Additional Comments from Labor Senators
1.1
Labor Senators wish to make only brief remarks in addition to the Chair's
report. Labor Senators thank the Chair for facilitating this inquiry.
Schedule 1 – Amendments to the FinTech Sandbox
1.2
Labor Senators note comments by FinTech Australia expressing
disappointment with the current sandbox arrangements:
I think it's fair to say that, from a FinTech Australia
perspective, the sandbox outcome to date has been disappointing. We understand
that just four fintechs have relied on the exemption to date, and we argue that
it's the construct of the original sandbox that was excessively rigid in its
approach.[1]
1.3
Labor Senators support the position of consumer groups, such as CHOICE,
that fintech companies be required to be assessed by ASIC before being allowed
entry into the sandbox. Labor Senators agree with Choice that the two major
tests on entry should be that the company wants to test something that is:
- genuinely
innovative; and
- provides a
consumer benefit.[2]
1.4
Labor Senators note that FinTech Australia also supported a test on
entry:
Having an official review or a screen is definitely something
that we would be supportive of to ensure that only appropriate companies or
businesses were able to enter the sandbox...
To the question that was asked earlier as to whether or not
this needs to be beneficial or not detrimental, we'd argue not detrimental is a
good outcome, and how you define beneficial also goes to that. It may be that
it's a similar economic outcome for a consumer but just delivered in a much
more user‑friendly, favourable, time efficient manner, which will create
benefits in other manners.[3]
Schedule 2 – the closure of tax loopholes
1.5
Treasury officials confirmed that this legislation has been introduced
because of tax arrangements that are not in line with the original policy
intent:
We find that there are certain arrangements which come to our
attention, often due to interpretations they've evolved in respect of the law.
In this case we're making minor technical amendments to rectify some anomalies
where taxpayers are applying the law in a way that's slightly inconsistent to
what was originally intended under the law...
In respect of the early-stage venture capital limited
partnerships, we provide a tax incentive of 10 per cent on eligible investments
in those vehicles. We intended for that offset to be 10 per cent. Stakeholders
raised that there may be certain situations where that offset was being
accessed in addition to the offset for early-stage innovation companies. That
was not intended under the law.[4]
1.6
Treasury officials confirmed that the original 2016 legislation,
particularly angel investor tax incentives, was based on the UK’s Seed
Enterprise Investment Scheme:
Yes, I understand that they were based on the Seed Enterprise
Investment Scheme.[5]
1.7
One of the key differences between the UK and Australian arrangements is
that the Australian Government allowed trusts and companies to access the Angel
Tax Incentive. While Treasury officials took on notice the question about
whether this loophole was due to a failure of the 2016 legislation and to
confirm that this loophole does not exist in the UK legislation, the Government
has not ruled out that the legislation in this bill is intended to rectify a
mistake of its own making. Put simply, it appears at this stage that the
Government deliberately chose to ignore certain elements of the UK arrangements
and this potentially opened up a tax loophole that they are now seeking to
close.
1.8
If true, it is incumbent on the Government to acknowledge to this
mistake before this bill is debated in the Parliament.
Position of Labor Senators
1.9
Labor Senators are supportive of the principles of the FinTech Sandbox.
Labor Senators continue to hold the view that there should be adequate protections
for consumers, and notwithstanding this, that the fintech sector and the
regulatory sandbox holds promise in challenging the status of the major banks
and can help to provide new products and services that improve the welfare of
ordinary Australians.
1.10
Labor Senators are supportive of this bill, but reiterate their view
that there should be an entry requirement to the sandbox based on the principles
of genuine innovation and beneficial consumer outcomes.
1.11
Labor Senators also believe, given international precedents for regular
reviews of Fintech Sandbox arrangements and the slow Australian adoption rate,
that Australia's Fintech Sandbox should be reviewed in 12 months to evaluate
consumer outcomes and whether the current regulatory arrangements are suitable
for fintech companies.
Recommendation 1
1.12
To amend the bill to include a mandatory review mechanism for the
enhanced FinTech Sandbox starting no later than 12 months after Royal Assent.
Senator Chris Ketter
Deputy Chair
Senator Jenny McAllister
Senator for New South Wales
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