Key points
The Bill proposes amendments to various taxation and superannuation law to:
- allow the Commissioner of the Australian Taxation Office (ATO) to direct an entity to complete an approved record-keeping course where the Commissioner reasonably believes the entity has failed to comply with its tax-related record-keeping obligations, as an alternative to existing financial penalties
- introduce a new reporting regime for the sharing (‘gig’) economy (initially applying to ride-sharing and short-term accommodation online platform operators and then extending to all other types of sharing economy online platforms such as food delivery and task services)
- remove the $250 non-deductible self-education expenses threshold
- allow the Administrative Appeals Tribunal (AAT) to temporarily stay the operation or implementation of an ATO decision impacting a small business entity
- expand eligibility for downsizer superannuation contributions to those aged 55 and over (down from the current 60 year age requirement).
Introductory Info
Date introduced: 3 August 2022
House: House of Representatives
Portfolio: Treasury
Commencement: Various dates as set out in the main body
of the digest.
Purpose of the
Bill
The Treasury
Laws Amendment (2022 Measures No. 2) Bill 2022 (the Bill) amends various
taxation and superannuation law for five separate purposes.
- Schedule 1 amends the Taxation
Administration Act 1953 (TAA) to allow the Commissioner of
Taxation (the Commissioner) to direct taxpayers (such as small business
entities) to complete an approved record-keeping course, rather than pay an
administrative penalty, for failing to comply with record-keeping requirements.
- Schedule 2 addresses the issues of transparency gap and
uneven playing field between the fast-growing sharing economy and the rest of
the economy.[1]
Schedule 2 requires electronic platform operators (such as Uber and Airbnb)
which facilitate sharing economy transactions, to provide certain information
on transactions made through the platform to the ATO for data matching and
prefilling purposes.
- Schedule 3 removes the $250 non-deductible self-education
expenses threshold to reduce complexity and compliance costs among taxpayers
who wish to claim deductions for work-related self-education expenses.
- Schedule 4 allows the Administrative Appeals Tribunal
(AAT) to pause the effects of certain decisions of the Commissioner applying to
small business entities during merits review of the decision.
- Schedule 5 amends the Income Tax
Assessment Act 1997 (ITAA 1997) to allow individuals aged
55 and above to make downsizer contributions to their superannuation plan from the
proceeds of selling their main residence.
As each schedule deals with a discrete topic, they are
dealt with separately in this Digest.
History of the amendments
Schedules 1 to 4 of the Bill reproduce amendments that
were introduced in Bills that lapsed at the dissolution of the 46th Parliament,
as shown in Table 1.
Table 1:
Comparison between the current schedules and their corresponding schedules in
lapsed Bills
Committee
consideration
Senate Standing Committee for the Selection of Bills
The Senate Standing Committee for the Selection of Bills
recommended that the Bill not be referred to a committee for inquiry.[2]
Senate Standing Committee for the Scrutiny of Bills
At the time of writing this
Digest, the Senate Standing Committee for the Scrutiny of Bills had not
considered the Bill.
Parliamentary Joint Committee on Human Rights
At the time of writing this Digest, the Parliamentary
Joint Committee on Human Rights had not considered the Bill.
Schedule 1:
Assisting businesses to meet their record-keeping obligations
A Bills
Digest was written for the lapsed Treasury
Laws Amendment (Enhancing Tax Integrity and Supporting Business Investment)
Bill 2022.[3]
As Schedule 1 to the current Bill is identical to Schedule 1 to the lapsed Bill,
the relevant part of the earlier Bills Digest is reproduced below, for readers’
convenience.
Background
Schedule 1 will amend the Taxation
Administration Act 1953 (TAA) and other legislation to allow the Commissioner of the ATO (the Commissioner) to direct an entity
to complete an approved record-keeping course (a tax-records education
direction).
Schedule 1
to the Bill implements the Black Economy — Assisting businesses to meet
their reporting obligations measure announced in the 2019–20 MYEFO.[4]
The Black Economy Taskforce (the Taskforce) was established in 2016 to develop a policy response to combat the ‘shadow economy’ (or
previously, the ‘black economy’)[5]
in Australia: activities which take place outside the tax and regulatory systems,
such as demanding cash payment to avoid tax obligations and not reporting or under-reporting income.[6] The report recognised
that such issues cannot be effectively tackled by traditional law enforcement
measures alone.[7]
The Taskforce’s Final Report (the Report) found that some
businesses have genuine difficulty complying
with their record-keeping obligations, resulting in omitted income
being added to the
black economy. The Report recommended:
- the requirements for tax-related record-keeping obligations should be clear and simple for entities carrying on businesses[8] and
- penalties for breaches
of these rules should be designed so that the ATO has a range of
administrative sanctions available at its discretion.[9]
In response to the Taskforce’s Report, the Morrison Government
agreed that the requirements for tax record-keeping should be clear and simple,
and that entities
carrying on businesses should adhere to
strong record-keeping practices.[10]
Schedule 1 will commence on the first 1 January, 1 April,
1 July or 1 October to occur after the day of Royal Assent. The Commissioner of
Taxation will be able to issue a tax-records education direction to an entity
three months after the day the Bill receives Royal Assent.[11]
Committee
consideration
Committee consideration of the
current Bill is set out on page 7 of this Digest. Below is a summary of
committee consideration of Schedule 1 to the lapsed Bill:
-
Senate Standing Committee for Selection of Bills: the
lapsed Bill was not referred to a committee for inquiry.
- Senate Standing Committee for the Scrutiny of Bills: had
no comment on Schedule 1 to the lapsed Bill[12]
- Parliamentary Joint Committee on Human Rights: had no
comment on Schedule 1 to the lapsed Bill.[13]
Policy
position of non-government parties/independents
The position of non-government parties
and independents on the measures
contained in Schedule 1
to the Bill could not be determined at the time of
writing.
Position of
major interest groups
The position of major interest groups and stakeholders on
measures contained in Schedule 1 to the Bill could not be determined at
the time of writing.
Financial
implications
The Explanatory Memorandum to the Bill summarises the
financial impact for Schedule 1 as follows:
The 2019-20 MYEFO estimated the measure Black Economy -
Assisting businesses to meet their reporting obligations - would have a
small but unquantifiable gain to the budget over the forward estimates period.[14]
Compliance
cost impact
Negligible.[15]
Statement of Compatibility with Human Rights
As required under Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the
Bill’s compatibility with the human rights and freedoms recognised or declared
in the international instruments listed in section 3 of that Act. The
Government considers that the Bill is compatible. Specifically, the Government
considers that Schedule 1 does not raise human rights issues.[16]
Key issues
and provisions
Schedule 1 will amend the TAA and
other legislation to allow the Commissioner to direct an entity to complete an approved
record-keeping course (a tax-records education direction) as an
alternative to the existing civil penalties, where the Commissioner reasonably
believes the entity has failed to comply with its tax-related record-keeping
obligations.
Current requirements to keep tax-related records
The scope of an entity’s
record-keeping obligations depends
on its nature, size, and structure.
In general, the tax law record-keeping provisions require entities carrying
on a business or subject to indirect tax obligations to
keep records:
- that record and explain transactions and other acts related to their tax affairs which
enable their tax liability to be readily ascertained
- are in English
(or are readily
accessible and easily
convertible into English)
- for 5 years
after they are prepared or obtained, or 5 years
after the completion of the transaction
or acts to which they relate (whichever is later).[17]
Current penalties for failure to meet tax recording keep requirements
Generally, where an entity is required to keep or retain
records under a taxation law and fails to do
so in the manner required,
they will be liable to an administrative penalty under section
288-25 in Schedule 1 of the TAA.[18] However, section 298–20
in Schedule 1 of the TAA allows the Commissioner to cancel
or refrain from imposing all or part of such an administrative penalty.
2018 Treasury
consultation paper
The 2018 Treasury
consultation paper Improving Black Economy
Enforcement and Offences requested submissions in response to the
question: ‘what non-financial penalties could be considered to enhance
compliance with tax law?’.[19]
Whilst travel bans and bankruptcy-style lists were
suggested in the consultation paper[20]
there appears to have been no suggestion regarding
tax-record education directions. Submissions to this consultation were not published and
Treasury did not produce a publicly available report on the outcome of the
consultation. Submissions that have been published on their own websites by
submitters do not discuss education as an enforcement measure.
As such, prior to the measure Black Economy – assisting
businesses to meet their reporting obligations being announced in the
2019-20 MYEFO[21]
there appears to have been no formal recommendation, consultation or proposal
to introduce a tax-records education regime in response to the Black Economy
Taskforce’s Final Report recommendation. That aside, given that the TAA
contains an existing education directions framework the measure can be seen
as broadly consistent with the recommendation that the ATO has a range of administrative sanctions available at its discretion.[22]
Summary of proposed power to issue a tax-records education direction
The amendments in Schedule 1 will enable
the Commissioner to issue a tax-records education direction requiring an
entity to complete an approved record-keeping course.
The purpose of a tax-records education direction is to directly
address the knowledge
gaps and reduce cases of
non-compliance with record keeping obligations by helping entities better
understand their tax-related record-keeping obligations.[23]
They will operate as an alternative to the administrative penalties that apply
where an entity has failed to meet its record-keeping obligations under a
taxation law.[24]
Existing education direction framework
The proposed tax-records education direction
will be implemented by amending the existing education direction framework in
Division 384 in Schedule 1 of the TAA. That framework allows the Commissioner to give an education direction to an entity
requiring a specified course of education
to be undertaken where the Commissioner reasonably believes the entity has
failed to comply with certain obligations arising under taxation laws. It also
allows the Commissioner to approve courses of education.[25]
Under the existing
TAA framework an education direction must be in writing and:
-
specify the approved
course that must be undertaken by:
- the taxpayer
(if a sole trader or individual) or
- an individual who makes, or participates in making, decisions that affect the whole, or a
substantial part, of the taxpayer’s business[26] and
- specify the period
within which the entity must comply with the direction
(which must be a
period that is reasonable in the circumstances).[27]
The direction requires
that the entity ensure that a specified approved course of education is undertaken by the appropriate person and provide
the Commissioner with evidence that the
relevant individual has completed the course.
[28]
What is a tax-records education direction?
A tax-records education direction is a written direction from the Commissioner to:
- undertake an approved
course of education specified by the Commissioner and
- provide the Commissioner with evidence of completion of the course.[29]
When can a tax-records education direction be issued?
The amendments in Schedule 1 will enable
the Commissioner to issue a tax-records education direction requiring an
entity to complete an approved record-keeping course where the Commissioner
reasonably believes that:
- there has been a failure
to comply with one or more specified
record-keeping obligations under a
taxation law where non-compliance gives rise to an administrative penalty under section
288- 25 of Schedule 1 to the TAA and
- the entity is not disengaged or deliberately avoiding
their record-keeping obligations.[30]
That is, it is
intended that the Commissioner will issue a tax-records education
direction to an entity where they reasonably believe
that the entity
has made a reasonable and genuine attempt to comply with (or believed they
were complying with) their tax record-keeping obligations.[31]
The Commissioner will be able to issue a tax-records
education direction to an entity three months after the day the Bill receives Royal
Assent.[32] Importantly, the amendments will apply to failures to comply with record-keeping
obligations under a taxation law that occur both before and after the Bill
receives Royal Assent.[33] In that regard the
Explanatory Memorandum states:
Providing the Commissioner with the ability to issue a
tax-records education direction in relation to breaches
of record keeping
obligations that occurred
before the commencement of the Bill is
appropriate and wholly beneficial to businesses. This is because the amendments
will allow entities to choose to complete the approved record-keeping education
course as an alternative to paying the financial administrative penalties if
they wish.[34]
What does a tax-records education direction require
a taxpayer to do?
A tax-records education direction requires the entity to:
- complete or arrange
for the completion of the approved course
of education before
the end of the specified period set out in the written direction and
- provide the Commissioner with evidence of completion of the course.[35]
Under the existing education framework in the TAA,
the Commissioner of Taxation or other entity
providing an approved
course of education
may charge fees for the course.[36]However, in the second reading speech to the Bill
the Assistant Treasurer stated that ‘the education course will be free’.[37]
A tax-records education
direction will operate
as an alternative to the existing administrative penalty that applies where an entity
has failed to meet its record-keeping obligations under a taxation law.[38]
What are the consequences for failing to comply with a tax-records education direction?
If an entity
fails to comply with a
tax-records education direction they will be liable to the original
administrative penalty as set out in section 288-25 of Schedule 1 to the
TAA.
[39] That is, there are no
additional penalties applied if an entity does not comply with a tax-records
education direction.
Schedule 2:
Sharing economy reporting regime
Background
The problems
identified in a fast-growing sharing economy
The ‘shadow economy’ refers to dishonest and criminal
activities that take place outside the tax and regulatory systems. It is a
complex and multi-faceted phenomenon that impacts tax, workplace relations,
financial, welfare, procurement and migration systems. The shadow economy impacts
all Australians by penalising honest taxpayers, undermining the integrity of
Australia’s tax and welfare systems, and creating an uneven playing field for
the majority of small businesses doing the right thing.[40]
The impact is being felt by many businesses and consumers, including those in
the sharing economy.
Facilitated through an electronic platform, the sharing
economy involves two parties entering into an online agreement for one to
provide services and/or loan personal assets to the other, for a payment. [41]
The sharing economy has grown significantly in recent years, facilitating
innovation, job growth and more choice for consumers. The internet has helped
to formalise sharing economy activities and created opportunities for parties
to earn a regular income. However, the growth of
sharing economy has also resulted in a transparency gap because tax
reporting systems currently do not adequately capture information about
transactions in this part of the economy.[42]
The Black
Economy Taskforce Final Report (the Report) noted that there is a risk that
sharing economy sellers misreport tax amounts either due to their:
- lack of awareness of associated tax obligations, or
- deliberate undertaking of shadow economy activities in the
sharing economy.[43]
In 2017, the Organisation for Economic Co-operation and
Development (OECD) suggested that the sharing economy raises three fundamental
tax issues:
- uncertainty amongst platform sellers on what their tax
obligations are
- lack of visibility to tax administrations, due to the
non-traditional nature of payments
- the platform provider may not be in the same jurisdiction as the
platform seller, and therefore it may be difficult to get information compared
to a provider located domestically. [44]
An OECD policy note noted options to address challenges
associated with the sharing economy, including:
- improving taxpayer education and self-reporting
- improving information accessible to tax administrations
- exploring a multilateral agreement between countries to
facilitate access and exchange of information on a more consistent basis.[45]
This ‘might require all platforms carrying out particular
types of activity to provide information in a standardised format on platform
users, transactions and income to the tax authority in their jurisdiction of
residence for exchange, through appropriate legal gateways, to the jurisdiction
of tax residency of the user’.
[46]
Size of the
problem
In 2016, it was estimated that the size of the shadow
economy had likely doubled since
2012 from 1.5% of GDP to around 3%
of GDP, or approximately $50 billion.[47]
For that reason, the Black Economy
Taskforce (the Taskforce) was established to combat the shadow economy.
In February 2017, it was suggested that Australia’s
sharing economy was worth approximately $15.1 billion. An estimated 10.8
million Australians were predicted to earn extra money from sharing economy
services from July to December 2017. Deloitte estimated that revenue generated
by the collaborative economy in New South Wales alone increased approximately
68 per cent between 2014-15 and 2015-16, with an increase in users of 108 per
cent.[48]
In 2018-19, the overall tax
gap, which included the shadow economy activities, was
estimated at around $33.5
billion, or 7.3% of the tax that should have been reported. It should be
noted that by June 2021, after a few other shadow economy recommendations were implemented,
the ATO had raised an extra $2.6 billion tax revenue.[49]
The
proposed solution - a new reporting regime for the sharing economy
In October 2017, the Black
Economy Taskforce Final Report was released. Recommendation
6.2: A sharing economy reporting regime, which is re-produced in the
current Explanatory
Memorandum,[50]
recommends that designated sharing economy websites should be required to
report payments made to their users to the ATO and other government agencies as
appropriate. The Government’s response to Recommendation 6.2 is set out in
Schedule 2 to the Bill.
In July 2017, the Board of Taxation also published a
report to the Government on Tax
and the Sharing Economy.
In the 2018–19 Budget, the former Government announced a whole-of-government
program for tackling the shadow economy in response to the Final Report.
The former Government further promised that it would consult with stakeholders
on how it could implement the Taskforce recommendation for a sharing economy
reporting regime.[51]
By February 2019, the former Government finalised a consultation on
Recommendation 6.2 and received 37 submissions.[52]
(Please see further discussions under the ‘2019 Treasury Consultation Paper’
section of this Bills Digest).In the 2019–20
Mid-Year Economic and Fiscal Outlook, the former Government announced the
introduction of a third-party reporting regime for the sharing economy to
increase the transparency of payments made via platforms and help to ensure
sellers are meeting their tax obligations.[53]
On 25 August 2021, Schedule 1 to the Treasury
Laws Amendment (2021 Measures No. 7) Bill 2021 introduced the reporting
regime for the first time. However, the Bill lapsed at the end of the 46th
Parliament, after having its third reading agreed to in the House of
Representatives.
On 3 August 2022, the current Bill was introduced, which revives
the lapsed schedule with the commencement dates being deferred by one-year.
Impacted
population
- Directly impacted population - Operators of an electronic
service, such as a website, internet portal, app, gateway, store or marketplace
(a platform) that allows buyers and sellers to transact will be required to
report information to the ATO on certain transactions.[54]
- Indirectly impacted population - Platforms users who may
be required to provide information to platform operators beyond what they are
currently providing or undertake additional verification requirements as
determined by the platforms. They may also receive education prompts from the
ATO to encourage them to ensure that all income obtained from the sharing
economy is declared.
Start dates
The amendments commence on the first 1 January, 1 April, 1
July, or 1 October after the day of Royal Assent. The reporting requirements
will apply from:
- 1 July 2023 for ride-sourcing and short-term accommodation
platforms.
- 1 July 2024 for all other platforms including asset
sharing, food delivery, tasking-based platforms.[55]
How will
the new regime work?[56]
The
applicable transactions and exemptions under Schedule 2
Unless an exemption applies, platform operators will
generally be required to report transactions for:
- all services
- the sharing or loaning of assets.[57]
Platform operators will not be required to report
the following exempted transactions:
- where only the title or ownership of goods are
exchanged
- for financial supplies, such as crowdfunding and financial
securities trading
- relating to the transfer of ownership of real property
- where the service, loaned assets, or property does not take place
in Australia
- that are subject to another tax reporting requirement, such as employer-employee
withholding, or the Taxable
Payments Reporting System (TPRS)
- arising from an online classifieds, listing, or advertising
service
- where the seller is also the operator of the platform.[58]
What
information will need to be reported by operators?
The ATO will specify the information required, including
those relating to:
-
the seller’s identification
-
the money exchanged in the transaction
-
the aggregate (not a per transaction basis) of the seller’s
transactions over the reporting period.[59]
Table 2:
Minimum information required by the ATO under Schedule 2
Source: Introducing
a Sharing Economy Reporting Regime – Fact Sheet for Exposure Draft Legislation
(June 2021), 2
Frequency
of reporting will be specified by the ATO
The reporting frequency is currently once a year under
section 396-55 of Schedule 1 to the TAA.
However, the Treasury has flagged that the operators may
report twice a year (1 July – 31 December, 1 January – 30 June) with reporting
due dates are 31 January and 31 July respectively.[60]
Information
is reported via ‘approved form’ using the Taxable Payments Reporting System
(TPRS)
The sharing economy reporting regime will be implemented
by applying the
TPRS
to certain transactions undertaken through electronic platforms.
[61]
How will
the ATO use the data?
The ATO will use the reported information for income
matching and potentially prefilling tax returns, hence reducing the compliance
burden on taxpayers.
What will
the data-sharing arrangements be like?
The ATO may share the collected data with other government
agencies but only under existing data-sharing provisions.
[62]
The ATO was not granted any additional authority to share with other government
agencies data received from third parties as required under the amendments. The ATO currently shares aggregated taxable income tax
data with other Commonwealth, state and territory government agencies under
existing legal powers and administrative Memoranda of Understanding.
The data may assist with the identification and collection
of GST liabilities where there is a pre-existing legal requirement for GST
registration and reporting, for example, in the ride-sourcing industry.
Compliance
burden on platforms and platforms users
Schedule 2 may require infrastructure changes to the
platforms and may impose other compliance cost on businesses. As mentioned in
the ‘Consultations and committee consideration’ section of this Bills
Digest, most platform operators expressed a general willingness to comply with
the reporting requirement, with a strong preference for minimising compliance
burdens, aligning with international standards, and ensuring that reporting
obligations apply broadly across all business models and industries.
The measure is estimated to result in a total average
annual regulatory cost of $22,000, which is consistent with the Government’s
Regulation Impact Statement (RIS) requirements.[63]
(See details in the ‘Regulatory Impact Statement (RIS)’ section in this
Bills Digest).
It is expected that once the platforms transition to
periodic reporting and automating data collection, the compliance burden may be
lowered in the long run. It would also allow a reduction in compliance costs
for a larger number of sharing economy sellers.
The individual platform operator may or may not pass on
any additional compliance costs to the users of the platform. This is a
consideration for individual operators.
Data
privacy
As with all data collected by the ATO, data collected
under Schedule 2 to the Bill will be protected by the
Privacy Act 1988
and the strict secrecy provisions of the
Income Tax
Assessment Act 1936, the
TAA and other tax laws, as well as the
Australian Privacy Principles
and the Australian
Government Privacy Code.
[64]
Strong civil and criminal penalties exist for persons who violate these
provisions, including for taxation officers.
Level
playing field with overseas platforms
There can be uneven playing field between domestic and
international platform operators where overseas operators may not feel
compelled to follow Australian obligations and may be restricted by data
protection requirements in other jurisdictions. Many countries are grappling
with the issue of access to information by overseas platforms. The OECD has
raised the possibility of a multilateral instrument to facilitate access and
exchange of information between countries on a more consistent basis.
[65]
Compliance
The reporting regime relies on quality and timely
information reported by the operators. Effective incentives such as warning
notices and consequences may need to be developed to ensure compliance.
Public consultations
Extensive industry consultation has occurred throughout
the development of the measure to inform its design and implementation. This
includes a consultation paper process from January to February 2019, targeted
industry consultations in 2020 and 2021,[66]
and public consultation on the Exposure Draft legislation from July to August
2021. This builds on the consultations conducted by the Board of Taxation and
the Black Economy Taskforce in 2017.
This Bills Digest does not repeat the Taskforce findings
and reported stakeholder views as they are already reproduced in Attachment 1
of the Explanatory Memorandum to the Bill. However, information on the more
recent consultations and committee consideration is set out below.
2019 Treasury
Consultation Paper
- Purpose As the Report did not provide detail on the design
of the proposed sharing economy reporting regime, the former Government sought public
views on the possible design characteristics via the January
2019 Treasury consultation paper.
- Important factors to consider for a new reporting regime –
the consultation paper considered that the regime should:
- promote a positive user experience
- influence
behavioural change in reporting taxable income
- adopt a light touch regulatory approach
- ensure a level playing field
- ensure sufficient and reliable information is periodically received by the Government
in a standardised format. [67]
- Two options were proposed:
- (Preferred Option) Reporting by sharing economy platforms –
this option was preferred by the majority of the submitters[68]
and was used as the basis to prepare the Exposure Draft legislation in 2021.
- Reporting by Financial Institutions – not discussed in this
Bills Digest. [69]
There were
37 submissions
received for this consultation, including 9 confidential submissions.
Twenty-eight submissions are published online.
Concerns
expressed by the minority submitters
A few submitters[70]
raised concerns over the legal treatment (such as employment status) of gig
economy workers; or proposed that separate definitions (and reporting regimes) should
apply to the gig and sharing economy. However, these discussions are beyond the
scope of this Bills Digest.
The Housing
Industry Association (HIA) ‘does not accept that a new reporting regime is
required’ and believes that ‘existing regimes are working to capture this
information.’[71]
The HIA was also ‘concerned that a response to the sharing economy may have unintended
consequences for other sectors of the economy, including the residential
building industry’ which has ‘well established modes of engagement’ of mainly independent
contractors.[72]
Queensland
Law Society raised concerns about the imposition and potential cost of
additional regulatory compliance for private entities; and privacy issues with
respect to the collection and sharing of information between other unrelated
departments.[73]
Self
Employed Australia submitted that ‘[a]utomated reporting of platform income
and the semi-automated populating of tax returns add to business and taxpayer
record-keeping efficiency. The Treasury recommendations concerning taxpayer
education and taxpayer entrepreneurship however are deeply inadequate. They
reflect a one-dimensional view of the purposes of taxation and tax reporting.’[74]
2021
Exposure Draft consultation
The key documents for the 2021 Exposure Draft consultation
are at Implementing a reporting regime for sharing economy platform
providers.
The Treasury published the exposure
draft and explanatory
material to the Treasury Laws Amendment (Measures for Consultation) Bill
2021: Introducing a sharing economy reporting regime. These two documents
provided the basis for the current Schedule 2.
No submissions are publicly available.
Committee
consideration
Committee consideration of the
current Bill is set out on page 7 of this Digest.
The committee consideration of the lapsed Treasury
Laws Amendment (2021 Measures No.7) Bill 2021 is relevant because Schedule
1 of that lapsed Bill is almost identical to Schedule 2 of the Bill, except for
the one-year delay in commencement dates. Below is a summary of committee
consideration of Schedule 1 to the lapsed Bill:
-
Senate Standing Committee for Selection of Bills:
recommended that the lapsed Bill be referred to the Senate Economics
Legislation Committee for inquiry and report by 14 October 2021—see further
discussion below. [75]
-
Senate Standing Committee for the Scrutiny of Bills: had
no comment on the Schedule 1 to the lapsed Bill.[76]
-
Parliamentary Joint Committee on Human Rights: had no
comment on the Schedule 1 to the lapsed Bill.[77]
2021 Senate
Economics Legislation Committee consideration
The lapsed Bill was referred to the Senate Economics
Legislation Committee in August 2021. Details of the public inquiry are at
Treasury
Laws Amendment (2021 Measures No. 7) Bill 2021 [Provisions].The committee undertook a
public
hearing on 6 October 2021 and collected
additional
information from Deliveroo and the Treasury, before publishing its
report
on 14 October 2021.
Committee Recommendation
The committee was satisfied that the Bill would deliver on
its intent and recommended the entire Bill be passed.
[78]The committee commented that ‘there is utility in the
Treasury and the ATO maintaining a dialogue with stakeholders and interested
parties to ascertain if further fine tuning is necessary during
implementation.’
[79]
Summary of
the submissions[80]
The committee received 10 submissions which were published
on its
inquiry
website.The ‘sharing economy reporting regime’ at Schedule 1 of
the lapsed Bill received most attention from the submitters.
[81]The committee noted the broad support for this schedule
which is an important first step in addressing tax discrepancies in the online
marketplace.
[82]The committee recognised that the main concerns revolved around
definitional questions and the extra bureaucratic requirements and how this may
hinder business operations. However, the committee took the view of the Tax
Institute, that there would appear to be enough discretion within the
arrangements to accommodate the concerns expressed.
[83]
Concerns
expressed by the submitters
Uber was supportive of the amendments but felt further
streamlining of the process was necessary.[84]
Airtasker supported the legislation in-principle but expressed
concerns over two issues.[85] First, the new data collection processes may
cause unnecessary ‘frictions’ and hence reduce job opportunities. Second,
Airtasker is also concerned with user privacy when data is shared liberally and
over a long period of time with a ‘backdoor type approach’.
Mable Technologies supported the amendments in-principle
but welcomed clarity on how they were to function.[86]
Hireup also supported the amendments, but felt further
issues needed to be addressed, for example, ensuring NDIS-related platforms are
taking responsibility for their legal obligations and workforce.[87]
Deliveroo expressed concerns about the definitions of
sharing and gig economies and felt that clarification was necessary so that
they, and perhaps other businesses like them, would not be unnecessarily
required to participate in the reporting regime.[88]
Menulog supported the legislation in-principle, but felt
it was cumbersome in its present form. Menulog recommended amendments which it believed
would make the legislation more workable.[89]
Tech Council also expressed similar sentiments. [90]
The Tax Institute suggested that the legislation as it
stands, coupled with the discretionary powers of the ATO, is sufficient to
achieve the stated goals.[91]
Financial
implications
The Explanatory Memorandum states that Schedule 2:
-
‘is estimated to have a cost to the budget of $8.2 million over
the forward estimates period’ [92]
(reflecting the combined impact of the originally announced measure in 2019-20
MYEFO and the one year delay in commencement)
-
‘also includes an estimated increase to GST payments to
the States and Territories of $13.5m over the same period’ [93]
-
over the medium term, the measure is expected to have a positive
impact on the budget reflecting improved tax compliance by sharing economy participants.
All figures
in this table represent amounts in $[m].
| 2021-22 |
2022-23 |
2023-24 |
2024-25 |
2025-26 |
| -7.2 |
-7.3 |
-5.0 |
+4.9 |
+6.4 |
Compliance
cost impact
Minimal.
[94]
Regulatory
Impact Statement (RIS)
RIS Status: Compliant
Assessment Rating: Independent Review
Post-Implementation Review Required: No
Regulatory Burden: - $0.022 m
The Black Economy Taskforce Final Report considered
several alternative options to a reporting regime, including withholding income
tax from payments made to sharing economy users, and creating a bright-line
test to distinguish between hobby and business activities. It was concluded
that the least onerous option would be to introduce a third-party reporting
regime requiring operators of electronic platforms to report information to the
ATO relating to transactions facilitated through their platform.[95]
Statement
of Compatibility with Human Rights
The Government considers that Schedule 2 to the Bill is:
- compatible with the human rights and freedoms recognised or declared
in the international instruments listed in section 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011[96]
- consistent with Article 17 of the International Covenant on
Civil and Political Rights (ICCPR) on the basis that its engagement
of the right to privacy (by requiring platforms to provide the ATO with a range
of personal information about individuals that the platforms collect in the
course of their business) will neither be unlawful nor arbitrary..[97]
Key issues
and provisions
Key Issues
- Transparency gap: The fast growing sharing economy has
resulted in a tax transparency gap because the current tax reporting systems do
not adequately capture information about transactions in this part of the
economy.
- Uneven playing field created: There is a risk that sharing
economy sellers misreport tax amounts either due to their:
- lack
of awareness of associated tax obligations, or
- deliberate
undertaking of shadow economy activities in the sharing economy.
Provisions
Current
provisions
A sharing economy specific reporting regime is needed
because the following existing reporting regimes are unsuitable:
Explainer:
the proposed new item 15 to section 396-55 of Schedule 1 to the TAA
The TPRS is located in sub-division 396–B of Schedule 1 to
the TAA and is a framework that outlines when specific entities are
required to report information about certain transactions to the ATO.
Types of entities mentioned in the framework are required
to provide information to the ATO in an approved form. The default frequency of
reporting is each financial year; however, the Commissioner of Taxation can
substitute another reporting frequency for specific types of entities required
to report under the framework.[99]
Schedule 2 to the Bill inserts ‘the operator of an
electronic distribution platform’ into the TPRS so the reporting requirements
under the framework apply to certain transactions made through an electronic
platform. The operators of electronic platforms will be required to provide
information regarding these transactions to the ATO.
Generally, if an electronic platform facilitates a supply
that is connected to Australia for consideration between two entities, then the
operator of the platform is required to report information about the
transaction to the ATO. The information required must only relate to the
identification, collection or recovery of a possible tax related liability or
possible reduction of a tax related liability.[100]
The requirement will not apply if the transaction only relates to a supply of
goods where ownership of the goods is permanently changed, where title to real
property is transferred, or the supply is a financial supply.[101]
The reason information does not need to be reported for these types of
transactions is because these transactions are not taxable or present a lower
risk from a compliance perspective.
The requirement will also not apply if the transaction
occurs between entities that are members within the same consolidated group or multiple
entry consolidated (MEC) group.[102]
Platforms will also not be required to report transactions subject to a
withholding obligation under Division 12 of Schedule 1 to the TAA – for
example, pay as you go (PAYG) income tax withholding.[103]
Schedule 3:
Removing the self-education expenses threshold
Background
The problem
of compliance costs associated with the $250 threshold
Currently the first $250 of self-education expense for a
prescribed education course is not deductible.[104]
However, the threshold has no policy basis to support it. [105] It generates no extra
revenue and imposes compliance costs on individual taxpayers while they
calculate the deduction amounts.
Under the current rule, individual taxpayers can apply
non-deductible education expenses[106]
against the $250 threshold (for example, childcare while attending
self-education courses). However, individuals would incur compliance costs as
they must keep records of expenses (deductible or not) to justify how the $250
threshold is applied. It takes time for the taxpayers to work out whether the
$250 threshold is met and how to divide between the deductible and non-deductible
expenses (if any).
Employers are liable to fringe benefit tax (FBT) for
providing work-related self-education expenses to their employees. Employers
would reduce the taxable value of the fringe benefit by the otherwise
deductible rule, provided record keeping requirements are met. Unlike
income tax deductions, currently employers do not have to reduce work-related
self-education expenses by $250 when working out the otherwise deductible amount.[107]
The
proposed change
Following the former Government’s
announcement in the
2021–22
Budget,
[108]
Schedule 3 to the Bill will remove this non-deductible $250 threshold from
relevant tax legislation.
Impacted
population
Individuals
Individual taxpayers will be able to claim deductions for
the full amount of work-related self-education expense, not the net amount exceeding
$250. Taxpayers will no longer be required to keep records to justify their
application of the threshold, as the threshold will be removed.
Schedule 3 does not change:
-
the way to determine whether a certain self-education outgoing is
deductible or not under the general deduction provision[109]
-
the tax position for non-work related self-education outgoing (for
example, these outgoings remain undeductible).
Employers
There are no substantial changes to how employers would
determine the taxable value for providing work-related self-education expenses,
since employers are not required to remove $250 from the
otherwise
deductible amount for FBT purposes. Schedule 3 to the Bill removes the $250
non-deductible component for income tax purposes and consequently will also remove
all the existing FBT references to the income tax provision that imposes the
$250 threshold.
[110]
Start dates
The first 1 January, 1 April, 1 July or 1 October to occur
after the day of Royal Assent.
-
The amendments to the Income Tax Assessment Act 1936 and Income
Tax Assessment Act 1997 will apply to assessments for the 2022-23 income
year and later income years.
-
The amendments of the Fringe Benefits Tax Assessment Act 1986 apply
to the FBT year starting on 1 April 2023 and to later FBT years.[111]
Public
consultation
As mentioned in the Explanatory Memorandum,
[112]
in 2020 the former Government held a public consultation on the best tax
arrangement(s) (if any) to encourage Australians to retrain and reskill to
support their future employment and career.
[113]
One of the matters raised was the removal of the $250 threshold.
[114]
The idea received unanimous support among stakeholders and was subsequently
announced in the
2021–22
Budget.
[115]
Committee consideration
Committee consideration of the current Bill is set out on
page 7 of this Digest.As discussed in the previous section of this Bills Digest,
the Senate Economics Legislation Committee considered Schedule 3 to the lapsed
Treasury
Laws Amendment (2021 Measures No.7) Bill 2021, which
is the equivalent to Schedule 3 of the current Bill.The committee noted the broad support for the schedule and
‘is satisfied that these amendments be passed without further comment.’
[116]
The Schedule 3 amendments were agreed to in the House of
Representatives, before the Bill lapsed due to the dissolution of the 46th Parliament.
Policy
position of non-government parties, independents and major interest groups
The amendments are uncontroversial.
Financial
implications
Schedule 3 is estimated to have a negligible impact on
receipts over the forward estimates period.
[117]
Compliance
cost impact
Schedule 3 is expected to reduce compliance costs for
individuals claiming self-education expense deductions.
[118]
Statement
of Compatibility with Human Rights
The Government considers that Schedule 3 to the Bill is
compatible with human rights as it does not raise any human rights issues.
[119]
Key issues
and provisions
The compliance cost (such as record keeping requirement
and time required to follow the complex rules) on the affected individual and
employer taxpayers is high and unnecessarily incurred for a tax provision[120]
that has stopped serving its original policy intent 37 years ago.The removal of this tax provision will reduce compliance
costs and has been unanimously agreed to among stakeholders and the Senate
Economics Legislation Committee. The proposal passed the House of
Representatives in the 46th Parliament.Section 82A of the Income Tax
Assessment Act 1936 will be repealed by item 26 of Schedule
3 to the Bill and references to this section will be removed from the
following tax legislation:
Schedule 4:
Increased Tribunal powers for small business tax decisions
Background
This schedule seeks to amend the Taxation
Administration Act 1953 to enable small business entities to
apply to the Small Business Taxation Division of the Administrative Appeals
Tribunal (AAT) for an order staying, or otherwise affecting, the operation or
implementation of decisions of the Commissioner of Taxation that are being
reviewed by the AAT.
For low-risk debt recovery cases, it means that the
taxpayers can seek an AAT order to stay the Commissioner’s debt recovery action
while a review of tax liability for, or quantum of, the tax debt is taking
place. The Bill allows the affected taxpayers to seek a faster and cheaper AAT
order of stay, instead of resorting to the traditional court judicial review
proceeding.
The new approach does not significantly alter the ATO’s
current approach to debt recovery as the Commissioner does not usually pursue
debt recovery action while a debt is under dispute. For example, in 2018-19
financial year, there were less than 30 instances where the Commissioner
pursued debt recovery action while the debt was under dispute.[121]
The
proposed change
Following the former Government’s announcement in the 2021–22
Budget, [122]
Schedule 4 proposes to empower the AAT to consider and balance the
competing objectives of facilitating the Commissioner’s impartial
administration of the tax system, and ensuring that undue hardships are not imposed
on small businesses until decisions relating to them are final.The AAT can pause or modify ATO debt recovery action in
relation to disputed debts that are being reviewed by the Small Business
Taxation Division of the AAT. In the second reading speech to the Bill, the
Assistant Treasurer advised:
These orders will be subject to integrity checks
intended to prevent aggressive taxpayers without genuine disputes from
receiving stay orders sought with the intention of frustrating the recovery of
genuine tax debts.[123]It was suggested that ‘small businesses will save in court
and legal fees and as much as 60 days waiting for a decision, as compared to
the current process of applying to a state or federal court for a stay on debt
recovery.’ [124]
Impacted
population
- Small business entities:
- From
1 July 2016, a small business entity is a sole trader, partnership, company or
trust that operates a business for all or part of the income year, and has a
turnover less than $10 million.
- For
previous income years, a small business entity had a turnover that is less than
$2 million. [125]
Start date
The day after Royal Assent.
Treasury
consultation
The former Government undertook
a public consultation on the draft legislation in January 2022.
[126] Submissions
provided to the consultation are not currently available.
Committee
consideration
Committee consideration of the current Bill is set out on
page 7 of this Digest.Schedule 3 to the lapsed
Treasury
Laws Amendment (Streamlining and Improving Economic Outcomes for Australians)
Bill 2022 is identical to Schedule 4 to the current Bill.
Summary of
committee consideration for the lapsed Bill
- Senate Standing Committee for the Scrutiny of Bills did
not comment on the relevant schedule of the lapsed Bill.[127]
- Senate Standing Committee for Selection of Bills: did not
consider the lapsed Bill prior to the dissolution of the 46th Parliament.
- Parliamentary Joint Committee on Human Rights: had no
comment on the lapsed Bill.[128]
Position of
non-government parties/independents/major interest groups
The position of non-government parties
and independents on the measures
contained in Schedule 4
could not be determined at the time of writing.
Financial
implications
Schedule 4 ‘is estimated [to] have a small but
unquantifiable cost to cash receipts.’[129]
Compliance
cost impact
Schedule 4 is estimated to have a minor impact on
compliance costs.[130]
Statement
of Compatibility with Human Rights
The Government considers that Schedule 4 is compatible
with human rights as it does not raise any human rights issues.[131]
Key issues
and provisions
Key issues
Schedule 4 provides an avenue for small businesses to
ensure they are not required to start paying a disputed debt until the matter
has been determined by the AAT. The Explanatory Memorandum to the Bill states:
The purpose of the amendments is to provide small business
entities with a cheaper, faster and simpler way to pause the effects of a
decision to recover a tax debt during merits review of the decision as compared
to applying to a court.[132]
However, the small business applicants must also satisfy
the AAT that they meet the additional requirements set out by the amendments
which are intended to maintain the integrity of the tax system and restrain people
from using an application for a stay order to frustrate the prompt recovery of
genuine tax debts. [133]
Key
provisions
Current law
The collection and recovery of unpaid tax-related
liabilities is covered by a common set of rules under Part 4–15 of Schedule 1
to the TAA. This regime applies to all tax-related liabilities. A
tax related liability is defined[134]
as a pecuniary liability to the Commonwealth arising under a taxation law.[135]
When a tax (such as income tax or GST) becomes due and payable,
it is a debt due to the Commonwealth of Australia.[137]
Liability to pay tax is a civil one, so failure to pay does not generally
expose the taxpayer to criminal remedies.[138]
The Commissioner, a Second Commissioner or Deputy
Commissioner may sue for and recover unpaid tax as a civil debt in any court of
competent jurisdiction (that is, in every court which by enactment is made
competent to entertain a claim for recovery of unpaid tax).[139]
Currently, if the Commissioner commences proceedings to
recover unpaid tax, or petitions the court for a sequestration or winding-up
order on the basis of the taxpayer’s failure to pay a tax debt, the taxpayer
can apply to the court for a stay of proceedings or dismissal of the petition.
However the AAT has no power to stay recovery proceedings.[140]
Liability to pay assessed tax, additional tax or any other amount is not suspended
pending the outcome of an application for review or appeal.[141]
Thus, once assessed tax or any other amount (e.g. penalties and GIC) becomes
due and payable, the Commissioner is entitled to take whatever steps necessary
and appropriate to recover the tax or other amount. This rule applies even if
any objection, review or appeal under TAA Part IVC, or any further
appeal, is still outstanding.[142]
The AAT is specifically prevented from granting a stay of execution of the
judgment debt pending determination of the review proceedings before it.[143]
Proposed
change: Schedule 4 to the Bill
Following the announcement in the 2021-22 Budget, the
proposed amendments in Schedule 4 to the Bill seek to extend the AAT’s power to
pause or modify ATO debt recovery action over debts that are being reviewed by
its Small Business Tax Division (SBTD). Small business entities that file an
application in relation to tax matters before the SBTD will be able to apply
for a pause or modification of the Commissioner’ debt recovery actions (such as
garnishee notices and recovery of GIC and related penalties) under the proposal,
until the underlying dispute has been decided.
[144]
However, in exercising this new power, the AAT must also
consider additional factors in the context of both the particular circumstances
of the taxpayer whose decisions is under review and on the overall taxation
system. The AAT must not make an order if the taxpayer’s application for review
and request to make the order are ‘frivolous, vexatious, misconceived, lacking
in substance or otherwise intended to unduly impede, prejudice or restrict the
proper administration or operation of a taxation law’.[145]
for example, applications from aggressive taxpayers who are phoenixing
operators, promoters of tax avoidance and evasion schemes and others without a
genuine dispute but seeking to frustrate a legitimate tax recovery process.[146]
The evidence that the small business applicants will be
expected to produce is the information within their knowledge or possession,
for example, information about the basis of their dispute with the
Commissioner, the history of their business, their compliance history, their
creditworthiness, and their financial position and the impacts of debt recovery
on that financial position, such as being deprived of meaningful review rights
if the decision goes into effect. The applicant will be given time to prepare
the required information.[147]
Schedule 5:
Expanding eligibility for downsizer contributions
Background
From 2018, individuals who were aged 65 or older were
permitted to use
the proceeds of one sale of their main residence to make contributions (downsizer
contributions) of up to $300,000 to their superannuation provider.[148]
Downsizer contributions can be made regardless of the other contributions caps
and restrictions that might apply to making voluntary contributions.[149]
The measure was proposed in the 2017–18 Budget, as part of a ‘Reducing pressure
on housing affordability’ package, on the basis that ‘encouraging downsizing
may enable more effective use of the housing stock by freeing up larger homes
for younger, growing families’.[150]
The Treasury Laws
Amendment (Enhancing Superannuation Outcomes for Australians and Helping
Australian Businesses Invest) Act 2022 reduced the age for downsizer
contributions from 65 to 60.[151]
This measure had been announced as part of the ‘Flexible Super package’ in the
2021–22 Budget[152]
and the Government stated that it:
provides greater flexibility for older Australians to
contribute to their superannuation and may encourage individuals to downsize
sooner to a home that better suits their needs, thereby freeing up the stock of
larger homes for younger families.[153]
The amendment applied in relation to superannuation contributions
made on or after 1 July 2022.[154]
Schedule 5 to the Bill proposes to further reduce the age
eligibility, from 60 to 55, for downsizer contributions to a superannuation
plan from the proceeds of selling a main residence, provided the other existing
conditions are met.
This will partially implement the Helping
homeowners who want to downsize commitment announced by the Coalition Government
on 15 May 2022 during the 2022 Federal election.[155]
This policy was then supported by the ALP.[156]
The Explanatory Memorandum states that the rationale for
the measure was to
provide greater flexibility
for older Australians to contribute to their superannuation and may encourage
individuals to downsize sooner to a home that better suits their needs, thereby
freeing up the stock of larger homes for younger families.[157]
All other eligibility requirements remain the same.
Impacted
population
When costing the Coalition policy, the PBO assumed:
-
approximately 5,000 people a year between the ages of 55 and 60
would make downsizer contributions and
-
these contributions were being brought forward as the same group
would have made them over the age of 60.[158]
Committee
consideration
Committee consideration of the current Bill is set out on
page 7 of this Digest.
Position of
non-government parties/independents/major interest groups
As set out above, the policy implemented by Schedule 5 was
an election commitment of the Liberal party. The position of other non-government parties
and independents on the measures
contained in Schedule 5 could
not be determined at the time of writing.
Financial
implications
Schedule 5 is estimated to decrease receipts by
$20.0 million over the forward estimates.[159]
| 2021-22
($m) |
2022-23
($m) |
2023-24
($m) |
2024-25
($m) |
2025-26
($m) |
| - |
.. |
.. |
-10.0 |
-10.0 |
- Nil
.. Not zero, but rounded to zero.
Parliamentary
Budget Office costing
Table A1:
Downsizer Contributions – Fiscal and underlying cash balances ($m)
| Tax
Revenue |
2022-23
($m) |
2023-24
($m) |
2024-25
($m) |
2025-26
($m) |
| Downsizer
Contributions |
0 |
-3.0 |
-4.0 |
-6.0 |
Source: Parliamentary Budget
Office, Appendix
E – Costing Documentation For The Coalition’s Election Commitments, 2022
Election commitments report, E-43.
Statement
of Compatibility with Human Rights
According to the Government, ‘schedule 5 is compatible
with human rights because it positively engages the right to society security’.[160]