting the opposition's position to repeal schedules 4 and 5. (Time expired)

Richard Colbeck (Tasmania, Liberal Party) Share this | Link to this | Hansard source

I'd like to make a contribution in respect of the points that Senator Smith made in relation to the government's promises in two senses. One is in relation to the fact that the government said that it would not touch franking credits. That was a clear election commitment, and we can add that to the now growing list of broken promises of this government of broken promises. This government promised a $275 reduction in power prices, higher real wages and now, on top of those and a number of other things, the promise that it would not touch franking credits. This government is clearly now a government of broken promises. This government also promised to govern through proper process and, as we saw through the last amendment, that clearly has not happened. We will see at the end of this amendment the test of the deal that was done between Labor and the Greens on the last amendment. I have to say I find it completely objectionable that my name would be taken, as it was in the chamber during the debate on the last amendment—

Louise Pratt (WA, Australian Labor Party) Share this | Link to this | Hansard source

But Senator Smith said that he supported the amendment in principle.

Richard Colbeck (Tasmania, Liberal Party) Share this | Link to this | Hansard source

Senator Pratt, if you want to make a contribution, get up and make a contribution later. I am making my contribution now. The issues have been raised in the Finance and Public Administration References Committee, and they are considerable and do warrant some change. The fact is that I am as outraged, as are Senator Pocock and everyone else on that committee and, I think, everyone else in this chamber, about the behaviour of PwC, but that that then translates to a simple agreement with the Greens for a solution does not fly.

Nick McKim (Tasmania, Australian Greens) Share this | Link to this | Hansard source

How is that relevant to the question before the chair?

Richard Colbeck (Tasmania, Liberal Party) Share this | Link to this | Hansard source

That was what was inferred, and I was listening in the chamber, Senator McKim. I object to the fact that my name has been taken, and that because I am outraged, which I am, at the behaviour of PwC, that naturally translates to agreement with the Greens solution. It clearly has been shown that neither the government nor the Greens consulted with anybody in the design of that amendment. Nobody was consulted. They found out about it in the paper, like everybody else. The government and the Greens have done a deal. It is a broken promise of the government for good governance, Senator McKim, quite simply. The Finance and Public Administration References Committee has not completed its inquiry. It has made no recommendations, so the sense from the minister or anyone else in this chamber that this has been through some committee process and that is a rationale for the amendment that was just passed is false. The minister might like to go back and review the Hansard afterwards and check to see whether the answers that have been put on the record actually stand up in the context of the committee process that we're undertaking right now.

The committee does not report until next year. It has made no recommendations in relation to what might happen with the Tax Practitioners Board. It may very well make recommendations. I very much appreciate the cooperative nature of the work on the committee by Senator Pocock, Senator O'Neill and Senator Pratt, which is shown in the way we are working through the issues here. We worked very closely together on dealing with this important matter. But we have made no recommendations, so any suggestion that this amendment came out of a committee process, particularly the one that I am chairing, is false. I find it outrageous that the government have to take on notice the question as to whether they have spoken to any of the bodies that Senator Smith mentioned, which are key bodies in the accounting profession. The fact the government couldn't answer that question effectively is the answer to the question. There has been no consultation, and there should have been. This is a very serious matter. The governance of the tax and accounting system through the Tax Practitioners Board is a very serious matter, and it warrants being done properly. It does warrant being done properly.

I think it's important that I put on the record that there have been no recommendations from the Finance and Public Administration References Committee. We will be considering this matter as a part of our continued work, as we should. But I reject out of hand any reflection that, because I'm outraged, we should adopt the Greens' solution. I do make the point that this government has a record of breaking promises, which grows as we pass through every week. I've named a couple of them today. We're just about to add another two to the process through the amendments that we just passed. The test on another one will come when we come to the vote on this amendment. The two are joined at the hip as part of the deal; there's no question about that in my mind.

The government should consider very carefully the words of Senator Smith when he said that we are trying to protect them from themselves in breaking yet another promise when we get to the vote on this particular amendment that the opposition has put forward. The government promised that it would have a proper cabinet and consultation process. It clearly didn't. It needs to lift its game in that sense. The important matter of the regulation of the accounting and tax professions through the Tax Practitioners Board should not be a matter of clandestine deals done out the back without anybody in the profession knowing. Quite frankly, the government should be ashamed of themselves for not going through a proper process so that, as Senator Smith quite rightly said, we can get the right outcome, which is what those of us sitting around the table in the committee genuinely want in the provision of oversight of these professions that are so important to the operation of so many of our corporations in this country. It's not the matter for a backroom deal. It's a matter for a proper consultation process, and the fact that the government can't say when the consultations were or even what the consultation process will be is a complete indictment of what they've done on this particular matter.

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

Senator Bragg and I have a number of questions for the government. I want to focus on the impact on investment. Senator Bragg may go to some questions around costings. We'll start with Shaw and Partners financial services, which submitted to the Senate Economics Legislation Committee. That submission said:

It appears the legislation as it is currently drafted will unintentionally catch many situations of legitimate company operation and could accordingly delay or discourage the normal processes of capital raising, investment, and economic growth within Australia.

My first question goes to whether the Treasury has modelled the impact of this bill on investment in Australia.

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

Firstly, I would like to put on the record, in relation to Senator Colbeck's contribution, that there was certainly no expectation said about his response and his part in the committee process. I do think it's important that that is placed on the record. I would also like to respond to the allegations he made in relation to our process on this. We have conducted this to the best of our ability, and I certainly know the minister and the Department of the Treasury have done so to the best of their abilities. I think the allegations that reflect on the minister's conduct in this need to be withdrawn. There was certainly nothing spurious about the way this was processed and handled. I put on the record that I reject that outright, Chair.

As to Senator Smith's question on franking credits, we certainly created this in terms of preventing the double taxation of dividend earnings. We certainly stand by the imputation system and franking credits. They will remain completely intact. This measure will not affect the tax treatment of regular dividends, and the overwhelming majority of shareholders will be unaffected by these measures.

We did consult widely on this measure, and I bring my response back to you, Senator Smith, and your questions earlier around dates and times. I do not have those with me. I have said—and I put it on the record here in the Senate—that they will be brought forward to you. There is nothing being hidden here, and I reject that outright. Obviously, through the Senate inquiry we've heard the concerns. At no point did I say that the Senate inquiry had been completed. We heard concerns that further targeting of the measure would be beneficial. In response to these concerns, we've done what we have done here today.

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

My question is still the same one: has Treasury modelled the impact of this bill on investment in Australia?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

Can I just get a clarification, Senator Smith? Are we talking about schedule 4 or schedule 5, or both?

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

I'm talking about the bill in its entirety.

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

I'm advised that it affects a small number of entities, but, as to the vast majority, no.

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

So, just to clarify, is it that a small number of entities have modelled the impact of the bill on investment or that the bill has been modelled against a small number of entities?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

It will not affect the tax treatment of regular dividends, and the overwhelming majority of shareholders will be unaffected by these measures. And it will not affect the regular capital-raising activities of companies.

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

How has the Treasury come at that view?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

I'm advised that Treasury has consulted widely on this. I reflect back on some of your previous questions around the organisations that were consulted with, and I'll be providing that to you and to the Senate.

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

Thank you, Minister. I'm just trying to get an understanding of whether the government thinks the bill will have a positive or negative impact on investment in Australia and how it has come at that view.

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

I'm advised that the evidence that has been seen is that it has been supported with investment continuing.

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

Perhaps on notice, could the government respond to this question: what is the expected aggregate benefit or penalty to investment in Australia as a result of this particular Treasury bill? How has that view been formed? What is the mechanism through which that view was formed? Was it modelling or stakeholder consultation? This is not an exhaustive list but just to provide some guidance. What was the more granular nature of that modelling or stakeholder consultation?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

We will take those questions on notice for you. I'm advised that capital raising using franking credits largely ceased once the Liberal government announced they were closing that loophole.

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

So you'll take that information on notice? Thank you very much. I turn to Chartered Accountants Australia New Zealand and CPA Australia. They submitted to the Senate Economics Legislation Committee:

We believe the drafting in Schedule 5 is unnecessarily broad, making it difficult for companies to practically apply proposed section 207-159 of the Income Tax Assessment Act 1997 (ITAA 1997). The lack of specificity in the provisions and insufficient guidance in the Explanatory Memorandum (EM) means that companies will be heavily relying on the Australian Taxation Office (ATO) to provide sufficient certainty to enable companies to progress with their capital management strategies.

Has the Treasury subsequently identified or done any investigation of how much legitimate investment and market activity would be captured by this bill?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

In relation to the earlier part of your question or statement, we've certainly made amendments in relation to what has come through the committee process. I will just seek advice in terms of the final aspect of your question. The advice is that the ATO will provide guidance as it normally does.

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

Specifically with regard to the quote from Chartered Accountants Australia and New Zealand and CPA Australia that I read most recently, what's the Treasury's view of that stakeholder view put by those two organisations?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

Can I confirm that you're referring to the quote from their submission to the Senate inquiry?

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

Yes.

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

I just responded to that in my previous response.

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

Apologies; would you mind just responding again? My apologies if I've misunderstood it, but it didn't sound like it was an answer.

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

Well, it was an answer. It may not be one that you like, but it was certainly an answer! What I said in my previous response to your initial question was that we are very aware of the submissions that have gone to the inquiry. They're obviously public. And we made our amendments in relation to those. That was my response to you earlier.

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

But, specifically, this quote talks about schedule 5 in its current form as being 'unnecessarily broad'.

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

McCARTHY (—) (): And that's exactly what I'm referring to. We've made amendments to schedule 5 to respond to the issues raised in the committee—and the explanatory memorandum. These amendments clarify the scope in response to that feedback.

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

Am I right to assume that Chartered Accountants Australia and New Zealand and CPA Australia were consulted on that government amendment?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

I will take that on notice in terms of a direct interaction. I did say that earlier in response to your questions—that I would bring those dates and times with organisations to the Senate. But, in a broader context with the submissions that have been provided to the Senate inquiry, that's where my response is coming from for you.

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

Gilbert + Tobin stated that the schedule would create uncertainty and would be impractical, at least in the context of public market transactions. Their quote goes on to say:

Schedule 5 creates unwarranted uncertainty and lacks simplicity, imposing a significant compliance burden on shareholders. Moreover, the level of evidence demanded by Schedule 5 may be well beyond the reasonable reach of the majority of shareholders. These factors combine to make Schedule 5 an unworkable provision…

Why doesn't the government accept that criticism?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

I'm advised that that consultation occurred widely with industry before we introduced these amendments. So we do believe we've clarified the scope appropriately.

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

Given the quote from Gilbert + Tobin and the government's assertion that its amendment narrowed this, did you consult with Gilbert + Tobin on the amendment?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

Again, if I could just refer you back to my previous answer with regard to individual organisations and companies, I said we would bring that to you on notice. So I will not be able to answer that directly in terms of individual companies or organisations.

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

The matter of the established practice test was alluded to in Senator Bragg's contributions. The ASA submitted to the Senate economics committee:

If the definition for the established practice in relation to dividend payments remain loose, we see the risk of an administrative and financial burden for shareholders whose companies inadvertently fall foul of the legislation. Taxpayers will be required to amend their tax returns and super funds amend their allocations to beneficial holders dating back to however long it takes for the transaction to be classified.

Does the government accept that comment?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

We've certainly clarified that in terms of the scope, and I've said here that the ATO will provide guidance on that, which will be the same with regard to this question as well.

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

Did the government consult with the Australian Shareholders Association on the amendment?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

Senator, we can be here all afternoon asking about individual organisations and companies. I refer to my previous answer to you—that I've taken on notice to give you the times and dates of when those consultations may, or may not, have occurred.

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

Just for the sake of clarity: in the previous debate we were talking about time lines, dates and consultations specifically in regard to Senator Pocock's amendment. What we're talking about here is consultations in regard to the government's amendment—just so that we're clear on that distinction.

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

I have said here a number of times that we have consulted widely. If you want specific times and dates in regard to our amendment then perhaps that's the question you're asking.

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

That is the question I'm asking. So, to be clear, we talked about consultation with the Australian Shareholders' Association. We talked about consultation with Gilbert and Tobin. We talked about consultation with Chartered Accountants Australia and New Zealand and with CPA Australia. And we talked about Shaw and Partners Financial Services.

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

Yes, we've taken those names, and we will get back to you on that. Thank you.

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

I'm going to ask some questions about schedule 5, in relation to the costing. Treasury have said that the costing difference in the budget arises from the imputation system operating as intended in the absence of contrived arrangements. What is the current costing for the forward estimates?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

It is $10 million per year.

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

Thank you. I guess what I'm trying to understand is why there is a costing of $10 million each year when the Treasury department had said, during the committee hearing into the bill, that, in their words, 'There aren't any cases of this.'

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

I'm advised that if nothing was done to stop the bad activities then we would see that cost go up.

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

Okay. The Treasury said in answer to a question on notice, 'There was no confirmed activity linked to franked distributions funded by capital raising since 2016.' So, I'm just trying to understand how there could be a change to the budget position, if there's been no activity that this measure is apparently designed to address in the past seven years.

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

That would probably be because, under the previous government, the then minister responsible for the Treasury, Scott Morrison, had brought it forward as something that was going to occur in terms of closing the loophole, and that never occurred, which is why we are now doing it.

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

What is the costing based on? Is it based on data from current market conditions today? Or is it based on market data from 2016?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

It's based on what would occur if nothing was going to happen at all. It was clear that that wasn't what we could do. We had to do something.

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

What inputs did Treasury use to come up with that $10 million? If there's been no activity for seven years, I'm trying to understand how there could be contemporaneous costing done.

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

I'm advised, Senator Bragg, that we're using the latest and only data—from 2016.

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

Just to confirm that, the data for a measure in 2023 is based on data from 2016-17. Can you explain how the time value of money and inflation have impacted that $10 million costing from seven years ago?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

Senator Bragg, I just want to put on the record here that Treasury didn't admit that there was no need for changes in this bill. Treasury is specifically on the record saying that the measure would continue to protect future revenue at risk if the government did not legislate this measure and that existing legislation is not adequate. They note that, if there weren't that legislation, it would send a signal that the behaviour that had been witnessed before the alert issued in 2016 could be allowed to resume. So, yes, we are looking at it in its entirety from here to 2016, and the fact that that loophole was never closed is why we're standing here today.

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

My question was: how has the $10 million been adjusted over the last seven years? Has that been affected by the time value of money and inflation?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

I refer you again to the genesis of all this. As I said, the Liberal government announced that they were going to close this loophole. If the government indicated that it would never be legislated, then the activity would likely start again. If you're concerned that there hasn't been any data for seven years, you'd have to take that up with the member for Cook in the other place.

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

It's not clear to me whether the $10 million costing has been inflated or whether the time value of money has been taken into account here. That's the question. The question is not about other people. The question is about how the costing in your budget has been developed and how it stacks up.

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

I am advised that it is based on the best available data.

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

Does it seem peculiar to you that data collected seven years ago, when there was market activity which was a cause for concern, generates the same number seven years later, when there's none of that market activity?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

I refer to my previous answer.

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

During the committee process, I sought the advice of the PBO to do a costing on this measure, and the Treasury did not agree to the disclosure of information to the PBO for the purposes of this costing. Can you explain why that happened?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

I'm advised that secrecy provisions prevented the full release—due to tax secrecy laws.

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

So how confident are you that this costing will stand up? Do you think there is a risk that this costing, given it's based on such ancient data, is not going to be right, particularly given the uncertainty about the way that the drafting of the bill stands and given the considerable stakeholder concern about whether it has a wider application? What is your view, for the record, about the likelihood that this particular costing is in fact not an accurate and contemporaneous costing?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

We stand by our costings. As I said in my previous response, if you have questions around the genesis of this and what has happened over the past seven years, I refer you to your colleague Scott Morrison MP, in the other house.

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

Can you explain that point to me, Minister? I'm not quite sure what you mean by that.

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

I will gladly explain that to you. Let's remember that the reason why we're standing here trying to close a loophole actually began under the then Treasurer Scott Morrison MP. A lot of the estimates that we've come to in terms of the costings, in terms of the questions that Senator Bragg has been putting to me, come from that time.

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

You would concede that the economic environment in our country, and indeed the growth of our economy, has changed considerably between 2016 and 2023-24?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

As I've responded, we've used the best data available to us. If you wish to seek more information, please, as I've said, go to the previous Treasurer, who brought this in at that time. That's going to be my same response.

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

Are you suggesting that the Australian economy in 2023-24 is going to look like 2016, as a result of Labor?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

I refer you to my previous answer.

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

There was a matter in the inquiry process that my attention was drawn to, and it was the international experience under similar arrangements. I will just paraphrase some of the evidence that was provided to the committee. The United Kingdom experience is that the dismantling of the advance corporations tax has shown that institutional ownership of companies listed on the United Kingdom stock market has plummeted. In 2000, insurance companies and pension funds owned about 38.7 per cent of the UK stock market. By 2020, they owned just 4.3 per cent, with the money being moved overseas into foreign companies and into alternative assets. As I mentioned, this was raised by a number of industry experts during the Senate inquiry. Has the Treasury had an opportunity to look at those statements, look at that experience in the United Kingdom, and reassure the parliament that we are free from a similar outcome?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

My response to that is that Australia and the UK are different countries, with different tax laws, and we will always have a look at what benefits Australia.

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

So you're confident that that thematic—money being shifted into foreign countries and into alternative assets overseas—will not be realised here in Australia?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

Yes. I refer you to my previous answer.

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

Did the Treasury do any analysis to come to that view?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

Well, it's certainly a fairly well-known view that the UK has different tax laws to Australia's tax laws.

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

On notice, if the Treasury did any work to come to that view, if that could be made to the chamber, that would be appreciated.

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

We'll take that on notice.

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

Treasury has suggested that there's no present issue with companies misusing franking credits under schedule 5, following the introduction of the taxpayer alerts in 2015 targeting perceived misbehaviour. I use the example of the UK's advance corporation tax again, which has shown the unintended consequences of tinkering with franking credit arrangements and that those consequences could be far reaching. Could you please explain again the rationale for the changes and why the proposed legislation goes beyond the points outlined in the 2015 taxpayer alert, which, if the Treasury's evidence is to be accepted, effectively stopped incidences of this behaviour?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

Senator Smith, the behaviour stopped simply because the parliament had said that it would move ahead in 2016 in terms of closing these loopholes. If we had done nothing and had sent that message more broadly across the country then of course those activities would have started again. That's why we're moving these amendments so that we can close this loophole.

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

Can you then explain to me the relationship between the evidence you have provided on the costings questions raised by Senator Bragg if the behaviour has ceased?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

My response to Senator Bragg was actually about the fact that we've referred to data from 2016-17 to now, and that at no point did we say that the activity was overwhelmingly out there. We know that if we don't close this loophole, it leaves open to the general broader community that that behaviour can start again. The fact is that this loophole was never closed. When you were in government the then Treasurer, Scott Morrison, did not close this loophole as he said he would. That's the why we're standing here today to close that loophole.

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

The committee received quite a bit of evidence in regard to the established practice test and suggestions that it would unfairly prejudice small and medium-sized companies and instead favour larger entities. Does the Treasury have a view on that comment and commentary?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

Senator Smith, as I've said previously, we are confident that we have targeted those particular concerns in the measure here. I refer to my previous responses in regard to that.

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

Is it the intention of the Treasury or the ATO to monitor behaviour to ensure that it isn't unfairly prejudicing small and medium-sized companies?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

Senator Smith, this doesn't change the role of the ATO. The ATO does that anyway. As I've said previously, there will be guidance sought from the ATOs as to steps forward in regard to not only what we're doing here with this piece of legislation but any other issues that the government needs to be aware of.

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

Is it available to the ATO or the Treasury to make available to the parliament information relating to the impact on small and medium-sized companies in the next year, two years, three years?

Malarndirri McCarthy (NT, Australian Labor Party, Assistant Minister for Indigenous Australians) Share this | Link to this | Hansard source

Senator Smith, there are a lot of hypotheticals there. I think we do know what the role of the ATO is, and we also know that there are secrecy laws as part of its role in conducting its duties. I refer to my previous answer. This is an important piece of legislation that does need to pass. I just ask that we move this to where it needs to be.

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

In evidence before the committee, a lot of attention was drawn to the negative impacts on retirees and mum-and-dad investors. How does the Treasury and the government reassure retirees and mum-and-dad investors that they won't be negatively impacted by this initiative?

Progress reported.

The DEPUTY PRESIDENT: We will now move to senators' statements.