Preliminary Pages
Chair’s foreword
The Bills make a number of significant improvements to the
tax laws across five issues, each of which the committee examined during the
inquiry.
Schedule 1 of the Tax Laws Amendment (2012 Measures No. 2)
Bill 2012 and the Pay As You Go Withholding Non-compliance Tax Bill 2012 seek
to make directors personally liable for their company’s unpaid superannuation
guarantee amounts. This will prevent unscrupulous directors from phoenixing
their businesses to avoid their super responsibilities. This practice has cost
Australian employees hundreds of millions of dollars in lost superannuation and
the committee commends both the intent and the operation of the Bills in this
regard.
Last year, the committee inquired into a package of Bills in
similar terms. The committee recommended that the Government should investigate
whether additional defences for directors should be inserted in the Bills. This
has occurred. If passed, the legislation will give new directors 30 days, up
from the current 14 days, to conduct due diligence before adopting a company’s
pre-existing obligations. Directors will also not be liable for a director
penalty where they took reasonable care in a matter and applied the super
legislation in a reasonable way.
The committee also recommended that the Government should
investigate whether the provisions should only apply if an individual has been
engaged in phoenixing. The Bills do not have this feature and industry argued
that they should be amended along these lines. Ultimately, the committee has
come to the view that such a change is not warranted because the provisions
will only apply when a company has not only failed to pay a super amount, but
that it has failed to notify the Australian Taxation Office (ATO) of this two
months after the event. The provisions are only triggered by a consistent, high
level of non-compliance.
Schedule 2 of the main Bill is designed to ensure that the
tax treatment of financial arrangements is consistent with the taxation of
financial arrangements (TOFA) tax timing rules. The provisions are to be
retrospective from the commencement of other TOFA amendments on 1 July 2010 and
this retrospectivity was the key issue in the inquiry. Stakeholders expressed
concern that taxpayers who had chosen to adopt the new TOFA rules (rather than
elect to keep prior arrangements) would be disadvantaged. However, the
committee accepts that the measures restore the original policy intent and the
Government had previously flagged that retrospectivity will be necessary with
TOFA to restore the policy intent from time to time.
Schedule 3 aims to protect a $6 billion revenue risk that
has arisen as a result of retrospective amendments in 2010 in relation to
consolidation rules. These changes allowed consolidated groups to claim
deductions back to 2002 in relation to the residual tax cost setting rule and
the rights to future income rule. In 2011, revenue problems with the 2010
changes became apparent and the Board of Taxation conducted an inquiry into the
matter. The Bill largely reflects the Board’s report. Groups that have already
received a refund or have an ATO ruling will generally be protected from the
retrospective changes. Given the transparency of the process and the amount of
revenue at stake, the committee again accepts that retrospective legislation is
appropriate.
The Income Tax (Managed Investment Trust Withholding Tax)
Amendment Bill 2012 and Schedule 4 of the main Bill increase the tax rate on
managed investment trusts for foreign investors from 7.5 per cent to 15 per
cent. This is a partial reversal of the recent decreases on this tax rate from
30 per cent a few years ago. The committee is mindful that, as equity
investments, the correct comparative rate is the company tax rate, currently
set at 30 per cent. Although the industry sector was concerned about how the
change would affect it, the committee accepts the Government’s argument of the wider
macroeconomic importance of Australia having a sound fiscal strategy, an
important driver for the whole economy.
The Passenger Movement Charge Amendment Bill 2012 increases
the charge from $47 to $55 from 1 July 2012 and indexes it to the consumer
price index. Similar to the managed investment trust provisions, the issues
revolved around an industry sector being concerned about how it would be
affected by a revenue increase. Once again, however, the committee supports the
provisions on a national basis because of the Government’s overall fiscal
strategy. The committee notes that the Government remains committed to the
Tourism 2020 initiative and continues to support the industry through programs
such as T-QUAL, infrastructure upgrades and maintaining and expanding tourism
attractions.
The Bills represent a responsible package aimed at securing
a sustainable revenue base for Australia, as well as protecting the
superannuation entitlements of Australian workers. The Bills should pass.
On behalf of the committee I thank the organisations that
assisted the committee during the inquiry through submissions or participating
in the hearing in Canberra. I also thank my colleagues on the committee for
their contribution to the report.
Julie Owens MP
Chair
Terms of reference
On 24 May 2012 the Selection Committee requested the
Committee to inquire into and report on:
n Tax Laws Amendment
(2012 Measures No. 2) Bill 2012;
n Income Tax (Managed
Investment Trust Withholding Tax)
Amendment Bill 2012;
n Pay As You Go Withholding
Non-compliance Tax Bill 2012; and
n Passenger Movement
Charge Amendment Bill 2012.
Under Standing Order 222(e), reports of the Selection
Committee are treated as having been adopted by the House when they are
presented.