Referral of the inquiry
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On Wednesday 25 August 2021, the Treasury Laws Amendment (2021 Measures No. 7) Bill 2021 (the bill) was introduced into the House of Representatives and read a first time.
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On Thursday, 26 August 2021, the Senate referred the provisions of the bill to the Economics Legislation Committee for inquiry and report by
14 October 2021.
Background
The Black Economy Taskforce
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Treasury’s Black Economy Taskforce (the Taskforce) was established in 2016 to develop an innovative, forward-looking, multi-pronged policy response to combat the black economy in Australia, recognising that these issues cannot be tackled by traditional law enforcement measures alone.
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To combat the tax compliance risks posed by the sharing economy, the Taskforce's final report (the Report), published on 8 May 2017, recommended that a compulsory reporting regime be implemented. A regime where the operators of electronic platforms are required to report payments made to their users, to the Australian Taxation Office (ATO) and other government agencies as appropriate.
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The Report found that without a reporting regime in place, it would be difficult for the ATO to gain information on compliance of sharing economy participants unless targeted audits were used. It found that formalising reporting requirements would also send a clear signal to sharing economy participants that in most cases payments would be taxable. It also found that this would align Australia with international best practice, as working with sharing economy electronic platforms operating across multiple jurisdictions to bring them into domestic tax and regulatory frameworks was identified as a matter of international cooperation.
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In response to the Report, the government agreed to implement measures to ensure the integrity of the tax system, including introducing a third-party reporting regime requiring electronic platforms to report information to the ATO for data-matching purposes. The measure Black Economy – introducing a sharing economy reporting regime was included in the 2019-20 mid-year financial outlook MYEFO.
Superannuation Complaints Tribunal (SCT)
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The SCT is a statutory tribunal established under the Superannuation (Resolutions of Complaints) Act 1993 (the 'Superannuation Complaints Act') which considers complaints about superannuation.
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In 2017, the Ramsay Review found that the existence of multiple financial services external dispute resolution schemes with overlapping jurisdictions means resulted in difficulties in achieving comparable outcomes for consumers with similar complaints. The Ramsay Review also found long-standing problems with the arrangements for resolving superannuation complaints in the SCT.
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In the government’s response to the Ramsay Review, it announced the creation of a new framework for dispute resolution with the establishment of a 'one stop shop' external dispute resolution scheme known as Australian Financial Complaints Authority (AFCA). The purpose of AFCA is to improve outcomes for consumers in the financial system.
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With the introduction of the Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Act 2018, (the 'AFCA Act'), AFCA replaced the SCT, as well as other bodies such as the Financial Ombudsman Service (FOS), and the Credit and Investments Ombudsman. Since 1 November 2018, AFCA has been the external dispute resolution body for complaints against financial firms, as well as superannuation disputes. It is a company limited by guarantee. The AFCA Act received Royal Assent on 5 March 2018.
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Under Schedule 3 of the AFCA Act, the Superannuation Complaints Act, along with consequential amendments, are to be repealed following a proclamation by the Treasurer or the day after four years of the commencement of the AFCA Act. This latter date is the 5 March 2022.
Removing the self-education expenses threshold
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In December 2020, the government consulted on the removal of the $250
non-deductible self-education expenses threshold as part of a discussion paper, Education and training expense deductions for individuals.
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According to the EM, stakeholders unanimously supported the removal of the $250 threshold as it no longer serves its original purpose and adds regulatory costs and complexity for individuals. Accordingly, the government announced the removal of the $250 work related self-education expense threshold in the 2021-22 Budget.
Purpose of the bill
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The bill contains three schedules:
Schedule 1–Sharing economy reporting regime
Schedule 2–Transitional provisions relating to the repeal of the Superannuation (Resolution of Complaints) Act 1993
Schedule 3–Removing the self-education expenses threshold
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Schedule 1 to the bill amends Schedule 1 to the Taxation Administration Act 1953 to require electronic platform operators to provide information on transactions made through the platform to the Australian Taxation Office (ATO). This measure implements a recommendation of the report of the Black Economy Taskforce.
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Schedule 2 to the bill:
amends the AFCA Act to facilitate the closure and any transitional arrangements associated with AFCA replacing the SCT; and
provides for the transfer of records and documents from the SCT to ASIC, the remittal of matters on appeal by the Federal Court, and introduces a rule-making power to allow the Minister to prescribe other matters of a transitional nature.
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Schedule 3 to the bill removes the $250 non-deductible threshold for
work-related self-education expenses by repealing section 82A of the Income Tax Assessment Act 1936. Removing the $250 non-deductible threshold reduces compliance costs for individuals claiming self-education expense deductions and simplifies the tax return process.
Summary of the provisions
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The Hon Mr Dan Tehan MP, Minister for Trade, Tourism and Investment, provided a summary of the bill's provisions:
The Treasury Laws Amendment (2021 Measures No. 7) Bill 2021 implements a number of streamlining and integrity measures.
Schedule 1 to the bill extends existing third-party reporting requirements to operators of electronic platforms.
Platform operators will be required to report to the ATO information regarding certain transactions that occur on their platforms, such as seller identification and payment details. This information will assist the ATO in its administration of the tax system and ensure sellers on these platforms are meeting their tax obligations.
These platforms are commonly used in what is known as the sharing or gig economy and provide a range of innovative opportunities for earning an income. As Australia's sharing economy continues to grow, a transparency gap has emerged as existing tax reporting requirements do not adequately capture information about transactions in this part of the economy.
Schedule 2 to the bill amends the Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Act to facilitate the closure of the Superannuation Complaints Tribunal and transitional arrangements associated with AFCA replacing the Superannuation Complaints Tribunal (SCT).
The AFCA Act will be amended to allow for the transfer of SCT records and documents to the Australian Securities and Investments Commission for ongoing records management, and will also allow the Federal Court to remit appealed cases back to AFCA, where previously these had been remitted to the SCT.
Schedule 2 also introduces a rule-making power to the AFCA Act, to allow the minister to prescribe matters of a transitional nature that may be required to facilitate the closure of the SCT.
Schedule 3 to the bill amends the Income Tax Assessment Act 1936 and makes consequential amendments to the Fringe Benefits Tax Assessment Act 1986, to remove the exclusion of the first $250 of deductions for prescribed courses of education.
These amendments will reduce compliance costs for individuals claiming self-education expense deductions.
The changes will apply to assessments for the 2022-23 income year and later income years, following royal assent.
Summary of new laws
Schedule 1
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Schedule 1 makes amendments to Subdivision 396-B so that the Taxable Payments Reporting System (TPRS) applies to electronic platforms that facilitate supplies from an entity to another entity.
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Generally, if an electronic platform facilitates a supply 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 requirement will generally not apply if the transaction only relates to a supply of goods where ownership of the goods permanently changed, where title to real property is transferred, or the supply is a financial supply. The requirement will also not apply if the transaction occurs within the same consolidated or Multiple Entry Consolidated Group (MEC) group. Platforms will also not be required to report transactions subject to another reporting or withholding obligation where those transactions are reported to the ATO.
Schedule 1: Comparison of old and new laws
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New law
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Current law
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Entities that operate electronic distribution platforms are required to report details about transactions relating to supplies made through those platforms to the ATO.
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No equivalent.
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Explanatory Memorandum, p. 11.
Schedule 2
amends the AFCA Act to assist in the closure of the SCT and to efficiently facilitate any transitional arrangements associated with moving the handling of superannuation complaints from the SCT to AFCA;
amends the AFCA Act to insert a provision dealing with the transfer of records and documents from the SCT to ASIC following the commencement of the Schedule 3 to the AFCA Act. These records and documents are taken to be protected information for the purposes of section 127 of the ASIC Act;
includes a power for the Federal Court to remit cases back to AFCA, where ordinarily, these would be remitted to the SCT; and
introduces a rule-making power to the AFCA Act to allow the Minister to prescribe matters of a transitional nature.
Schedule 2: Comparison of old and new laws
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New law
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Current law
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The AFCA Act includes a rule-making power for prescribing matters of a transitional nature relating to the closure of the SCT.
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No equivalent
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Records and document previously held by the SCT and transferred to ASIC. Such records and documents are protected information.
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No equivalent
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In making an appeal determination, the Federal Court may remit cases back to AFCA to remake a decision, where originally, these would be remitted back to SCT.
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No equivalent
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Explanatory Memorandum, pp. 18–19.
Schedule 3
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Schedule 3 removes the $250 non-deductible threshold for work-related
self-education expenses. Individuals must determine the deductibility of their self-education expenses by reference to section 8-1 of the ITAA 1997, as affected by other general deduction limitations and any relevant specific deductions.
Financial impact
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According to the EM:
Schedule 1 is estimated to have a cost to the budget of $5.1 million, in fiscal balance terms, over the forward estimates period at the time of the 2019-20 MYEFO, with a $7.2 million loss during 2021-22, and a $2.1 million gain during 2022-23;
Schedule 2 will have nil impact; and
Schedule 3 is estimated to have a negligible impact on receipts over the forward estimates period – effectively nil.
Regulation Impact Statements
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With regard to Schedule 1, the EM states that the measure is estimated to result in a total average annual regulatory cost of $0.022 million. Treasury has stated that, rather than provide a dedicated regulation impact statement (RIS) consistent with the regulation impact statement requirements, Treasury has nominated the Black Economy Taskforce Final Report as meeting the requirements of a RIS.
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With regard to Schedule 2, the EM states that on 9 May 2017, the government announced its response to the Ramsay Review, which was the first comprehensive review of the financial system’s EDR framework. The Ramsay Review was commissioned by the Government in April 2016 and led by an independent, expert panel comprising Professor Ian Ramsay, Ms Julie Abramson and Mr Alan Kirkland.
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The EM explains that Treasury has also certified the Ramsay Review and subsequent consultation as a process and analysis equivalent to a RIS.
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With regard to Schedule 3, the EM offers no discussion about a RIS for this measure.
Commencement
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The various schedules of the bill come into effect as outlined in the table below:
Commencement information
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Sections 1 to 3 and anything in this Act not elsewhere covered by this table.
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The day this Act receives the Royal Assent.
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Schedule 1
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The first 1 January, 1 April, 1 July or 1 October to occur after the day this Act receives the Royal Assent.
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Schedule 2
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The day after this Act receives the Royal Assent.
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Schedule 3
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The first 1 January, 1 April, 1 July or 1 October to occur after the day this Act receives the Royal Assent.
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Source: Treasury Laws Amendment (2021 Measures No. 7) Bill 2021, p. 2.
This table only relates to the provisions of this Act as originally enacted. It will not be amended to deal with any later amendment of this Act.
Compatibility with human rights
Schedule 1
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The EM explained that Schedule 1, engage the prohibition on arbitrary or unlawful interference with privacy contained in Article 17 of the International Covenant on Civil and Political Rights (ICCPR), as operators of electronic platforms will need to provide a range of personal information to the Commissioner about individuals that they collect in the course of their business.
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The EM explained that the obligation for operators to report this information is compatible with the prohibition as it is neither arbitrary nor unlawful. Taxpayer information held by the ATO is subject to strict confidentiality rules that prohibit tax officials from making records or disclosing this information unless a specific legislative exemption rule applies.
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The EM argued that this Schedule is consistent with Article 17 of the ICCPR on the basis that its engagement of the right to privacy will neither be unlawful nor arbitrary. To this extent, the EM concluded that this Schedule complies with the provisions, aims and objectives of the ICCPR.
Schedule 2
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The EM explained that Schedule 2 engages, or may engage, the right to privacy which is contained in Article 17 of the ICCPR which contains the right to protection from arbitrary or unlawful interference with privacy and reputation. The right in Article 17 may be subject to permissible limitations, where these limitations are authorised by law and are not arbitrary.
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Where records and documents are transferred to ASIC following the closure of the SCT, these records and documents may contain personal or sensitive information relating to individuals who bought complaints to the SCT. This information is received as ‘protected information’ under section 127 of the Australian Securities and Investments Act 2001 which prohibits disclosure and unauthorised use unless in specified circumstances. Furthermore, where the request for information would have previously gone to the SCT, it will now be directed to ASIC for information relating to the original determination.
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Where ASIC does disclose this information, either to AFCA or the Federal Court, ASIC must comply with disclosure and retention principles contained in the Privacy Act 1988 and section 127 of the Australian Securities and Investments Act 2001. Under this section, disclosure to AFCA and the Federal Court for the purposes of their role and function is considered an ‘authorised disclosure’.
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Based on the above factors, if there is interference with the right to privacy this is considered to be permissible as it is reasonable, proportionate and necessary to achieve the legitimate objective of maintaining consumer confidence in the financial services and consumer credit industry. Therefore, to the extent that Schedule 2 engages the right to privacy, it is consistent with Article 17 of the ICCPR as it subject to limitations that are authorised by law and are not arbitrary.
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The EM concluded that Schedule 2 is compatible with human rights as it does not raise any human rights issues.
Schedule 3
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The EM argued that Schedule 3 does not engage any of the applicable rights or freedom and is thus does not raise any human rights issues.
Legislative scrutiny
Human rights committee
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As of Thursday 30 September 2021, the Joint Standing Committee on Human Rights has made no comment on this bill.
Scrutiny of bills committee
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As of Thursday 30 September 2021, the Senate Standing for the Scrutiny of Bills has made no comment on this bill.
Conduct of the inquiry
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The committee advertised the inquiry on its website and wrote to relevant stakeholders and interested parties inviting written submissions by Friday, 10 September 2021.
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The committee received 10 submissions which are listed at Appendix 1.
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The committee held one public hearing for the inquiry on Wednesday 6 October 2021 at Parliament House, Canberra. The names of witnesses who appeared at the hearing can be found at Appendix 2.
Acknowledgments
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The committee thanks all individuals and organisations who assisted with the inquiry, especially those who made written submissions and appeared at the public hearing.